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Disclaimer: I know next to nothing about the financial system or banking inside baseball. This is just one founder's reaction to the whole mess. We were reluct

Disclaimer: I know next to nothing about the financial system or banking inside baseball. This is just one founder's reaction to the whole mess. We were reluctant to move our funds most of the day yesterday. Felt like a lot of dumb panic. We had emails from a few investors, most saying "stay calm" but one saying "move your money to this bank that I'm invested in!" ugh. We decided near the end of the day to move at least half our funds (in a money market) out, but by then it was too late to initiate anything. Now we're finding this morning nobody at SVB is returning our calls. We are able to log into the online portal just fine. So not sure if/when we'll be able to to move anything. Annoyingly, we're moving it because everyone else is moving it. I know it's a really dumb, self-fulling prophecy but at this point you don't want to be the last in line. Note: I'm still not actually worried that our money will evaporate permanently. But I can definitely see a situation where it is inaccessible for several weeks, causing issues with payroll and operations. I expect worst case a large bank will swoop in last second and buy all the dumb investment vehicles/bonds for pennies on the dollar and then our access to cash will come back.

gizmo 4y ago
When assets << liabilities nobody wants to buy the bank. Especially when you don't get any time to do due diligence. This isn't just a liquidity problem, this is a solvency problem. The bonds they have aren't temporarily worth less because nobody wants to buy them, the bonds are liquid and have a fair market value based on the current interest rate environment. Your cash isn't at the bank anymore. Your cash has been invested in bonds and those bonds are now worth less than the number you see in your bank account. That's bad.
- asimpletune 4y ago
  It's not a solvency problem. The bonds are valued based on when they mature, not what they fetch on the open market. It is a liquidity issue, which means the money is there, but they can not access the money in the amount of time they need it by.
  - Edmond 4y ago
    There is that economic adage attributed to Keynes: In the long run we're all dead. If you need money but your current assets in whatever form can't furnish that fund for you, I am afraid you're broke.
    - bloppe 4y ago
      So you're saying having zero money is equivalent to having future money that can be borrowed against in the present? Obviously the latter is not as good as just having money. But it's clearly better than the former. Therein lies the difference between solvency and liquidity problems.
      - Edmond 4y ago
        Not at all, my point is to avoid fancy words like "solvency" and "liquidity", they blind you to the basic fact that if you need cash today and you can't get it then you're broke. Whether you have assets that *you* believe you could draw on in the future doesn't matter when your need is immediate.
        bloppe 4y ago
        You say blindingly fancy words. I say important difference. You say basic fact. I say oversimplification. We can argue about the semantics of the word "broke", but the difference here is between losing all your money vs. having to take out a loan now that you're pretty much guaranteed to be able to repay when your bonds mature and only losing the interest payments on that loan.
        orangesite 4y ago
        But here's the the bugger: Folk don't give you loans when you're insolvent.
        bloppe 4y ago
- nemothekid 4y ago
  >The bonds they have aren't temporarily worth less because nobody wants to buy them, the bonds are liquid and have a fair market value based on the current interest rate environment. Maybe I’m missing something but couldn’t you just potentially wait for the bonds to mature?
  - gizmo 4y ago
    "Dear customer, we're currently having a teensy tiny problem with liquidity. Kindly do not withdraw any money for the next 10 years. No worries, though! Everything is fine. Please don't panic."
  - albatross13 4y ago
