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I'm feeling like this is early days of a disaster in Silicon Valley. We're at the first or second domino teetering right now. I hope a Sequoia or KPB will step

I'm feeling like this is early days of a disaster in Silicon Valley. We're at the first or second domino teetering right now. I hope a Sequoia or KPB will step up and save the bank, otherwise a lot of their portfolio investments are about to start missing payrolls.

tikkun 4y ago
How so?
- rickreynoldssf 4y ago
  If startups have their funds in SVB, which most do, and they can't wire those funds to ADP or whatever there's no payroll. I know this first hand because when I had a startup we wired upcoming payroll to ADP every two weeks. One week our bank (not SVB) made a mistake and payroll didn't go out. It was a mess but thankfully BofA bent over backwards to fix things.
dmix 4y ago
I can't count how many times I've read similar comments on HN in the last 10yrs
- cbayram 4y ago
  Rising interest rates is what’s different this time around
  - ejb999 4y ago
    rising interest rates, and an economy that is beginning to falter.
    - datavirtue 4y ago
      Citation needed.
      - ejb999 4y ago
        then go find one.
        deleted 4y ago
        [deleted]
      - yeahsure22 4y ago
        How about bank failures? As in multiple banks have now failed.
        VHRanger 4y ago
        The bank failures (SI, SBNY, SIVB) were tied to stuff that grew 300% in 2 years (speculative VC crap, crypto) It's bad, but likely still a contained collapse (hopefully!)
        yeahsure22 4y ago
        It doesn’t work like that, these banks didn’t fail because of exposure to particular industries. They failed to manage their IR risk just the same as every other American bank. Now they will all be in for some serious pain. In 2021 it would have been considered fringe economic theory for rates to hit 5%. Most economists would have told you it was more likely to be at -1% now.
    - jlmorton 4y ago
      The doomsayers have shifted from "we've been in a recession for six months, they just changed the definition of a recession" to "an economy that is beginning to falter." I'll take that as a sign that the economy remains robust.
      - checkcircuits 4y ago
        Really? That seems bold. They quite literally changed the definition of a recession. Just because it's not a historically accurate recession does not mean we are not in, nor that are not heading into, one. ZIRP is dead, there's no indication interest rates will go down any time soon, CPI indicates food costs are not moving, energy is still expensive, layoffs are picking up steam, housing is at it's most unaffordable time in history, etc. You look at the gestalt sitting in front of you and you say "the economy remains robust". Lord, I wish I had your naivity^W^W^W^W^W^W^W optimism. I lived through the GFC and suffered the consequences of hedonistic money policy. History may not repeat but it certainly rhymes and all of this is starting to smell very familiar to me. I'm not in possession of a crystal ball but as it stands there is still too much money in the economy. The VAST majority of stock value since the GFC has been from stock buyback programs and not bottom line increases. That alone should tell you the possible origin of the next disaster.
    - KoftaBob 4y ago
      Based on what?
      - samstave 4y ago
        Falter or maybe 're-balance' --> Look at all the thousands of layoffs in tech, the price of real-estate at all sectors, interest rates, savings-account rates of the population, homeless, unemployed, under-employed etc. There are a fuck-ton of factors that all have not-so-rosey outlooks. Its amazing we dont have an actual game "sim America" and you get to fiddle with all the various economic levers in our tax code and see the output based on real data coming from various sources in the economic space (like farm, military, foreign subsidies, etc) One that takes in the budget proposal from .gov and lets you fiddle with the model and such and crowdsource the best model outcomes through millions of game players - rewarded kind of like the lottery - everyone pays $1 a month to come up with the best model - its run through many simulations and the best model wins a bunch of cash. and then, wait for it, chatGPT writes an actual budget bill to be voted on.
- endisneigh 4y ago
  most of the last 10 years had near 0% interest rate
  - lazide 4y ago
    It’s really mind boggling that SVB put so much money into bonds with long maturations at essentially zero or negative interest rates. I wonder how many others did similar?
    - nemo44x 4y ago
      It's not like they wanted to. Loads of money was coming in from funded companies but the demand for loans was low. So they had to put the money somewhere and banks (not just SVB) began putting record amounts into treasuries. At least they got something from them so they could pay interest on things and keep the lights on. The government printed a ton of money and demand for loans crashed after the pandemic started. People even paid loans down. Many companies weren't borrowing much because of supply chain issues - why borrow if you can't use it? I'm not blaming the government - unemployment went through the roof for awhile and they had to protect people. But this is a side effect that no one really saw. That the treasuries would lose a lot of value because of super rapid interest rate increases while companies start eating away at their runway because no new investment is coming. It all makes sense today but literally no one saw this coming a couple weeks ago.
