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https://twitter.com/DavidSacks/status/1634292056821764099 https://twitter.com/DavidSacks/status/1634292056821764099 Looking at the comments here, it's possible

https://twitter.com/DavidSacks/status/1634292056821764099 https://twitter.com/DavidSacks/status/1634292056821764099 Looking at the comments here, it's possible that this may trigger a run on banks.

tekla 4y ago
There is no evidence of this
dragontamer 4y ago
Why? My money at VMFXX is almost entirely composed of safe Fed Repos with average maturity of 2-weeks. VUSXX is mostly Treasury Bills, again of maturity averaging like 2-weeks. My money at SWVXX is composed of AAA-rated bank notes, of similar 2-weeks-ish maturity average. The idea of a bank, like SIVB, being composed of largely 30-year mortgages and 10Y or 30Y Treasury Bonds is insane. The bank deserves to die after taking such high duration risks. There should be _NO_ bailout. I can barely believe a bank was so stupid to keep customer deposits backed by something so risky. ---------- We've been preparing our financial system for the last 15 years (since 2008) for the next financial storm. We've got "stress tests" to see that various banks have severed contamination between each other, at least in theory. Lets see how good our preparations have held up. No point giving up and bailing things out before we've even tested our new financial system regulations. We can afford to let some banks go under. Only if the contagion has a chance of spreading everywhere should we consider the last-ditch effort of a bailout.
- cplusplusfellow 4y ago
  I couldn’t give two shits about banks that go under. The businesses that concern me are the ones who lose deposits.
  - JohnFen 4y ago
    They won't lose deposits except insofar as they decided it was OK to exceed the 250k limit for FDIC insurance. And in deciding to do that, they were deciding to take a risk and got burned by it -- but it was a risk they willingly took on.
    - celestialcheese 4y ago
      Asking honestly - if you just got $100m wired to your account from a Series C, what's the right way to protect your cash?
      - JohnFen 4y ago
        Honest answer? I don't know. But when my business was in a similar position (not from VCs and only about 25% of that amount), my business partner, attorney, and accountant sure did, so I know it can be done. IIRC, it was a fairly complex mix of different things. There certainly wasn't a single place that held all of the money. I know that this sort of problem isn't new, and I know that there are a variety of ways to mitigate the risk to acceptable levels. I don't think you can ever completely eliminate risk. Dealing with large amounts of money is very complex and really requires experts to do right. I'm an engineer, not a money expert. Your question is better aimed at a subject matter expert. But my underlying point isn't even that these companies did the wrong thing. Only that they took a risk -- and starting a business is itself taking a risk. That's not necessarily a bad thing. But when you take a risk, you're (obviously) taking a risk that the money will be lost. That's truly an unfortunate thing, but everyone knows the rules of the game.
        boeingUH60 4y ago
        In jest, this comment reminds be of that article about "The Gods On Hacker News" [1]. A random user just typed "when I had about $25mn in my business account..." like that's nothing, lol. 1- https://www.riknieu.com/the-gods-on-hackernews/ https://www.riknieu.com/the-gods-on-hackernews/
        JohnFen 4y ago
        I gotcha. But I never had anything like $25mil. The business did. It's a rather significant difference. Even there, that wasn't profit that could be spent freely. The majority of it was already spoken for to cover expenses.
      - dragontamer 4y ago
- qqqwerty 4y ago
  He is suggesting that the Fed/FDIC make depositors whole, not necessarily bail out the bank. There is a good chance that depositors will be made whole regardless, but even if it does require some intervention it is probably worth it to prevent this from spreading to other banks. There are very valid reasons why certain organizations would need to keep more than $250k in an account, and if everyone of them started transferring their money to a handful of the safest institutions, then things could quickly get out of control.
- beezle 4y ago
  It is not insane at all. Banks match expected duration of their assets and liabilities. This bank made a number of errors and was caught in a classic liquidity squeeze. Not the first and won't be the last.
SketchySeaBeast 4y ago
As a rule let's not use Twitter comments as indicators of anything, but most I see seem to either be enjoying the chaos or confused as to how SVB's bad decisions leading it to fail will lead to other banks failing.
EwanG 4y ago
Is that universally a bad thing? Are all US Banks so thinly capitalized that none of them could survive a run? If so, then doesn't that make one question why you'd ever keep money in a Bank in the first place? I get that the FDIC insurance is supposed to make you whole as long as you have less than $250K in a bank. But then you have to ask if the FDIC can actually cover that for several banks at a time - particularly at a time when the debt ceiling has not been raised and so Treasury can probably ill afford additional unplanned spending.
