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SVB Hall of Shame

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Re: SVB Hall of Shame

#41

Post by nl »

rexreed wrote: post #18
nl wrote: post #11

Hmm It was 100% possible to genuinely hold the belief that "Silicon Valley Bank is safe" and to advise portfolio companies to remove money to reduce risk. In-fact, that looks like it was the prudent way to behave: depositors probably haven't lost their money but it sure is a lot less liquid. And this is exactly why bank runs are dangerous - once there is risk of one the safe thing to do is to remove your money as wel…

The best way to prevent a bank run is not to run. A stampede isn't caused by the movement of a lone animal, but by the herd. It's a classic feedback loop.

There was a balance sheet crisis at the bank. It's pretty easy to see how that could quickly develop into a situation where withdrawls were limited.

> The best way to prevent a bank run is not to run.

That is irrational for every individual actor. There is very little downside in withdrawing the money and huge downside in not doing so.

The best (and only?) way to really prevent a bank run is for an actor that everyone trusts to aggressively step in and provide guarantees.

See for example the situation at Credit Swisse where the Swiss National Bank had to step in on March 16 to provide $54B in loans: https://www.aljazeera.com/economy/2023/3/15/credit-suisse-sl...

Re: SVB Hall of Shame

#43

Post by [deleted] »

dahdum wrote: post #27

Put another way, this is a list of VCs that prioritize their portfolio companies health and success more than their personal banking relationships or public perception. That’s a pretty strong signal to future startups they’ve got your back when the shit hits the fan. I’m not saying it’s good , but I’m betting a lot of founders are feeling pretty thankful. The bailout was never guaranteed.

[deleted]

Re: SVB Hall of Shame

#44

Post by kevinwang »

Here's a defense of those critiqued here (I am uninformed, so please correct me with more nuance):

Bank runs are similar to prisoners' dilemmas. If all depositors could agree to not bank run, then they would have. Without this agreement, it does make sense to participate in the bank run (earlier is better), since if the bank run happens and you tried to be "good" by not running, you could be the one holding the bag at the end. And if the bank run doesn't happen, then no cost is incurred.

So unfortunately, a bank run is one of those situations where everyone makes really rational decisions in the absence of coordination, but the outcome is bad.

Is this a valid defense?

Re: SVB Hall of Shame

#45

Post by jmyeet »

BoiledCabbage wrote: post #34

The single largest learning point from this experience was how entirely hollow the whole Silicon Valley libertarian ethos really was. And yet again, another group that claims to say "leave us be, take away restrictions and oversight we'll take care of ourselves, be more efficient an ask nothing of you", turnouts to be just another form of "leave us along so we can benefit, and then come save us when we need help". An…

It's so much worse than that.

The same people who cry to be bailed out of a bank run are the same people who wring their hands about the moral hazard of student debt relief. You will find that theme repeated. Any government money spent on poor people we simply cannot afford.

The rich never stop asking the government for money. They expect it. They certainly never refuse it. Never forget that.

"Libertarians" are pretty much just Reagan-era deregulation conservatives. It is utterly self-serving.

Re: SVB Hall of Shame

#46

Post by twelve40 »

If Bloomberg is to be believed, the run started after the funds started experiencing real problems with regular money movement. In which case, it is kind of an emergency?

> But the firm learned that its limited partners were encountering issues using SVB services as they tried to transfer the funds — they weren’t immediately going through as expected, the person said.

https://www.bloomberg.com/news/articles/2023-03-11/thiel-s-f...

But the funny part is that this story is still unfolding. The bank's new management is soliciting new business under the same "startup-friendly" pitch (and presumably a large number of the same assets and liabilities), and again vulnerable to _the same exact run on a small-ish number of uninsured deposits_ (as opposed to diversified banks with lots of insured accounts across many industries). Except, now they also pitch it as fully insured! So how does this even end? Is it a temporary thing until the bridge bank gets acquired by somebody, or do they have now perpetual 100% protection from the FDIC? Really trying to understand. What good is a friendly bank that collapses from mismanagement and is propped up to serve the same small segment, vulnerable to the same run again?

Re: SVB Hall of Shame

#47

Post by asdfaoeu »

SVB didn't fail because people pulled money, it failed because of a lack of risk management. Complaining about those pulling money out is silly. If anything they should have pulled it out much earlier.

Re: SVB Hall of Shame

#48

Post by [deleted] »

davidw wrote: post #6
idopmstuff wrote: post #2

> The board was asleep at the switch. They are now unemployable. That's not really how this works. The CAO of the bank was CFO of Lehman. People in these positions just get credit for the fact that they had a front row seat for this sort of financial implosion, so they can (theoretically) help whoever else's board they join avoid that sort of thing. > But those players within the venture capital community who were si…

> The people in the VC community who triggered the bank run did the right thing by their startups. I don't really have a horse in this race, but: while the above argument makes sense, what about all their future startups? Everyone says nice things about how it was good to have this bank that understood startups and treated them well, and now that is all gone. And no one who had deposits lost their money anyway. It se…

[deleted]

Re: SVB Hall of Shame

#49

Post by benatkin »

Contagions gonn contage.

If it was in a vacuum maybe they could have kept a lid on it. But I disagree that they should have stayed calm about it with what happened prior with TerraUSD, Luna, Celsius, and FTX. The length of the list shows that it would have been infeasible to collude to stay quiet.

This hall of shame feels like an ego trip.

Re: SVB Hall of Shame

#50

Post by rexreed »

viraptor wrote: post #39
rexreed wrote: post #18

Earlier quoted context omitted.

The best way to prevent a bank run is not to run. A stampede isn't caused by the movement of a lone animal, but by the herd. It's a classic feedback loop.

That's not a way to prevent the bank run. That's just choosing to not be a part of it. Unless you can both coordinate with and convince others to do the same, you're not preventing anything.

It sure seems that of all the people who could coordinate and convince others not to run, this list of investors with several thousand overall portcos would be just the right people. A moment of stability at a time of crisis would sure be better than a run for the doors NOW approach that set off the stampede.

Imagine the ALL-CAPS tweets and backdoor phone calls that could have been possible if these very same investors (who now rally behind the shuttered and reopened bank) could have called for calmness instead of panic. But that's not what happened. Once the run starts, you can't stop it.

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