      - HDThoreaun 4y ago
        No, they did not have to put the money somewhere. They could've kept the cash as cash if they wanted to. Holding cash is free for a bank, it's not like their costs increased since they weren't paying any interest on deposits. They could've bought derivatives to hedge against the likely scenario that interest rates increase. They could've bought 1 year bonds instead of 10. They really fucked up here. > But this is a side effect that no one really saw. Literally everyone except SVB saw that long term bonds would decrease in value post pandemic when interest rates increase. Interest rate increases lowering the value of bonds is quite literally the most basic rule of bonds.
- newaccount2021 4y ago
  [dead]
- Invictus0 4y ago
  I hate comments like this. Bad things just don't happen anymore just because the last 10 years of doomsday predictions turned out to be wrong?
  - Me1000 4y ago
    Bad things can happen but they’re more likely to be predicted accurately when someone puts up some data. But most of these doomsayers are just working from vibes. “It feels like”. They’re unhelpful comments.
- pigsty 4y ago
  If everyone’s saying we’re in a bubble, we probably are. Just because it keeps getting bigger doesn’t mean it’s not going to pop. We’ve had 15 years of people getting billions for phone apps made in 12 months and forgotten in 6. Random individual software startups are valued more than basically the entire hardware industry under them. Bitcoin peaked out at 1.28 trillion and it still has no use beyond being a converter from dollars, to crypto, to dollars again with the occasional hand wavey “dude it’s totally completely secure and stable and everyone will use it in the future as a currency! Look how much I made by investing at the peak!” story.
  - Otek 4y ago
    No, if no one is saying that we are in a bubble, then we might be in one. Because when everyone thinks it’s a bubble they are extra careful. When they don’t think about it, they just grow the bubble
  - hnfong 4y ago
    If literally everyone's saying we're in a bubble, by definition we wouldn't be. Nobody would be buying at ever higher prices in a bubble, so who's making those trades? Sure, you might claim those people are unhinged and don't count, but they'd say the same to you. Unless you actually start going to your broker and buy a bunch of PSQ your comments here carry as much weight as mine.
    - SamBam 4y ago
      People can simultaneously believe they're in a bubble and still be buying. They may believe that they'll be able to sell before it pops. Or they may believe if it keeps growing long enough it won't matter that it's a bubble, because they'll have made enough money.
- treis 4y ago
  Can you give some examples?
- samstave 4y ago
  Were you around during the 2001 bust? It was surreal. I had a BBQ at my house and had ~75 attendees... all tech workers. of the ~75 people there, ~3 had jobs. I was out of work for 18 months during that period. Luckily I had a background in Animation and Architecture to fall back on and got a job designing tech companies when the crisis lifted. 2008 was worse though.
- kilgnad 4y ago
  The true death of silicon valley will come as a slow burn. Arguably the burn has already begun years ago.
tootie 4y ago
The same Sequoia who bet the farm on FTX? I'll sit tight and wait for the FDIC. They have ample authority to do an orderly liquidation in a worst case scenario.
- el_nahual 4y ago
  Sequoia has $85B AUM. Despite its insanely large bet (hundreds of millions) into FTX, it didn't "bet the farm." Far from it.
- rickreynoldssf 4y ago
  Well if a startup just closed a $20MM round they'll get back $250,000 after a long unwinding from the FDIC. So that's a pretty big haircut. I look to Sequoia because, of any VC fund, they are the most likely to be able to pull off a takeover of SVB. I am still gobsmacked that they invested hundreds of millions in a company with no board or CFO (FTX)
  - adamsmith143 4y ago
    I mean if you put $20MM into an account with only $250k of insurance you miiiiight deserve to go out of business.
    - jefftk 4y ago
      There are a lot of things that can kill a startup, and founders need to prioritize between them. Bank failures are rare enough that I wouldn't be surprised if many otherwise-good startups had not considered them to be a risk worth focusing on.
  - 015a 4y ago
    That's not remotely true, for a couple reasons. 1) FDIC insurance only applies in situations where the bank doesn't have the assets to make depositors whole. SVB has a ton of assets; most sources I've found asserting 100% deposit coverage, just not liquid. Even if the FDIC takes over (which isn't even likely) (edit: this aged well), the insurance element is irrelevant; its about operations and finding funding to drive liquidity. 