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Tons of VCs had their assets there too. It could lead to serious ramifications, anyone with substantially more than $250k in that bank is out a lot and only tim

Tons of VCs had their assets there too. It could lead to serious ramifications, anyone with substantially more than $250k in that bank is out a lot and only time will tell how much they’ll be able to recoup. It’s not an FTX situation, the assets are somewhat there, but the losses in securities look extreme and unwinding them at a fair price may take months, if not years

shawabawa3 4y ago
It is actually exactly an FTX situation Not as extreme maybe, and less fraud got us here, but $assets < $deposits
- cowmoo728 4y ago
  There is a very large difference between FTX and SVB. The people behind FTX will probably go to jail because they committed crimes and effectively stole money. SVB mismanaged interest rate risk and ended up on the wrong side of interest rate hikes. They had similar results of people quickly trying to pull all their money out, but it's not "exactly an FTX situation".
  - blibble 4y ago
    no bank on earth can survive every depositor turning up at once and demanding their money whereas an exchange shouldn't have a position at all and a hedge fund normally doesn't allow withdrawals at all (without vast notice)
    - freejazz 4y ago
      Well, people didn't show up to demand their money for no reason.
- hef19898 4y ago
  My reading is that the long term book value of those assets is bigger than the deposits. And now that the deposits are withdrawn, SVB ahs to liquidate thise assets at current market value, which is (maybe?) lower than deposits. So, at the least, it looks like a strange risk management approach on behalf of SVB. And those clients that kept most of their money at this one, single bank.
- ethbr0 4y ago
  From TFA: >> As of December 31, 2022, Silicon Valley Bank had approximately $209.0 billion in total assets and about $175.4 billion in total deposits.
- ptero 4y ago
  I see it as very different from FTX. In SVB there was no fraud and no criminal wrongdoing; there may be no moral wrongdoing either. SVB was a chartered bank, subject to all regulation and reserve balance rules that other banks follow. As far as we know they followed all regulation to a letter. Two things got SVB down. First, a rapid change in interest rate got their assets repriced down. It did not need to be fatal, this happens to all banks when interest rates rise quickly. Second, its customers did a ran and went to pull their money. If all depositors of the BoA or Chase pull money out, those banks will collapse, too. This is highly unlikely for the BoA -- if folks start saying that BoA will collapse most depositors would shrug it off; the diversity of its base will make a run highly unlikely. But as SVB was a much smaller bank and had a lot of similar customers (startups advised by similar VCs) the ran was seen as plausible at which point it was over -- customers pulled enough money to kill the bank. This is the price we pay for the flexibility of the current banking system that allows people to get loans and free checking accounts. My 2c.
  - Mistletoe 4y ago
    There may be no moral wrongdoing but it seems quite dumb to be so heavily in securities that massively lose value when rates go up and rates are at historic lows, no? The only job for these execs was to know which way the wind is blowing and they showed themselves to be not much better than every other rabid fool that bought GME etc. thinking things would never change and bull runs and low rates would last forever.
  - freejazz 4y ago
    To be fair, it sounds like some shockingly negligent management on SVB's part. Obviously thats orders of magnitude off from the complete lack of management w/ SBF.
- eshack94 4y ago
  This is a bad take. It isn't the same situation.
ivalm 4y ago
Presumably VCs have only a tiny fraction of their fund as available as cash, so I guess it won’t be too brutal.
- zamnos 4y ago
  The VC fund only has a tiny fraction of their fund as cash because most of it is loaned to to their portfolio companies, which have it in cash at the bank their VC partners told them to (because you can't pay payroll with Tbills), which, to a large degree (judging from the comments on the thread from last night) was SVB. It's going to be brutal for every company who didn't get their funds out before this morning's announcement, not to mention the possible contagion risks.
  - ivalm 4y ago
    Yes, the companies will be screwed but that’s not what I meant. What I meant by VCs have a tiny fraction of their fund as cash is that cash is held by LPs and is called upon only when the VC funds a startup. When a VC raises a $1B fund they don’t get the money, they get commitment that the money will be available. So this means that this failure shouldn’t affect VCs ability to invest in the future as most LPs didn’t hold their money in SVB.
    - gcek9 4y ago
      That's right. Although there is an interesting thing to consider: if you look at page 13 of the deck they shared on Wednesday[1], it says 56% of SVB's total loans are in the form of lines of credit issued to PE/VC funds, secured by their LP commitments. I imagine many if not most of those are fairly small in size, but it's possible some funds took out much larger lines of credit, secured by their future LP commitments, and were holding that cash at SVB. So we could definitely see some funds affected to varying extents. [1] https://s201.q4cdn.com/589201576/files/doc_downloads/2023/03/Q1-2023-Mid-Quarter-Update-vFINAL3-030823.pdf https://s201.q4cdn.com/589201576/files/doc_downloads/2023/03...
      - 4y ago
anonymouse008 4y ago
9 times out of 10 bankruptcy is a cashflow mismatch - this is going to be quite painful for a lot of things.