    From what I understand, for this method to become profitable (or even reasonably close) the interest rates have to drop down to where they were when the bonds were purchased. Otherwise the bond yields will never be worth it and the price of the bond(s) continue to stay lower than what they were purchased for. These bonds were most likely purchased when interest rates were near 0 and I don't think anyone is banking on those rates returning any time soon. That being said, I'm going off of some basic reading I've done this morning: https://www.fbfs.com/learning-center/bonds-interest-rates-and-the-impact-of-inflation https://www.fbfs.com/learning-center/bonds-interest-rates-an...
    - altdataseller 4y ago
      Stupid question but why were they buying bonds when interest rated was near 0? Were they betting on negative interest rates?
      - muzz 4y ago
        Short-term rates were near 0, but Long-term rates were 1.x%, which doesn't sound like much but keep in mind they bought tens of billions of dollars of these bonds. That 1.x% on that huge amount would be over $1 Billion per year. It's a mismatch in terms of the duration, ie your depositors can ask for their money back at any time but the bonds don't mature for many years, but as long as the deposits are kept there the bank can get away with it. The succinct answer is: Greed.
ak_111 4y ago
May I ask you why do you sound so calm and confident that your money will not evaporate permanently (above the FDIC guarantee)? Banks going bust is a totally normal thing in a capitalist system, and bigger more established banks than SVB have done so only a decade ago.
- whitemary 4y ago
  The banks a decade ago got bailed out. None of their customers lost money.
  - toomuchtodo 4y ago
    A bailout is not guaranteed. How long it takes to be made whole is unknown. How long can you go without cash while regulators work out the details. How long will payroll and creditors wait for you to get your cash back. Hope for the best, plan for the worst. Edit (epoch time 16784666958): https://www.cnbc.com/2023/03/10/silicon-valley-bank-is-shut-down-by-regulators-fdic-to-protect-insured-deposits.html https://www.cnbc.com/2023/03/10/silicon-valley-bank-is-shut-... (Silicon Valley Bank is shut down by regulators, FDIC to protect insured deposits)
    - whitemary 4y ago
      Nonsense. A bailout has more precedent now, and the current political situation with the Democrats in the White House virtually guarantees it. The last bailout never had a precedent or approval of the American people, but they did it anyway and they will do it again. Capitalism doesn’t allow planning for the worst. Karl Marx showed us this 150 years ago, and the working class is regularly reminded in blood, but the ruling class just never seems to get it. I wonder why.
      - dudeDDRrulez 4y ago
        Dodd Frank did away with bail outs. It will be a “bail in” using customer deposits this time around.
      - 4y ago
time_to_smile 4y ago
> Felt like a lot of dumb panic. A lesson everyone should have learned from the toilet paper scarcity crisis during the pandemic is that it doesn't matter if it's rational or smart, if you want to keep your ass clean make sure you're in the front of a line when people are panicking. You could make a pretty compelling argument that the last decade the entire tech sector has been propped up by "dumb exuberance", but people aren't complaining about the money they made during that period.
- bloppe 4y ago
  If you can tell that people are panicking, you're not at the front of the line.
  - ornornor 4y ago
    I’m reusing that.
Lightbody 4y ago
Well this comment aged well
- zamnos 4y ago
  At least you're able to acknowledge your mistakes. For your employee's sakes, I hope you're able to make next payroll.
- sergiomattei 4y ago
  Thoughts now?
draw_down 4y ago
[dead]
justin66 4y ago
> Annoyingly, we're moving it because everyone else is moving it. I know it's a really dumb, self-fulling prophecy but at this point you don't want to be the last in line. On the bright side, Ronnie James Dio wrote a song about your current predicament.
sritam7 4y ago
I guess you were right - In historic last-minute deal, HSBC acquires Silicon Valley Bank UK, says all depositors’ money is safe https://techcrunch.com/2023/03/13/in-historic-last-minute-deal-hsbc-acquires-silicon-valley-bank-uk-says-all-depositors-money-is-safe/ https://techcrunch.com/2023/03/13/in-historic-last-minute-de...