- dougmwne 4y ago
  What you are talking about here is the financial apocalypse. If a hundred million people all lose the money in their bank accounts, then we go back to the barter system overnight. The thing you will be bartering will likely be seeds and ammunition.
- 7speter 4y ago
  Though I’ve never connected the dots the way you have, the last time major commercial banks (like WaMu) failed it was because of being caught swapping much riskier assets than this article is pinning the blame of SVB failing for. Also, when it was clear that there was a risk for cascade collapse of major commercial banks, fed leadership and potentially people from the fdic went to congress and told them to stop playing partisan football, and TARP was passed within a week. If SVB really failed because it misstepped and believed it would make more money off of government bonds and didn’t, I don’t really see there being a risk of the major banks collapsing. If lots of smaller banks banked on (no pun intended) doing the same thing though…
fshbbdssbbgdd 4y ago
The subtext here is David Sacks and his friends are investors in Silicon Valley companies. Lots of Silicon Valley companies are depositors of SVB and could lose money if there is a haircut on assets over $250k, or at least will lose temporary access to their cash. David Sacks wants SVB to be bailed out by a major bank so those deposits are made good. He’s talking about a wider economic impact because that’s an argument that such a bailout is necessary for the country, not just local VCs.
- wpietri 4y ago
  The especially funny thing to me is that some VCs were telling their portfolio companies to get their money out of SVP first thing this morning. So Sacks is a VC asking for a bailout on a bank run triggered by VCs. Cry me a river. It's nice that he took time from his busy schedule decimating Twitter to share his views. But in my opinion VCs can't simultaneously claim to be such financial geniuses that they deserve lower taxes (via the carried interest loophole) but such babes in the woods that they need Uncle Sam to bail them out for a bad financial decision. Pick a lane, buddy.
  - malermeister 4y ago
    [flagged]
    - wpietri 4y ago
      Ah yes, a classic for sure. That pairs well with the libertarians who demand freedom to do anything they want to others, with a state just large enough to keep their inferiors from doing anything in return.
    - MrMan 4y ago
      yeah its high comedy
- practice9 4y ago
  > friends Chamath?
happytoexplain 4y ago
I don't use Twitter. The Tweets I see when I click this link are 80% political shitflinging from one side of US politics (even the replies to each one are 100% one-sided), and 20% non-political. Why?
- danielheath 4y ago
  Because that’s estimated to maximise the chance of you signing up?
- quickthrowman 4y ago
  Twitter attempts to manipulate your emotions by showing you controversial things to keep you looking at ads as long as possible, just like every other social media company.
spamizbad 4y ago
Sorry, but the systemic risk here is vastly overstated. Yes, this will be painful to the tech sector but they made some truly awful decisions and have to pay the piper. We should also consider the moral hazard at play here. How are future tech CEO's going to go into work every day and completely crush it 200% if they know that the government will bail them out if their monkey jpeg startup fails? A bailout will only breed lazy entrepreneurs, taking hard-earned tax dollars away from America's job-doers.
- 7speter 4y ago
  Dunno if you’re being intentionally tongue in cheek, but a monkey jpeg startup is pretty lazy/scammy/bs-y
  - arcanemachiner 4y ago
    I believe it is a reference to the NFT craze. So, yes to all 3.
- yieldcrv 4y ago
  all I’m seeing is that the monkey jpeg startup just needs to never take VC capital from Andreesen Horowitz and then won’t be tied to using that one bank just stick with selling directly to collectors and you already have enough money
  - iSnow 4y ago
    >just stick with selling directly to collectors and you already have enough money Uh, oh! Unregistered security...
    - yieldcrv 4y ago
      I’ll accept that if baseball cards are securities too
bagels 4y ago
I don't think the statement is completely misplaced as other comments on this thread indicate. Everyone has to be wondering if their bank is next. Just an anecdote, but, I'm sitting here wondering if I should sell the bank bonds I bought because the counterparty risk just skyrocketed. It doesn't take much to get the snowball going.
lotsofpulp 4y ago
Did he delete this tweet? https://twitter.com/TheyCallMeTarz/status/1634316411232288771?s=20 https://twitter.com/TheyCallMeTarz/status/163431641123228877...
tonetheman 4y ago
[dead]

https://twitter.com/DavidSacks/status/1634292056821764099 https://twitter.com/DavidSacks/status/1634292056821764099 Looking at the comments here, it's possible that this may trigger a run on banks.

