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I'm surprised that Stripe Capital hasn't extended a similar offer for customers of SVB.
where do you think Stripe Capital banks They threw all their Atlas customers into SVB, according to Atlas customers
> Loans are issued by Celtic Bank, a Utah-Chartered Industrial Bank Member FDIC. All loans subject to credit approval.
The VCs collectively orchestrated a bank run that destroyed a bank that serviced them for 40 years, when they should have instead cooperatively organized an LTCM-style consortium bailout for it, and helped them raise capital. The selfishness and short-sightedness of VCs never ceases to impress.
I think you massively underestimate how hard it is to coordinate under these kinds of conditions. Plenty of startups are going to be unable to make payroll, which can pierce the corporate veil in CA, it's not a situation where cooperation is the first thought.
I think you're unfamiliar with the Long-Term Capital Crisis, and the speed with which it was resolved (two days: Sep 22-23). In fact, it's partly because the NY Fed and big banks acted so swiftly and responsibly, that most people have never heard of this and don't realize how close we came to a financial crisis:
>The Fed came to be concerned that if LTCM’s extensive list of counterparties tried to exit their positions at the same time, it would create a rapid and widespread sale of assets, a fire sale, which could potentially impair the economy.
>On September 22, the New York Fed invited a core group of three firms to a meeting to discuss the LTCM situation. The core group, later expanded to a fourth firm, formed three working groups to consider possible solutions, one of which came up with the idea of a consortium approach. A broader group of thirteen firms was invited to the New York Fed that evening to discuss the approach. The firms disagreed over how much each firm should contribute to a rescue package and could not commit to such an effort on such short notice (Siconolfi 1998).
>The talks on a combined rescue reconvened on the morning of September 23, but were soon halted by news that an investor group led by Warren Buffet had made an independent offer to buy out the firm's partners for $250 million and subsequently inject $3.75 billion capital into the fund (Loomis 1998). This appeared a clean solution to both the creditors and the Fed, and McDonough advised Meriwether that it was likely his best bet (Schlesinger and Schroeder 1998). By the 12:30 p.m. deadline, however, the offer was not accepted due to reported legal issues.
>With no other solution in sight, the talks resumed with more haste inside the New York Fed. The consortium ultimately came to an agreement at about 6:00 p.m. on September 23. Together, fourteen firms put up $3.625 billion in capital in exchange for 90 percent of the fund’s ownership (two firms included in the talks declined to participate).
https://www.federalreservehistory.org/essays/ltcm-near-failu...
Coincidentally, this took place ten years before, and nearly to the day (Sep 15th), of the collapse of Lehman Brothers in 2008, which had also been especially exposed to LTCM in 1998.
Lot of libertarians suddenly interested in the services a central government can offer them today.
SVB is basically solvent and had a panic bank run. It should be pretty low risk to offer startups credit collateralized against their SVB deposits.
No, SVB was solvent as long as their assets didn’t have to marked to market, once there was a bank run they became insolvent. If the SVB assets are liquidated they will not cover the deposits.
Earlier quoted context omitted.
97% of deposits in SVB exceeded the FDIC threshold. The question is, by how much on average? The amount of risk here is significant. I think this is a desperate play by a company in a struggling industry.
Yes, but the assets of the balance sheet exceed the liabilities by a reasonable percentage. The vast majority of what will be paid out won't be from the FDIC's funds, it will be from those assets.
1) When yields go up, treasury prices fall. 2) When yields go down, treasury prices rise. 3) The only way you get the basis cost for a treasury back is if you hold to maturity.
When a bank run happens, you (if you are bank) need cash. Lots of it. If you own assets, you have to sell those assets to come up with that cash. SVB had to sell ALL of their notes for less than they bought them for. See #3.
The losses by SVB were realized well before today. This has been going on for a while now. Outside of $250,000 per account type per person, the only additional money folks will get back is whatever a bank sale comes up with, which won't be as much as most folks think, since the core assets were already sold off. If I had to make an educated guess, most startups/investors will lose more than 50% of what they started with. Remember, high interest rates. SVB will NOT be sold at a good price. This is not a market for sellers, it is a market for buyers. Again, sky high interest rates and many of the very investors that could make that sale possible had money at this bank. That means a lower sale price.
Earlier quoted context omitted.
Those assets cannot plausibly be sold for their currently stated value in the near-term. That's the whole reason SVB got into this mess...
Right but that's why loans make sense. We know the assets are good quality but it will take time to liquidate them. Companies that can't wait for that to happen will benefit from taking a loan to buy themselves time.
If they bought them near the peak value what they can actually sell the income streams for is going to be a lot less than what they paid.
I'm surprised that Stripe Capital hasn't extended a similar offer for customers of SVB.
where do you think Stripe Capital banks They threw all their Atlas customers into SVB, according to Atlas customers
If a victim of SVB tries to use HN as Stripe customer support and asks if they are exposed, will they respond and admit that their business capital funds in Atlas is lost?
> They threw all their Atlas customers into SVB, according to Atlas customers
And removed all mentions about SVB in Atlas. Stripe has been very quiet about their own involvement in SVB for their entire business.
Earlier quoted context omitted.
People aren't waiting ten years for their money.
I’m inclined to say they will if it guarantees they get it back.