2) When startups close a round of funding, they don't just get a check for $20M and throw it in their SVB account. Funding rounds are an agreement between the VC firm and the startup for that money, which transitively represents an agreement between the VC firm and its partners, and the money is generally delivered "just in time", not all at once. When the startup needs an infusion, they go to the VC, who then goes to their own bank accounts or their partners, who then go to their own bank accounts, and wire transfers happen. SVB is only one player here; yeah, its absolutely true that many startups (maybe most) directly use SVB, but its less common the further up the chain you move as the money gets more and more boring (when you hear "partner" think "old boring local business magnate who has banked with JP Morgan for 50 years"). And more-over short of systemic bankruptcy the VCs are still on the hook for that $20M. The risk that SVB, the financial industry, and regulators are worried about right now is short-term liquidity. Startups may have $xxx,000 in their SVB account which they use to make payroll every two weeks and pay vendors and such, which is separate from the $xxM on contract with the VC. If SVB can't meet outflow demands, the people staying and trying to make payroll are going to get caught up with the panic'ed people trying to pull all their money out, and short-term liabilities like payroll are at risk. That's part of of the reason why some VCs are pushing their startups to pull money out; its not about "oh my god we're going to lose all our money", its because they don't want to get caught in the herd and be forced to pull money from other sources which are also less liquid, like long-term investments or going to their partners. Put another way, SVB's liquidity issues could spiral to cause liquidity issues further down the chain; and no one in the industry wants that to happen. But, its a macroeconomic prisoners dilemma. And, to be frank, and I mean this absolutely genuinely and sincerely; most VCs are just rich idiots. Lets be real, the industry is proud of the fact that if one bet in fifty pays out 100x it'll make up for 49 bad bets, yet we treat them as paragons of investing genius? Their biggest motivation is to avoid embarrassment among their drinking buddies (read: investing partners) during the next trip to Jackson.
deleted 4y ago
[deleted]
nemo44x 4y ago
Indeed - it really began in late November, 2021. We hit a peak then and we also started to see some of the highest flyers begin to taper off and come down. The not as darling names were first. By early 2022 we started to see the entire segment draw down and it accelerated into Q2 of 2022. The flimsiest startups that weren't generating revenue yet were the canary as they were the first to start doing layoffs in May, June, and July of 2022. As the industry came to realize that the Fed was intent on raising rates, the middle and bigger players started to plan scale downs. Q3 saw revenues starting to slip and Q4 was a bloodbath for revenues. Just about everyone seemed to cut 10%-20%. Q1 of 2023 has stabilized a bit and began with a market rally, but it could just be a dead cat bounce on the path to lower lows as the year goes on. Seeing SVB implode suddenly is ominous not so much because of them, but what it means for the industry right now. I was hoping that we maybe hit the trough in Q4 of 2022 but it would appear this year will be bleak and I sadly suspect we'll be seeing more layoffs in the second half of this year if the first half continues to miss. I hope I'm wrong. We are about at the point where a bear market ends (around 9 months) but that's just an average. We could very well have quite a few more months or even the entire year and into next year ahead. High flying tech has been in a bear market now for over a year, although it probably needed a correction.
- arlcode 4y ago
  How are companies doing which are profitable and are valued mainly on that instead of their "future" growth? (I understand that Big tech is also doing layoffs because they massively overhirred during the pandemic)
cbayram 4y ago
Playing out this scenario: Will missing payrolls result in layoffs/resignations? Thus, increasing unemployment rate that the FED desires. If contagion doesn’t spread outside of tech/startup, does the government have any incentive to intervene? Maybe this is not too big to fail. A sale seems like the most likely scenario out of this liquidity problem (insolvency). It’ll be dirt cheap and has to make sense to its buyer. edit: Even with recent downturn in tech, there is still sizable value in having tech as banking clients.
- paganel 4y ago
  Supposedly these jobs are the “good” jobs to still have around no matter what because, again, supposedely, they create innovation, which innovation then creates an increase in productivity (among other things), which increase in productivity has been one of the Holy Grails of mainstream economics for the last half century (with the FED being a pillar of said mainstream economics). So, in that light, losing these jobs would be like throwing away the kid with the bathwater. I personally don’t agree with all the premises and conclusions I’ve enumerated above, but imo that’s how a mainstream economist (like one working for the FED right now) is most likely to view things.
  - lazide 4y ago
    It’s the tide going out - we’ll see who’s swimming naked.
- dboreham 4y ago
  Employers are legally on the hook for payroll so what will happen is management/stock holders will foot the bill.
  - noughtme 4y ago
    I think the implication is that companies won't have enough cash on hand to make payroll in future periods, so will layoff staff to cut payroll expensess.
  - cjblack 4y ago
rcme 4y ago
If someone saves the bank, it'd have to be someone who a vested interest in making sure the bank doesn't fail. As it stands, the bank has negative value.

