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Bank run on Silicon Valley Bank

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Re: Bank run on Silicon Valley Bank

#661

Post by dijit »

raspberry1337 wrote: post #657
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.

UK before Tatcher was a depressed society with stagflation, rising crimes, crumbling infrastructure; that couldn't even clean its own streets. It was a society completely hamstrung by old unions that would happily collapse the economy in face of global competition, as long as their jobs gave the same pay - nominally. Thatcher won two landslide re-elections for a reason.

Honestly, I'm not an economist, even worse I was not a fully functioning and critical thinking adult before the Thatcher era, you could well be right but I find it really hard to believe.

For example the UK has also had subsequent Conservative victories for the last 12 years or so but every single argument made in 2010 about their approach has been proven true. To the detriment of every person in the UK.

So it doesn't necessarily follow in my eyes that an election win means that what you're doing is the right thing, only that you are popular and you can convince people you will do something to help them.

Re: Bank run on Silicon Valley Bank

#662

Post by nostrademons »

kentonv wrote: post #375
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?

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 was in a similar situation when my startup went up in flames and I went to get a mortgage, but I just showed the bank copies of the dissolution paperwork and they accepted that without any further questions. If a startup really is defunct it usually makes sense to formally dissolve it - otherwise you're on the hook for franchise taxes, registered agent fees, etc, and those can add up after a few years.

Re: Bank run on Silicon Valley Bank

#663

Post by smcl »

noizejoy wrote: post #660
raspberry1337 wrote: post #657

Earlier quoted context omitted.

UK before Tatcher was a depressed society with stagflation, rising crimes, crumbling infrastructure; that couldn't even clean its own streets. It was a society completely hamstrung by old unions that would happily collapse the economy in face of global competition, as long as their jobs gave the same pay - nominally. Thatcher won two landslide re-elections for a reason.

> Thatcher won two landslide re-elections for a reason. Arguably the reason was the war, not domestic policy [0] [0] https://history.com/news/margaret-thatcher-falklands-war

You're downvoted but I don't think you're wrong. In general it seems to be the case that if you're waging a war and you're not getting completely crushed the electorate (or at least the "undecided" voters") tends to rally around whoever happens to be in charge. And indeed I think it's fairly safe to say that most agree that Thatcher benefitted electorally from a strong response to the invasion.

I should add that as a Scot I'm definitely not a fan of hers (you just grow up there knowing "Thatcher Bad") but I'm not quite at "put a stake through her heart and garlic round her neck"[0] :)

[0] - https://twitter.com/halaljew/status/1294414600566382598

Re: Bank run on Silicon Valley Bank

#664

Post by zamnos »

Retric wrote: post #255
ttt333 wrote: post #246

Earlier quoted context omitted.

respectfully, I'm not so sure. The decline in bonds applies to all fixed-rate securities. The only alternatives would have been just straight up cash (bad with inflation) or riskier, less-liquid assets (non-tradable loans with floating rates, for example). They are limited on the latter by risk weighting, and I'm not sure having looser risk controls on the asset side would really help confidence in the banking sector…

Inflation isn’t a concern here. Depositors hand a bank 1 billion and X% inflation hits, well the bank still only owes them 1 billion.

a depositor isn't going to deposit 1 billion and only expect 1 billion back out months later. that's some poor people shit. Large sums of money like that, banks pay you for the pleasure of holding it. So a bank offering 4.5% APY like SVB offers would owe an extra 3.2 million to the billionaire if they look at their account a month later.

The problem is, the underlying assets that SVB owns will only pay them back at 1% APY, and only in 20 years or whatever, and the billionaire has been promised 4.5%APY and is expecting to have access to one months worth of interest next month. that 3.5 difference is thus a huge problem for SVB.

Re: Bank run on Silicon Valley Bank

#665

Post by twelve40 »

zht wrote: post #546
twelve40 wrote: post #421

Earlier quoted context omitted.

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 be…

Sure and there’s also anecdotes of larger banks doing the exact opposite

Ok, let's chalk it up to my irresistible charm when I showed up at the branch that day, I can live with that.

Re: Bank run on Silicon Valley Bank

#666

Post by zamnos »

wbl wrote: post #398
Narkov wrote: post #338

Earlier quoted context omitted.

> 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. That's akin to saying my house won't burn down because I have insurance. Don't underestimate the stupidity of large crowds of people.

No FDIC insured account has ever lost a penny, despite bank failures happening.

Hm? Plenty of them did back in 2008. They were only insured uptm to $100k back then, it's up to $250k now but anyone who has more than that in the bank, which plenty of companies do, is sitting on a pile of risk. So then you withdraw your money from SVB down to $250k and then everyone else doing that - you have your bank run.

Re: Bank run on Silicon Valley Bank

#667

Post by shafyy »

cm2187 wrote: post #188
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.

A variant of Thatcher's "Being powerful is like being a lady, if you have to tell people you are, you aren't".

Or Tywin Lannister's "Any man who must say, 'I am the King', is no true king."

Re: Bank run on Silicon Valley Bank

#668

Post by dx034 »

MrDresden wrote: post #627
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.

In the end they're not, because if there isn't outright fraud, some other bank will just buy them. If Silicon Valley bank is in trouble, I'm sure one of the bigger ones would want to buy them. Their customer base is worth something and they'd get it for next to nothing. And for JP Morgan or Citi, a run on Silicon Valley bank hardly touches their cash reserves..

Re: Bank run on Silicon Valley Bank

#669

Post by dx034 »

toss1 wrote: post #379
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.

Meanwhile, Peter Theil is openly encouraging everybody to tell each other that SVB is sinking and to pull their money [0]. What a guy. [0] Thiel Fund, Venture Firms Advise Companies to Pull Money From SVB

Will only drive the stock price down so that another bank will buy them up. :Not sure if that's what he's aiming for.

Re: Bank run on Silicon Valley Bank

#670

Post by gadders »

MengerSponge wrote: post #576
cm2187 wrote: post #188

Earlier quoted context omitted.

A variant of Thatcher's "Being powerful is like being a lady, if you have to tell people you are, you aren't".

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.

I wouldn't call defeating communism and winning the Cold War "societal harm".
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