tekla 4y ago

There is no evidence of this

dragontamer 4y ago

Why? My money at VMFXX is almost entirely composed of safe Fed Repos with average maturity of 2-weeks. VUSXX is mostly Treasury Bills, again of maturity averaging like 2-weeks. My money at SWVXX is composed of AAA-rated bank notes, of similar 2-weeks-ish maturity average. The idea of a bank, like SIVB, being composed of largely 30-year mortgages and 10Y or 30Y Treasury Bonds is insane. The bank deserves to die after taking such high duration risks. There should be _NO_ bailout. I can barely believe a bank was so stupid to keep customer deposits backed by something so risky. ---------- We've been preparing our financial system for the last 15 years (since 2008) for the next financial storm. We've got "stress tests" to see that various banks have severed contamination between each other, at least in theory. Lets see how good our preparations have held up. No point giving up and bailing things out before we've even tested our new financial system regulations. We can afford to let some banks go under. Only if the contagion has a chance of spreading everywhere should we consider the last-ditch effort of a bailout.

cplusplusfellow 4y ago
I couldn’t give two shits about banks that go under. The businesses that concern me are the ones who lose deposits.
- JohnFen 4y ago
  They won't lose deposits except insofar as they decided it was OK to exceed the 250k limit for FDIC insurance. And in deciding to do that, they were deciding to take a risk and got burned by it -- but it was a risk they willingly took on.
  - celestialcheese 4y ago
    Asking honestly - if you just got $100m wired to your account from a Series C, what's the right way to protect your cash?
    - JohnFen 4y ago
      Honest answer? I don't know. But when my business was in a similar position (not from VCs and only about 25% of that amount), my business partner, attorney, and accountant sure did, so I know it can be done. IIRC, it was a fairly complex mix of different things. There certainly wasn't a single place that held all of the money. I know that this sort of problem isn't new, and I know that there are a variety of ways to mitigate the risk to acceptable levels. I don't think you can ever completely eliminate risk. Dealing with large amounts of money is very complex and really requires experts to do right. I'm an engineer, not a money expert. Your question is better aimed at a subject matter expert. But my underlying point isn't even that these companies did the wrong thing. Only that they took a risk -- and starting a business is itself taking a risk. That's not necessarily a bad thing. But when you take a risk, you're (obviously) taking a risk that the money will be lost. That's truly an unfortunate thing, but everyone knows the rules of the game.
      - boeingUH60 4y ago
        In jest, this comment reminds be of that article about "The Gods On Hacker News" [1]. A random user just typed "when I had about $25mn in my business account..." like that's nothing, lol. 1- https://www.riknieu.com/the-gods-on-hackernews/ https://www.riknieu.com/the-gods-on-hackernews/
        JohnFen 4y ago
        I gotcha. But I never had anything like $25mil. The business did. It's a rather significant difference. Even there, that wasn't profit that could be spent freely. The majority of it was already spoken for to cover expenses.
    - dragontamer 4y ago
qqqwerty 4y ago
He is suggesting that the Fed/FDIC make depositors whole, not necessarily bail out the bank. There is a good chance that depositors will be made whole regardless, but even if it does require some intervention it is probably worth it to prevent this from spreading to other banks. There are very valid reasons why certain organizations would need to keep more than $250k in an account, and if everyone of them started transferring their money to a handful of the safest institutions, then things could quickly get out of control.
beezle 4y ago
It is not insane at all. Banks match expected duration of their assets and liabilities. This bank made a number of errors and was caught in a classic liquidity squeeze. Not the first and won't be the last.

SketchySeaBeast 4y ago

As a rule let's not use Twitter comments as indicators of anything, but most I see seem to either be enjoying the chaos or confused as to how SVB's bad decisions leading it to fail will lead to other banks failing.