tikkun 4y ago

How so?

rickreynoldssf 4y ago
If startups have their funds in SVB, which most do, and they can't wire those funds to ADP or whatever there's no payroll. I know this first hand because when I had a startup we wired upcoming payroll to ADP every two weeks. One week our bank (not SVB) made a mistake and payroll didn't go out. It was a mess but thankfully BofA bent over backwards to fix things.

dmix 4y ago

I can't count how many times I've read similar comments on HN in the last 10yrs

cbayram 4y ago
Rising interest rates is what’s different this time around
- ejb999 4y ago
  rising interest rates, and an economy that is beginning to falter.
  - datavirtue 4y ago
    Citation needed.
    - ejb999 4y ago
      then go find one.
      - deleted 4y ago
        [deleted]
    - yeahsure22 4y ago
      How about bank failures? As in multiple banks have now failed.
      - VHRanger 4y ago
        The bank failures (SI, SBNY, SIVB) were tied to stuff that grew 300% in 2 years (speculative VC crap, crypto) It's bad, but likely still a contained collapse (hopefully!)
        yeahsure22 4y ago
        It doesn’t work like that, these banks didn’t fail because of exposure to particular industries. They failed to manage their IR risk just the same as every other American bank. Now they will all be in for some serious pain. In 2021 it would have been considered fringe economic theory for rates to hit 5%. Most economists would have told you it was more likely to be at -1% now.
  - jlmorton 4y ago
    The doomsayers have shifted from "we've been in a recession for six months, they just changed the definition of a recession" to "an economy that is beginning to falter." I'll take that as a sign that the economy remains robust.
    - checkcircuits 4y ago
      Really? That seems bold. They quite literally changed the definition of a recession. Just because it's not a historically accurate recession does not mean we are not in, nor that are not heading into, one. ZIRP is dead, there's no indication interest rates will go down any time soon, CPI indicates food costs are not moving, energy is still expensive, layoffs are picking up steam, housing is at it's most unaffordable time in history, etc. You look at the gestalt sitting in front of you and you say "the economy remains robust". Lord, I wish I had your naivity^W^W^W^W^W^W^W optimism. I lived through the GFC and suffered the consequences of hedonistic money policy. History may not repeat but it certainly rhymes and all of this is starting to smell very familiar to me. I'm not in possession of a crystal ball but as it stands there is still too much money in the economy. The VAST majority of stock value since the GFC has been from stock buyback programs and not bottom line increases. That alone should tell you the possible origin of the next disaster.
  - KoftaBob 4y ago
    Based on what?
    - samstave 4y ago
      Falter or maybe 're-balance' --> Look at all the thousands of layoffs in tech, the price of real-estate at all sectors, interest rates, savings-account rates of the population, homeless, unemployed, under-employed etc. There are a fuck-ton of factors that all have not-so-rosey outlooks. Its amazing we dont have an actual game "sim America" and you get to fiddle with all the various economic levers in our tax code and see the output based on real data coming from various sources in the economic space (like farm, military, foreign subsidies, etc) One that takes in the budget proposal from .gov and lets you fiddle with the model and such and crowdsource the best model outcomes through millions of game players - rewarded kind of like the lottery - everyone pays $1 a month to come up with the best model - its run through many simulations and the best model wins a bunch of cash. and then, wait for it, chatGPT writes an actual budget bill to be voted on.
endisneigh 4y ago
most of the last 10 years had near 0% interest rate
- lazide 4y ago
  It’s really mind boggling that SVB put so much money into bonds with long maturations at essentially zero or negative interest rates. I wonder how many others did similar?
  - nemo44x 4y ago