shawabawa3 4y ago

It is actually exactly an FTX situation Not as extreme maybe, and less fraud got us here, but $assets < $deposits

cowmoo728 4y ago
There is a very large difference between FTX and SVB. The people behind FTX will probably go to jail because they committed crimes and effectively stole money. SVB mismanaged interest rate risk and ended up on the wrong side of interest rate hikes. They had similar results of people quickly trying to pull all their money out, but it's not "exactly an FTX situation".
- blibble 4y ago
  no bank on earth can survive every depositor turning up at once and demanding their money whereas an exchange shouldn't have a position at all and a hedge fund normally doesn't allow withdrawals at all (without vast notice)
  - freejazz 4y ago
    Well, people didn't show up to demand their money for no reason.
hef19898 4y ago
My reading is that the long term book value of those assets is bigger than the deposits. And now that the deposits are withdrawn, SVB ahs to liquidate thise assets at current market value, which is (maybe?) lower than deposits. So, at the least, it looks like a strange risk management approach on behalf of SVB. And those clients that kept most of their money at this one, single bank.
ethbr0 4y ago
From TFA: >> As of December 31, 2022, Silicon Valley Bank had approximately $209.0 billion in total assets and about $175.4 billion in total deposits.
ptero 4y ago
I see it as very different from FTX. In SVB there was no fraud and no criminal wrongdoing; there may be no moral wrongdoing either. SVB was a chartered bank, subject to all regulation and reserve balance rules that other banks follow. As far as we know they followed all regulation to a letter. Two things got SVB down. First, a rapid change in interest rate got their assets repriced down. It did not need to be fatal, this happens to all banks when interest rates rise quickly. Second, its customers did a ran and went to pull their money. If all depositors of the BoA or Chase pull money out, those banks will collapse, too. This is highly unlikely for the BoA -- if folks start saying that BoA will collapse most depositors would shrug it off; the diversity of its base will make a run highly unlikely. But as SVB was a much smaller bank and had a lot of similar customers (startups advised by similar VCs) the ran was seen as plausible at which point it was over -- customers pulled enough money to kill the bank. This is the price we pay for the flexibility of the current banking system that allows people to get loans and free checking accounts. My 2c.
- Mistletoe 4y ago
  There may be no moral wrongdoing but it seems quite dumb to be so heavily in securities that massively lose value when rates go up and rates are at historic lows, no? The only job for these execs was to know which way the wind is blowing and they showed themselves to be not much better than every other rabid fool that bought GME etc. thinking things would never change and bull runs and low rates would last forever.
- freejazz 4y ago
  To be fair, it sounds like some shockingly negligent management on SVB's part. Obviously thats orders of magnitude off from the complete lack of management w/ SBF.
eshack94 4y ago
This is a bad take. It isn't the same situation.

ivalm 4y ago

Presumably VCs have only a tiny fraction of their fund as available as cash, so I guess it won’t be too brutal.

zamnos 4y ago
The VC fund only has a tiny fraction of their fund as cash because most of it is loaned to to their portfolio companies, which have it in cash at the bank their VC partners told them to (because you can't pay payroll with Tbills), which, to a large degree (judging from the comments on the thread from last night) was SVB. It's going to be brutal for every company who didn't get their funds out before this morning's announcement, not to mention the possible contagion risks.
- ivalm 4y ago
  Yes, the companies will be screwed but that’s not what I meant. What I meant by VCs have a tiny fraction of their fund as cash is that cash is held by LPs and is called upon only when the VC funds a startup. When a VC raises a $1B fund they don’t get the money, they get commitment that the money will be available. So this means that this failure shouldn’t affect VCs ability to invest in the future as most LPs didn’t hold their money in SVB.
  - gcek9 4y ago
    That's right. Although there is an interesting thing to consider: if you look at page 13 of the deck they shared on Wednesday[1], it says 56% of SVB's total loans are in the form of lines of credit issued to PE/VC funds, secured by their LP commitments. I imagine many if not most of those are fairly small in size, but it's possible some funds took out much larger lines of credit, secured by their future LP commitments, and were holding that cash at SVB. So we could definitely see some funds affected to varying extents. [1] https://s201.q4cdn.com/589201576/files/doc_downloads/2023/03/Q1-2023-Mid-Quarter-Update-vFINAL3-030823.pdf https://s201.q4cdn.com/589201576/files/doc_downloads/2023/03...
    - 4y ago

anonymouse008 4y ago

9 times out of 10 bankruptcy is a cashflow mismatch - this is going to be quite painful for a lot of things.