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Bank run on Silicon Valley Bank

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Re: Bank run on Silicon Valley Bank

#421

Post by twelve40 »

necubi wrote: post #180
ericpauley wrote: post #58

I'm really curious why banks like this are popular in the first place. I get why startups would want to lend from them, but what is the advantage of parking cash in a "startup-focused" bank? The rest of the business is exciting/risky enough, wouldn't you want your banking to be as boring as possible?

Well, just as an example SVB gave my startup a bank account and a no personal recourse credit card days after we'd formed the corporation. No way you'd get that from BofA. They understand the startup ecosystem in a way that big banks don't. Now there's some competition from startup-focused banks like Brex and Mercury, but a five years ago SVB was one of the only games in town.

I got a BofA checking account, credits cards and a business car loan in the first month after setting up a brand new corp with 0 assets. It's almost kind of funny how it worked exactly as you described, at BofA.

P.S. which makes me wonder how much of SVB friendliness was just smart marketing. If you look up and down this thread, most of the SVB "explanations" here are strictly circular: "they are good for startups because they are good for startups", with little to none useful info.

Re: Bank run on Silicon Valley Bank

#422

Post by thepasswordis »

cj wrote: post #400

I just received an email from one of our investors, sent to all portfolio companies, advising everyone to transfer all of their money out of SVB at 8:30am tomorrow morning. Investment/VC funds are doing the same (we’re talking many, many billions of deposits lost in a span of a few days). There is a chance SVB will freeze assets while they deal w liquidity crunch which may impact startup ability to pay bills, pay sal…

That sounds remarkably similar to a crypto exchange blowing up.

Re: Bank run on Silicon Valley Bank

#423

Post by phendrenad2 »

vonnik wrote: post #192

SVB is an institution that has supported a lot of businesses in tech. There are a lot of harmful clowns out there fearmongering. They should stop. The failure of a bank like this, if it occurs, would be bad for a lot of people.

Come on, fearmongering by a few internet trolls isn't going to change the outcome. If the bank fails, it was going to fail anyway. If it pulls through, it was going to anyway.

Re: Bank run on Silicon Valley Bank

#424

Post by airstrike »

bink wrote: post #189
mmastrac wrote: post #168

SVB was historically such a weird bank - it was the most "famous" tech bank, perhaps solely because of its name - but yet it was so utterly behind in the technology it used for _years_.

Behind other banks or behind tech companies? Every bank I've ever used is about 10 years behind when it comes to tech.

10 is a very generous number

Re: Bank run on Silicon Valley Bank

#425

Post by ericd »

danielmarkbruce wrote: post #417
ericd wrote: post #370

Earlier quoted context omitted.

There’re always T-Bills…

Your employees don't accept t-bills as payment. Your suppliers don't accept them either. To do business, you need money in a bank account. Not all your money, but a decent chunk of money needs to be there for day to day.

Sure, you need some, but many small businesses leave it all in a bank. It's easy to just set up recurring buys of 4 week t-bills that you can halt at any time, payroll is predictable, and suppliers are commonly on net 30-90.

Re: Bank run on Silicon Valley Bank

#426

Post by SkyPuncher »

trogdor wrote: post #399
danielmarkbruce wrote: post #181

Earlier quoted context omitted.

Everyone doesn't need to know or care in many cases. The FDIC insures deposits up to $250k. That covers the vast majority of accounts at most banks. So a run won't occur at most banks. There were hardly any runs in 2008 for this reason - the relatively few "run type things" which happened were where big interbank exposures existed. SVB's customers are weighted significantly more towards businesses who will have more…

>The FDIC insures deposits up to $250k Per depositor, per insured bank, per account category. It’s not that difficult to keep significant excess deposits insured.

Not difficult for the average person. Extremely difficult for a business running hundreds of thousands in transactions per month.

Re: Bank run on Silicon Valley Bank

#427

Post by selimthegrim »

phphphphp wrote: post #66
anon291 wrote: post #19

Earlier quoted context omitted.

Perhaps I'm overly skeptical, but everyone should know that all banks have the risk of 'if everyone takes their money out, the bank won't be able to make it work', right?

Sure, and everyone knows that their favourite person in the world could just run them over in a car and kill them in seconds, but if your best friend says to you, “you know, I could drive my car into you and you would die… your life could be snuffed out with a moments notice” you may start to question your friendship.

This was basically why Saadat Hasan Manto packed up and left India for Pakistan after partition.

Re: Bank run on Silicon Valley Bank

#428

Post by brutusborn »

sanderjd wrote: post #410
brutusborn wrote: post #349

Earlier quoted context omitted.

Modern Islamic countries without usury manage to feed their citizens so although I would agree that banning loans would cause a lot of pain in the modern economy, I can't see how it would cause mass starvation.

Your "countries with Sharia law are good" argument might not be as compelling to me as you seem to think it is... Are there any good examples of non-authoritarian non-dictatorships in this space? Edit to add: You're right, I guess, that our government would probably take over everything and narrowly dodge mass starvation with mere mass poverty, but that doesn't sound great to me either. And mass starvation isn't so f…

I didn't say they were "good", I'm just pointing out that they generally aren't starving, which means your point was hyperbolic.

I don't understand why the government would need to "take over everything" to avoid starvation. There's no technical reason that capitalism can't exist without usury. Again I'm not saying usury is good or bad, just that it doesn't 'need' to exist. I suspect it is good for society when well regulated (better use of capital), and horrible for society when allowed without limit (indentured servitude, instability e.g. GFC caused by immoral lending).

The question is which world are we living in? I'd argue the West is living in the latter world, the GFC is a symptom that shows that our financial system is causing more harm than good. In this case if the US had used the Islamic system, banks would have owned the assets they were "lending" for, and so would not be incentivized to make risky loans and sell them to unsuspecting investors. A bank isn't going to give a loan on an overvalued property if they know it will sit on their books until the losses are eventually realized.

Re: Bank run on Silicon Valley Bank

#429

Post by koromak »

thepasswordis wrote: post #422
cj wrote: post #400

I just received an email from one of our investors, sent to all portfolio companies, advising everyone to transfer all of their money out of SVB at 8:30am tomorrow morning. Investment/VC funds are doing the same (we’re talking many, many billions of deposits lost in a span of a few days). There is a chance SVB will freeze assets while they deal w liquidity crunch which may impact startup ability to pay bills, pay sal…

That sounds remarkably similar to a crypto exchange blowing up.

its almost like making bets with money you don't actually have yet is a bad idea

Re: Bank run on Silicon Valley Bank

#430

Post by brutusborn »

jongjong wrote: post #365
brutusborn wrote: post #349

Earlier quoted context omitted.

Modern Islamic countries without usury manage to feed their citizens so although I would agree that banning loans would cause a lot of pain in the modern economy, I can't see how it would cause mass starvation.

Exactly, and even in those cases, it only serves to enrich certain people who intermediate the loans and to satiate reckless or impatient consumers. It's more like gambling; it appeals to and takes advantage of human nature but doesn't benefit the individual; it only benefits the house. It doesn't actually provide any true value to society.

I disagree, loans can benefit both parties if they are well regulated. In these cases loans provide a lot of value for society. Reckless loans are a symptom of an under regulated system (or in the case of the GFC, a combination of under regulation and no effective enforcement).
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