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This is bad. This is real bad. ...and I don't think we're going to know the depth of the badness for a while. Think the credit crunch that precipitated the 200
by rickreynoldssf 4y ago
This is bad. This is real bad. ...and I don't think we're going to know the depth of the badness for a while. Think the credit crunch that precipitated the 2008 crash. Though this will be localized to tech startups and it's only the kinds of people who read Hacker News who are going to be affected. A massive wrench has been tossed into the economic machinery of Silicon Valley and other tech hubs.
A bunch of companies now have no or little operating cash and all they're going to have on Monday is $250k each.
- mtoner23 4y agoNope, this is why we have the FDIC, most americans wont even notice
- postalrat 4y agoDid you even read the comment you replied to?
- mtoner23 4y agothe FDIC does more than hand out 250k checks. They will find a buyer for this bank who can successfully manage its assets. and most likely will payout uninsured account holders at least 90 cents on the dollar. Probably even all 100 cents. Remember the bailouts the goverments made to banks on 08, we didnt lose a cent on those. the govt made money. We are gonna be ok
- rickreynoldssf 4y agoThis isn't going to happen before Monday. Or before the AWS bill is due. $250k isn't going to cover most company's operating cash needs.
- mtoner23 4y agofair point. we'll see how it goes though, i dont expect it to be a banking collapse thougu
- in_cahoots 4y agoIf the Twitter saga has shown anything, it’s that companies can afford not to pay on their contracts, at least in the short term. Amazon will give them a grace period because a customer paying a few weeks late is better than the customer going belly-up.
- rickreynoldssf 4y agoIf your company's next payroll is more than $250k you're going to notice. Not even getting into accounts payable for various other suppliers etc.
- swarnie 4y agoI do thin Xe's right in saying "Most Americans wont notice" How many of you are directly paid by the Valley tech sector?
- disgruntledphd2 4y agoIt's the indirect effects that'll get you though. Consider my company has nothing at SVB, but 50% of their customers do. Still gonna be pretty bad when half your clients can't pay you.
- jcadam 4y agoHadn't considered this. I work for a consultancy...
- greatwave1 4y agoYeah, but you're pulling that 50% number from thin air. How many companies do you think actually have 50% of their customers banked by SVB? SVB had ~$200b in total assets, less than 1% of the total assets in banks across the U.S. alone. There are definitely going to be indirect effects, but HN and other voices in early-stage tech are predisposed to overestimate the impact on the broader economy.
- bostik 4y agoThe article gave two numbers I didn't know about, and both came as a surprise: > As at the end of 2022, it had 37,466 deposit customers, each holding in excess of $250,000 per account -- and -- The bank does have another 106,420 customers whose accounts are fully insured but they only control $4.8 billion of deposits So SVB had only about ~150k banking customers. And of those, less than 40k are actually affected by this debacle. But those were concentrated enough to make SVB the 20th largest bank in the US. Puts things in perspective.
- rco8786 4y agoFDIC is only good for $250k per account...
- mtoner23 4y agoThe fdic is much more than just 250k per account
- rco8786 4y agoCan you expand on that? The FDIC per account insurance limit is definitely $250k. Are you saying that the FDIC has other protections in place, or something else?
- astrange 4y agoPer account type per bank per depositor isn't it?
- toomuchtodo 4y agoSounds like an opportunity to provide bridge financing to these startups on the basis of their potential FDIC deposits claim?
- djbusby 4y agoVery high risk.
- toomuchtodo 4y agoFor sure, but that’s where the high reward is. Scared money don’t make money.
- UncleOxidant 4y agoIs there even time for some lending entity to do enough due diligence to figure out which of the startups are even worth gambling on? That could take weeks or months. In the meantime payrolls have to be met, leases and light bills paid.
- deleted 4y ago[deleted]
- dahdum 4y agoYou aren't gambling on the startup if the collateral is the receivership certificate / advance dividend. Those should be quick to verify. Any loans up to $250k would be even easier.
- toomuchtodo 4y agoYes? https://news.ycombinator.com/item?id=35102196 https://news.ycombinator.com/item?id=35102196
- toomuchtodo 4y agohttps://news.ycombinator.com/item?id=35112410 https://news.ycombinator.com/item?id=35112410
- coredog64 4y agoThat’s not true. The FDIC will be disbursing money above and beyond the $250k to account holders. It won’t be the balance of their account but they’ll also get a piece of paper laying out how much more they’re potentially owed. As the FDIC winds the bank down, it will use that money to make account-holders whole. The big losers are SVB shareholders and bond holders, as they’re going to get the biggest haircut.
- rickreynoldssf 4y agoADP isn't going to take that paper to cut paychecks. AWS isn't going to want that paper either. The best you can do is take that paper and get a loan with a stupid high interest rate and that's not going to happen quickly.
- avs733 4y agoI may be wrong but... ADP could always take it at 90%, figure out the expected return and everybody wins AWS could take it plus some equity for credits? I imagine the incremental cost of providing the compute is worth the risk No one forces the economy to operate on dollars - and both traditionally and currently a whole lot of it doesn't.
- DonsDiscountGas 4y agoThe Fed is having an emergency meeting Monday. My guess is they loan the bank-formerly-known-as-SVB as much as necessary to cover depositors needs for the next year, and get paid back as the banks assets are sold off. https://www.federalreserve.gov/aboutthefed/boardmeetings/20230313closed.htm https://www.federalreserve.gov/aboutthefed/boardmeetings/202...