    It's not like they wanted to. Loads of money was coming in from funded companies but the demand for loans was low. So they had to put the money somewhere and banks (not just SVB) began putting record amounts into treasuries. At least they got something from them so they could pay interest on things and keep the lights on. The government printed a ton of money and demand for loans crashed after the pandemic started. People even paid loans down. Many companies weren't borrowing much because of supply chain issues - why borrow if you can't use it? I'm not blaming the government - unemployment went through the roof for awhile and they had to protect people. But this is a side effect that no one really saw. That the treasuries would lose a lot of value because of super rapid interest rate increases while companies start eating away at their runway because no new investment is coming. It all makes sense today but literally no one saw this coming a couple weeks ago.
    - HDThoreaun 4y ago
      No, they did not have to put the money somewhere. They could've kept the cash as cash if they wanted to. Holding cash is free for a bank, it's not like their costs increased since they weren't paying any interest on deposits. They could've bought derivatives to hedge against the likely scenario that interest rates increase. They could've bought 1 year bonds instead of 10. They really fucked up here. > But this is a side effect that no one really saw. Literally everyone except SVB saw that long term bonds would decrease in value post pandemic when interest rates increase. Interest rate increases lowering the value of bonds is quite literally the most basic rule of bonds.
newaccount2021 4y ago
[dead]
Invictus0 4y ago
I hate comments like this. Bad things just don't happen anymore just because the last 10 years of doomsday predictions turned out to be wrong?
- Me1000 4y ago
  Bad things can happen but they’re more likely to be predicted accurately when someone puts up some data. But most of these doomsayers are just working from vibes. “It feels like”. They’re unhelpful comments.
pigsty 4y ago
If everyone’s saying we’re in a bubble, we probably are. Just because it keeps getting bigger doesn’t mean it’s not going to pop. We’ve had 15 years of people getting billions for phone apps made in 12 months and forgotten in 6. Random individual software startups are valued more than basically the entire hardware industry under them. Bitcoin peaked out at 1.28 trillion and it still has no use beyond being a converter from dollars, to crypto, to dollars again with the occasional hand wavey “dude it’s totally completely secure and stable and everyone will use it in the future as a currency! Look how much I made by investing at the peak!” story.
- Otek 4y ago
  No, if no one is saying that we are in a bubble, then we might be in one. Because when everyone thinks it’s a bubble they are extra careful. When they don’t think about it, they just grow the bubble
- hnfong 4y ago
  If literally everyone's saying we're in a bubble, by definition we wouldn't be. Nobody would be buying at ever higher prices in a bubble, so who's making those trades? Sure, you might claim those people are unhinged and don't count, but they'd say the same to you. Unless you actually start going to your broker and buy a bunch of PSQ your comments here carry as much weight as mine.
  - SamBam 4y ago
    People can simultaneously believe they're in a bubble and still be buying. They may believe that they'll be able to sell before it pops. Or they may believe if it keeps growing long enough it won't matter that it's a bubble, because they'll have made enough money.
treis 4y ago
Can you give some examples?
samstave 4y ago
Were you around during the 2001 bust? It was surreal. I had a BBQ at my house and had ~75 attendees... all tech workers. of the ~75 people there, ~3 had jobs. I was out of work for 18 months during that period. Luckily I had a background in Animation and Architecture to fall back on and got a job designing tech companies when the crisis lifted. 2008 was worse though.
kilgnad 4y ago
The true death of silicon valley will come as a slow burn. Arguably the burn has already begun years ago.

