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Bank run on Silicon Valley Bank

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Re: Bank run on Silicon Valley Bank

#641

Post by shalmanese »

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.

We wish that's what a crypto exchange blowing up was like! Every exchange crisis is either a liquidity crisis or a solvency crisis, we keep on wishing crypto exchange crises are liquidity crises but they inevitably get revealed as solvency crises where crime or incompetence means the money everyone thought was there is just flat out gone.

Re: Bank run on Silicon Valley Bank

#642

Post by senttoschool »

spaceman_2020 wrote: post #551
thepasswordis wrote: post #422

Earlier quoted context omitted.

That sounds remarkably similar to a crypto exchange blowing up.

This is the point where you realize most modern startups are built on the same shaky promises as crapto.

What? Not even remotely the same.

Re: Bank run on Silicon Valley Bank

#643

Post by bink »

sanderjd wrote: post #340
bink wrote: post #190

Earlier quoted context omitted.

I think you're probably right, but "Low level of contagion" sounds exactly like what we heard in 2007.

I don't remember hearing that in 2007. Pretty much the first thing I heard about the financial crisis was that there was gigantic contagion risk throughout the financial system.

Maybe not that exact phrase but it does conjure to mind the video of Cramer saying Bear Stearns was fine.

https://www.youtube.com/watch?v=gUkbdjetlY8

Re: Bank run on Silicon Valley Bank

#644

Post by danielmarkbruce »

neural_thing wrote: post #631
danielmarkbruce wrote: post #549

Earlier quoted context omitted.

Maybe. Smart people assumed Lehman wouldn't be left to sink. It was. And it caused a lot of problems. And the people who realized afterward that it was a mistake are retiring right about now.

Lehman had assets of ~4% of GDP and was a pure investment bank. JPM has assets of ~15% of GDP and has 66 million household clients. I'll take the odds that it's too big to fail.

These are logical sounding arguments, and you are going to be right more often than not. But humans make these decisions, they made the decision to let Lehman sink and it was obviously bad in retrospect, and there were many folks who were opposed to the bailouts in 08.

There are better options than playing these odds. Spread across banks, hold short term treasuries etc. Treasury functions at a company exist for a reason.

Re: Bank run on Silicon Valley Bank

#645

Post by senttoschool »

dmix wrote: post #541
Animats wrote: post #536

This is what a US bank failure looks like.[1] This 2009 picture shows the CEO of a failed bank near Chicago at the moment the 80-person FDIC team has arrived to take over. He's being told that it is no longer his bank. The bank re-opened for withdrawals the next day under FDIC control, and was later sold off to another bank. [1] https://i.postimg.cc/zGQNQmmf/bankfailed.jpg

https://www.youtube.com/watch?v=KIh6NEBL8BU Edit: the video was relatively optimistic given the subject matter, at least for bank customers, not the owner. Assuming there's a market for buyers in such a case. I'm curious if and how the "secret online bidding process" the FDIC runs to find bidders doesn't leak out to the owners of banks. It's possible the banker in the photo heard about it via word of mouth when it wa…

The end of this video is the juiciest part: Maybe we shouldn't allow mega banks like BoA, Chase, etc. to exist because they pose systematic risk to the economy and have to be bailed out by tax payers if they fail.

Re: Bank run on Silicon Valley Bank

#646

Post by victorbjorklund »

humaniania wrote: post #640
FanaHOVA wrote: post #553

Earlier quoted context omitted.

I will not be giving advice or opinions, but please don’t post anecdotes as facts to generate panic. This isn’t what most VC funds are doing.

Wouldn't they be FDIC insured?

Just up to 250k. And even if you have less than that. Would your business be OK if your money got locked up for weeks/months before you get that reimbursed? How you will pay the company bills etc

Re: Bank run on Silicon Valley Bank

#647

Post by [deleted] »

nonethewiser wrote: post #562
dublinben wrote: post #176

Earlier quoted context omitted.

Matt Levine is fond of this highly relevant quote by Bagehot: “Every banker knows that if he has to prove that he is worthy of credit, however good may be his arguments, in fact his credit is gone.” It seems that CEOs of banks haven't learned anything since 1873 when this was observed.

> “Every banker knows that if he has to prove that he is worthy of credit, however good may be his arguments, in fact his credit is gone.” Is that terribly worded or is it just me? I figure it’s supposed to be poetic but I find it tedious. I think it could be simplified like this: “A banker who argues his creditworthiness has none.” I realize it’s a quote but holy shit.

[deleted]

Re: Bank run on Silicon Valley Bank

#648

Post by dkrich »

chollida1 wrote: post #11

Shares just fell 60%, not this year, but today, which is the biggest drop I can think of. This is after a $1.25B common stock offering in an attempt to shore up its cash reserves. Keep in mind they are raising cash by selling equity with their shares at $100 when they were at $500 a less than a year ago. That's pawn shop levels of selling. To say they are in trouble is like saying it would be tough to sell a house th…

Is this not a function of awful risk management? They seemingly put an outrageous percentage of depositors money at risk buying long bonds which I’m sure seemed like the best “fail safe” option at the time not thinking that rates would keep climbing.

But if other banks don’t have such enormous amounts of money leveraged it seems possible this is a one off case. When rates get hiked as quickly as they have risks that were always there that nobody considered are made obvious.

Re: Bank run on Silicon Valley Bank

#649

Post by Firmwarrior »

chollida1 wrote: post #82
antibasilisk wrote: post #55

[flagged]

I assume you are trolling, but in case you are not. How would you provide loans to help get businesses started? How would you provide loans to people to buy their first homes? How would you provide loans so people can afford to go to school? How would you provide loans to buy a vehicle so people can get to/from their job before they get a paycheck? How would farmers afford to buy land, equipment and plant crops befor…

I don't think we should abolish lending, but all those things would be vastly cheaper in a miserly debt free economy

Re: Bank run on Silicon Valley Bank

#650

Post by dkrich »

adam_arthur wrote: post #16
chollida1 wrote: post #11

Shares just fell 60%, not this year, but today, which is the biggest drop I can think of. This is after a $1.25B common stock offering in an attempt to shore up its cash reserves. Keep in mind they are raising cash by selling equity with their shares at $100 when they were at $500 a less than a year ago. That's pawn shop levels of selling. To say they are in trouble is like saying it would be tough to sell a house th…

Re: your duration point, these loans can be sold, either on the open market or a private exchange. Calling it a duration mismatch is a bit misleading. They took on duration risk and their loans lost value is more accurate. Otherwise they would just sell the loans (which they stated they did, but clearly it wasn’t enough thus the equity raise)

Wasn’t enough for what, though? To pay out money deposited with them on a short term basis.
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