gizmo 4y ago

When assets << liabilities nobody wants to buy the bank. Especially when you don't get any time to do due diligence. This isn't just a liquidity problem, this is a solvency problem. The bonds they have aren't temporarily worth less because nobody wants to buy them, the bonds are liquid and have a fair market value based on the current interest rate environment. Your cash isn't at the bank anymore. Your cash has been invested in bonds and those bonds are now worth less than the number you see in your bank account. That's bad.

asimpletune 4y ago
It's not a solvency problem. The bonds are valued based on when they mature, not what they fetch on the open market. It is a liquidity issue, which means the money is there, but they can not access the money in the amount of time they need it by.
- Edmond 4y ago
  There is that economic adage attributed to Keynes: In the long run we're all dead. If you need money but your current assets in whatever form can't furnish that fund for you, I am afraid you're broke.
  - bloppe 4y ago
    So you're saying having zero money is equivalent to having future money that can be borrowed against in the present? Obviously the latter is not as good as just having money. But it's clearly better than the former. Therein lies the difference between solvency and liquidity problems.
    - Edmond 4y ago
      Not at all, my point is to avoid fancy words like "solvency" and "liquidity", they blind you to the basic fact that if you need cash today and you can't get it then you're broke. Whether you have assets that *you* believe you could draw on in the future doesn't matter when your need is immediate.
      - bloppe 4y ago
        You say blindingly fancy words. I say important difference. You say basic fact. I say oversimplification. We can argue about the semantics of the word "broke", but the difference here is between losing all your money vs. having to take out a loan now that you're pretty much guaranteed to be able to repay when your bonds mature and only losing the interest payments on that loan.
        orangesite 4y ago
        But here's the the bugger: Folk don't give you loans when you're insolvent.
        bloppe 4y ago
nemothekid 4y ago
>The bonds they have aren't temporarily worth less because nobody wants to buy them, the bonds are liquid and have a fair market value based on the current interest rate environment. Maybe I’m missing something but couldn’t you just potentially wait for the bonds to mature?
- gizmo 4y ago
  "Dear customer, we're currently having a teensy tiny problem with liquidity. Kindly do not withdraw any money for the next 10 years. No worries, though! Everything is fine. Please don't panic."
- albatross13 4y ago
  From what I understand, for this method to become profitable (or even reasonably close) the interest rates have to drop down to where they were when the bonds were purchased. Otherwise the bond yields will never be worth it and the price of the bond(s) continue to stay lower than what they were purchased for. These bonds were most likely purchased when interest rates were near 0 and I don't think anyone is banking on those rates returning any time soon. That being said, I'm going off of some basic reading I've done this morning: https://www.fbfs.com/learning-center/bonds-interest-rates-and-the-impact-of-inflation https://www.fbfs.com/learning-center/bonds-interest-rates-an...
  - altdataseller 4y ago
    Stupid question but why were they buying bonds when interest rated was near 0? Were they betting on negative interest rates?
    - muzz 4y ago
      Short-term rates were near 0, but Long-term rates were 1.x%, which doesn't sound like much but keep in mind they bought tens of billions of dollars of these bonds. That 1.x% on that huge amount would be over $1 Billion per year. It's a mismatch in terms of the duration, ie your depositors can ask for their money back at any time but the bonds don't mature for many years, but as long as the deposits are kept there the bank can get away with it. The succinct answer is: Greed.

ak_111 4y ago

May I ask you why do you sound so calm and confident that your money will not evaporate permanently (above the FDIC guarantee)? Banks going bust is a totally normal thing in a capitalist system, and bigger more established banks than SVB have done so only a decade ago.

whitemary 4y ago
The banks a decade ago got bailed out. None of their customers lost money.
- toomuchtodo 4y ago
  A bailout is not guaranteed. How long it takes to be made whole is unknown. How long can you go without cash while regulators work out the details. How long will payroll and creditors wait for you to get your cash back. Hope for the best, plan for the worst. Edit (epoch time 16784666958): https://www.cnbc.com/2023/03/10/silicon-valley-bank-is-shut-down-by-regulators-fdic-to-protect-insured-deposits.html https://www.cnbc.com/2023/03/10/silicon-valley-bank-is-shut-... (Silicon Valley Bank is shut down by regulators, FDIC to protect insured deposits)
  - whitemary 4y ago
    Nonsense. A bailout has more precedent now, and the current political situation with the Democrats in the White House virtually guarantees it. The last bailout never had a precedent or approval of the American people, but they did it anyway and they will do it again. Capitalism doesn’t allow planning for the worst. Karl Marx showed us this 150 years ago, and the working class is regularly reminded in blood, but the ruling class just never seems to get it. I wonder why.
    - dudeDDRrulez 4y ago
      Dodd Frank did away with bail outs. It will be a “bail in” using customer deposits this time around.
    - 4y ago

time_to_smile 4y ago

> Felt like a lot of dumb panic. A lesson everyone should have learned from the toilet paper scarcity crisis during the pandemic is that it doesn't matter if it's rational or smart, if you want to keep your ass clean make sure you're in the front of a line when people are panicking. You could make a pretty compelling argument that the last decade the entire tech sector has been propped up by "dumb exuberance", but people aren't complaining about the money they made during that period.

bloppe 4y ago
If you can tell that people are panicking, you're not at the front of the line.
- ornornor 4y ago
  I’m reusing that.

Lightbody 4y ago

Well this comment aged well

zamnos 4y ago
At least you're able to acknowledge your mistakes. For your employee's sakes, I hope you're able to make next payroll.
sergiomattei 4y ago
Thoughts now?

draw_down 4y ago

[dead]

justin66 4y ago

> Annoyingly, we're moving it because everyone else is moving it. I know it's a really dumb, self-fulling prophecy but at this point you don't want to be the last in line. On the bright side, Ronnie James Dio wrote a song about your current predicament.

sritam7 4y ago

I guess you were right - In historic last-minute deal, HSBC acquires Silicon Valley Bank UK, says all depositors’ money is safe https://techcrunch.com/2023/03/13/in-historic-last-minute-deal-hsbc-acquires-silicon-valley-bank-uk-says-all-depositors-money-is-safe/ https://techcrunch.com/2023/03/13/in-historic-last-minute-de...