tootie 4y ago

The same Sequoia who bet the farm on FTX? I'll sit tight and wait for the FDIC. They have ample authority to do an orderly liquidation in a worst case scenario.

el_nahual 4y ago
Sequoia has $85B AUM. Despite its insanely large bet (hundreds of millions) into FTX, it didn't "bet the farm." Far from it.
rickreynoldssf 4y ago
Well if a startup just closed a $20MM round they'll get back $250,000 after a long unwinding from the FDIC. So that's a pretty big haircut. I look to Sequoia because, of any VC fund, they are the most likely to be able to pull off a takeover of SVB. I am still gobsmacked that they invested hundreds of millions in a company with no board or CFO (FTX)
- adamsmith143 4y ago
  I mean if you put $20MM into an account with only $250k of insurance you miiiiight deserve to go out of business.
  - jefftk 4y ago
    There are a lot of things that can kill a startup, and founders need to prioritize between them. Bank failures are rare enough that I wouldn't be surprised if many otherwise-good startups had not considered them to be a risk worth focusing on.
- 015a 4y ago
  That's not remotely true, for a couple reasons. 1) FDIC insurance only applies in situations where the bank doesn't have the assets to make depositors whole. SVB has a ton of assets; most sources I've found asserting 100% deposit coverage, just not liquid. Even if the FDIC takes over (which isn't even likely) (edit: this aged well), the insurance element is irrelevant; its about operations and finding funding to drive liquidity. 2) When startups close a round of funding, they don't just get a check for $20M and throw it in their SVB account. Funding rounds are an agreement between the VC firm and the startup for that money, which transitively represents an agreement between the VC firm and its partners, and the money is generally delivered "just in time", not all at once. When the startup needs an infusion, they go to the VC, who then goes to their own bank accounts or their partners, who then go to their own bank accounts, and wire transfers happen. SVB is only one player here; yeah, its absolutely true that many startups (maybe most) directly use SVB, but its less common the further up the chain you move as the money gets more and more boring (when you hear "partner" think "old boring local business magnate who has banked with JP Morgan for 50 years"). And more-over short of systemic bankruptcy the VCs are still on the hook for that $20M. The risk that SVB, the financial industry, and regulators are worried about right now is short-term liquidity. Startups may have $xxx,000 in their SVB account which they use to make payroll every two weeks and pay vendors and such, which is separate from the $xxM on contract with the VC. If SVB can't meet outflow demands, the people staying and trying to make payroll are going to get caught up with the panic'ed people trying to pull all their money out, and short-term liabilities like payroll are at risk. That's part of of the reason why some VCs are pushing their startups to pull money out; its not about "oh my god we're going to lose all our money", its because they don't want to get caught in the herd and be forced to pull money from other sources which are also less liquid, like long-term investments or going to their partners. Put another way, SVB's liquidity issues could spiral to cause liquidity issues further down the chain; and no one in the industry wants that to happen. But, its a macroeconomic prisoners dilemma. And, to be frank, and I mean this absolutely genuinely and sincerely; most VCs are just rich idiots. Lets be real, the industry is proud of the fact that if one bet in fifty pays out 100x it'll make up for 49 bad bets, yet we treat them as paragons of investing genius? Their biggest motivation is to avoid embarrassment among their drinking buddies (read: investing partners) during the next trip to Jackson.

