3 ms·

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 And now that the deposits are withdrawn, SVB ahs to liquidate thise assets at current market value, which is (maybe?)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.

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.