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Bank run on Silicon Valley Bank

techcrunch.com

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Re: Bank run on Silicon Valley Bank

#621

Post by subroutine »

trogdor wrote: post #560
kentonv wrote: post #375

Earlier quoted context omitted.

To add to the other comments, SVB also courts startup founders for their private banking arm, and there, too, the benefit is that they actually understand startup founders. Example: After our startup went up in flames in 2017 my wife and I (co-founders) got "regular jobs" with nice salaries. Some time later, we tried to refinance our mortgage with Chase. The banker at Chase was very happy to serve us right up until t…

I understand that a C corp is its own legal entity, but from a risk management perspective, the bank’s approach makes perfect sense.

How? I'm no banker, but to me their financial picture reads: married couple, both currently have nice salary working at companies X and Y, together have proven ability to raise millions in capital. I would say yes please take our refi loan, and do come back if you need anything else.

Re: Bank run on Silicon Valley Bank

#622

Post by kortilla »

jedberg wrote: post #603

I've received emails from a couple of startups that I've invested in with screenshots showing all their money moved out of SVB into another account. I'd say now is a good time to short SVB if you're into that sort of thing.

If you’re reading stories like this, it’s too late. The short interest has already exploded, the stock has already lost 40%, and now we’re in takeover/bailout territory.

You’re a day late. Try again on the next bank failure.

Re: Bank run on Silicon Valley Bank

#623

Post by Asparagirl »

charrondev wrote: post #482
sillybov3456 wrote: post #241

Earlier quoted context omitted.

FDIC insurance is similar in the sense that if the feds ever have to say "don't worry that JP Morgan or is going under, most of you will be covered within the FDIC limit", then we're fucked in so many other ways it doesn't matter. That is after all why we invented the term "systemically important".

Your acting as if the FDIC only exists to cover a massive systemic failure. In the event of something like that additional intervention may be need sure. However, the FDIC covers all banks, and is generally involved with smaller banks fail and they are they to insure whatever balance the bank could not cover with its remaining assets when it failed. I’m not actually aware though what the last incident they actually h…

One of the largest recent FDIC payouts was IndyMac. I'm not sure if this was the most recent one, but certainly one of the most recent big ones. They were so bad that no one wanted to take them over! And the other banks were in such a bad way at the time, the FDIC couldn't force through a shotgun wedding with a semi-willing suitor. So the FDIC got stuck with them.

But worse, thousands of the individual depositors and businesses who banked at IndyMac were over the FDIC limits and they lost, collectively, hundreds of millions of dollars. The FDIC insurance limit at that time was $100k per separately-named account per bank; it is now $250k. And the $250k raise was, in a surprisingly kind move, purposely made retroactive to help cover some of the losses that people had suffered during the GFC under the previous lower limit.

And still, despite all that, lots of people lost lots of money when the bank went under:

https://www.latimes.com/archives/la-xpm-2010-may-31-la-fi-in...

Re: Bank run on Silicon Valley Bank

#624

Post by jsemrau »

tito wrote: post #357

SVB is our bank, I got in touch with a member of the senior team there and got the following message to share. (My own interpretation is I'm comfortable and I'm not planning to pursue it further at the moment): As you know, we are limited in what we can share until the transaction formally closes next week but in the meantime I’m attaching concise information on the strength of our business, based on our recent mid-q…

Well, most of the ratings are done based on financial statements. The problem we are seeing is that losses in held-to-maturity securities do not show up in these financial statements and might create a liquidity crunch in case of a bank run.

Re: Bank run on Silicon Valley Bank

#625

Post by subroutine »

piva00 wrote: post #619
wpietri wrote: post #592

Earlier quoted context omitted.

Which bank? There are two different banks here with very different risk management approaches.

One is still standing, the other seems to be insolvent.

Indeed, SVB is still standing while JP Morgan Chase got a $25 billion dollar bailout in 2008.

https://money.cnn.com/news/specials/storysupplement/bankbail...

Re: Bank run on Silicon Valley Bank

#626

Post by dools »

refurb wrote: post #607
MengerSponge wrote: post #576

Earlier quoted context omitted.

It's really amazing that both Thatcher and Reagan came to power at around the same time, delivered such fabulous witticisms, and caused very similar societal harm.

Not that shocking. Both the UK and US had suffered under economic policies that didnt deliver. Not shocking the voters wanted something different.

Didn't deliver!? That's an absurd claim.

Re: Bank run on Silicon Valley Bank

#627

Post by MrDresden »

rippercushions wrote: post #15

From https://techcrunch.com/2023/03/09/silicon-valley-banks-share... : Becker said the bank has “ample liquidity” to support its clients “with one exception: If everybody is telling each other that SVB is in trouble, that will be a challenge.” Pro tip: if you're CEO of a bank that's facing a bank run, don't tell the press that you'll be in trouble if everybody takes their money out.

Most if not all banks would have trouble paying out if there was a run. It is called fractional reserve banking.

Re: Bank run on Silicon Valley Bank

#628

Post by csomar »

carom wrote: post #4

Specific issues with SVB, not systemic. [1] 1. https://techcrunch.com/2023/03/09/silicon-valley-bank-firms-...

This is systemic and a direct result of the tightening. Money is literally disappearing from pockets right now. This will continue until the fed eases its policy.

Re: Bank run on Silicon Valley Bank

#629

Post by panarky »

femto113 wrote: post #506
amluto wrote: post #483

Earlier quoted context omitted.

> SVB has a fine balance sheet for now, they’re just running out of easy things to sell. Do they? If SVB is sitting on a pile of Treasury bonds that mature in 20 years, they can “hold to maturity” and get their principal plus some very low interest rate. But this is useless! In a fantasy world in which all their depositors leave and they keep those bonds for 20 years, they are indeed worth that amount in 20 years, wh…

HTM accounting isn't the problem, it's one tool among many and has its uses. SVB's mistake was buying long term paper just as the country was heading into a rising rate environment. This has already put them in a hole they probably can never dig themselves out of (selling stock is clearly not gonna work). I think the only non-disastrous path forward here is an acquisition by another bank big enough to just absorb tha…

Borrowing short and lending long has been the traditional function of banks for hundreds of years. They profit from the interest rate spread between what they pay on short-term liabilities (mainly deposits) and what they receive on long-term assets (usually business or housing loans).

It's hilarious that banks serving crypto and startup ecosystems aren't failing because their crypto and startup loans went bad, they're failing because of the duration risk from holding long-term Treasurys on their balance sheet.

Re: Bank run on Silicon Valley Bank

#630

Post by EGreg »

I have barely been in silicon valley but this level of centralization sounds absolutely bonkers.

Why did 50% of VCs and their startups and their mom bank all bank at the same bank?

Decentralization seems to get a bad rap in the valley

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