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Agree. SVB was not small, but an order of magnitude smaller than the large money center banks (Citi, BofA, JPMChase). That being said, nearly every other bank
by JackFr 4y ago
Agree.
SVB was not small, but an order of magnitude smaller than the large money center banks (Citi, BofA, JPMChase).
That being said, nearly every other bank of that size submitted Dodd Frank Stress Test results to the Fed in 2022.
https://www.federalreserve.gov/publications/files/2022-dfast-results-20220623.pdf https://www.federalreserve.gov/publications/files/2022-dfast...
Somehow SVB avoided this. I don’t see this as systemic at all. The FDIC will make depositors whole and the owners and managers did a bad job and they lose. The worst possible response would be a bailout of any sort beyond ordinary FDIC receivership.
- boppo1 4y ago97% of depositors exceeded the FDIC limit.
- phone8675309 4y agoThat stinks, and I feel for them. Let's hope people will learn a lesson from this - never keep all your eggs in one basket.
- fbdab103 4y agoAren't we talking about hundreds of millions/billions of dollars? At that scale, not a lot of baskets available.
- throwing_away 4y agoCould a tech company have split their accounts into separate $250k accounts? I'm not sure if the bank would offer that.
- x3n0ph3n3 4y agoNo, FDIC insurance applies to account owners, not accounts. Fun fact, if you're married, you can actually turn that into 3 * FDIC insurance limit. - Account 1: You - Account 2: Your spouse - Account 3: Jointly you and your spouse
- paulclinger 4y agoEven more: single, joint, retirement, revocable and irrevocable trust accounts all fall into different categories and are insured independently for each account owner in each bank (the joint account is 250k for all co-owners): https://www.fdic.gov/resources/deposit-insurance/financial-products-insured/ https://www.fdic.gov/resources/deposit-insurance/financial-p...
- edulix 4y agoOr you could hold short-term t-bills for any extra money over the FDIC insurance limit. Then you are good unless the US Gov goes bankrupt, which is a non-zero risk but much lower and different.
- tome 4y agoYes, I don’t understand what systemic forces are making this not the standard practice.
- phone8675309 4y agoSVB and its depositors most likely felt that SVB was too big to fail and that the government would just bail them out
- quesera 4y agoYou'd need to split across multiple banks. This can be done manually, with some logistical challenges. This can also be done automatically, e.g. via CDARS.
- otikik 4y agoWhat about this other lesson: bankers need to be punished harder.
- youngtaff 4y agoOr perhaps the other lesson is VCs shouldn’t create a run on the bank they holds their funds and the companies they invest in funds
- phone8675309 4y agoWe don't punish bankers in this country.
- HyperSane 4y agoThen they should have understood the risk they were taking.
- WeylandYutani 4y agoAnd chosen a better bank. Besides common strategy in my country: have more money than 250k spread it around at multiple banks.
- HyperSane 4y agoThere are services that do that automatically.
- ageek123 4y agoI’m not sure you’re using the standard definition of “make whole”…