EwanG 4y ago

Is that universally a bad thing? Are all US Banks so thinly capitalized that none of them could survive a run? If so, then doesn't that make one question why you'd ever keep money in a Bank in the first place? I get that the FDIC insurance is supposed to make you whole as long as you have less than $250K in a bank. But then you have to ask if the FDIC can actually cover that for several banks at a time - particularly at a time when the debt ceiling has not been raised and so Treasury can probably ill afford additional unplanned spending.

dougmwne 4y ago
What you are talking about here is the financial apocalypse. If a hundred million people all lose the money in their bank accounts, then we go back to the barter system overnight. The thing you will be bartering will likely be seeds and ammunition.
7speter 4y ago
Though I’ve never connected the dots the way you have, the last time major commercial banks (like WaMu) failed it was because of being caught swapping much riskier assets than this article is pinning the blame of SVB failing for. Also, when it was clear that there was a risk for cascade collapse of major commercial banks, fed leadership and potentially people from the fdic went to congress and told them to stop playing partisan football, and TARP was passed within a week. If SVB really failed because it misstepped and believed it would make more money off of government bonds and didn’t, I don’t really see there being a risk of the major banks collapsing. If lots of smaller banks banked on (no pun intended) doing the same thing though…

fshbbdssbbgdd 4y ago

The subtext here is David Sacks and his friends are investors in Silicon Valley companies. Lots of Silicon Valley companies are depositors of SVB and could lose money if there is a haircut on assets over $250k, or at least will lose temporary access to their cash. David Sacks wants SVB to be bailed out by a major bank so those deposits are made good. He’s talking about a wider economic impact because that’s an argument that such a bailout is necessary for the country, not just local VCs.

wpietri 4y ago
The especially funny thing to me is that some VCs were telling their portfolio companies to get their money out of SVP first thing this morning. So Sacks is a VC asking for a bailout on a bank run triggered by VCs. Cry me a river. It's nice that he took time from his busy schedule decimating Twitter to share his views. But in my opinion VCs can't simultaneously claim to be such financial geniuses that they deserve lower taxes (via the carried interest loophole) but such babes in the woods that they need Uncle Sam to bail them out for a bad financial decision. Pick a lane, buddy.
- malermeister 4y ago
  [flagged]
  - wpietri 4y ago
    Ah yes, a classic for sure. That pairs well with the libertarians who demand freedom to do anything they want to others, with a state just large enough to keep their inferiors from doing anything in return.
  - MrMan 4y ago
    yeah its high comedy
practice9 4y ago
> friends Chamath?

happytoexplain 4y ago

I don't use Twitter. The Tweets I see when I click this link are 80% political shitflinging from one side of US politics (even the replies to each one are 100% one-sided), and 20% non-political. Why?

danielheath 4y ago
Because that’s estimated to maximise the chance of you signing up?
quickthrowman 4y ago
Twitter attempts to manipulate your emotions by showing you controversial things to keep you looking at ads as long as possible, just like every other social media company.

spamizbad 4y ago

Sorry, but the systemic risk here is vastly overstated. Yes, this will be painful to the tech sector but they made some truly awful decisions and have to pay the piper. We should also consider the moral hazard at play here. How are future tech CEO's going to go into work every day and completely crush it 200% if they know that the government will bail them out if their monkey jpeg startup fails? A bailout will only breed lazy entrepreneurs, taking hard-earned tax dollars away from America's job-doers.

7speter 4y ago
Dunno if you’re being intentionally tongue in cheek, but a monkey jpeg startup is pretty lazy/scammy/bs-y
- arcanemachiner 4y ago
  I believe it is a reference to the NFT craze. So, yes to all 3.
yieldcrv 4y ago
all I’m seeing is that the monkey jpeg startup just needs to never take VC capital from Andreesen Horowitz and then won’t be tied to using that one bank just stick with selling directly to collectors and you already have enough money
- iSnow 4y ago
  >just stick with selling directly to collectors and you already have enough money Uh, oh! Unregistered security...
  - yieldcrv 4y ago
    I’ll accept that if baseball cards are securities too

bagels 4y ago

I don't think the statement is completely misplaced as other comments on this thread indicate. Everyone has to be wondering if their bank is next. Just an anecdote, but, I'm sitting here wondering if I should sell the bank bonds I bought because the counterparty risk just skyrocketed. It doesn't take much to get the snowball going.

lotsofpulp 4y ago

Did he delete this tweet? https://twitter.com/TheyCallMeTarz/status/1634316411232288771?s=20 https://twitter.com/TheyCallMeTarz/status/163431641123228877...

tonetheman 4y ago

[dead]