deleted 4y ago

[deleted]

nemo44x 4y ago

Indeed - it really began in late November, 2021. We hit a peak then and we also started to see some of the highest flyers begin to taper off and come down. The not as darling names were first. By early 2022 we started to see the entire segment draw down and it accelerated into Q2 of 2022. The flimsiest startups that weren't generating revenue yet were the canary as they were the first to start doing layoffs in May, June, and July of 2022. As the industry came to realize that the Fed was intent on raising rates, the middle and bigger players started to plan scale downs. Q3 saw revenues starting to slip and Q4 was a bloodbath for revenues. Just about everyone seemed to cut 10%-20%. Q1 of 2023 has stabilized a bit and began with a market rally, but it could just be a dead cat bounce on the path to lower lows as the year goes on. Seeing SVB implode suddenly is ominous not so much because of them, but what it means for the industry right now. I was hoping that we maybe hit the trough in Q4 of 2022 but it would appear this year will be bleak and I sadly suspect we'll be seeing more layoffs in the second half of this year if the first half continues to miss. I hope I'm wrong. We are about at the point where a bear market ends (around 9 months) but that's just an average. We could very well have quite a few more months or even the entire year and into next year ahead. High flying tech has been in a bear market now for over a year, although it probably needed a correction.

arlcode 4y ago
How are companies doing which are profitable and are valued mainly on that instead of their "future" growth? (I understand that Big tech is also doing layoffs because they massively overhirred during the pandemic)

cbayram 4y ago

Playing out this scenario: Will missing payrolls result in layoffs/resignations? Thus, increasing unemployment rate that the FED desires. If contagion doesn’t spread outside of tech/startup, does the government have any incentive to intervene? Maybe this is not too big to fail. A sale seems like the most likely scenario out of this liquidity problem (insolvency). It’ll be dirt cheap and has to make sense to its buyer. edit: Even with recent downturn in tech, there is still sizable value in having tech as banking clients.

paganel 4y ago
Supposedly these jobs are the “good” jobs to still have around no matter what because, again, supposedely, they create innovation, which innovation then creates an increase in productivity (among other things), which increase in productivity has been one of the Holy Grails of mainstream economics for the last half century (with the FED being a pillar of said mainstream economics). So, in that light, losing these jobs would be like throwing away the kid with the bathwater. I personally don’t agree with all the premises and conclusions I’ve enumerated above, but imo that’s how a mainstream economist (like one working for the FED right now) is most likely to view things.
- lazide 4y ago
  It’s the tide going out - we’ll see who’s swimming naked.
dboreham 4y ago
Employers are legally on the hook for payroll so what will happen is management/stock holders will foot the bill.
- noughtme 4y ago
  I think the implication is that companies won't have enough cash on hand to make payroll in future periods, so will layoff staff to cut payroll expensess.
- cjblack 4y ago

rcme 4y ago

If someone saves the bank, it'd have to be someone who a vested interest in making sure the bank doesn't fail. As it stands, the bank has negative value.