4 ms·

I don't understand why people are blowing this out of proportion. SVB had $100 billion of securities that are now worth about 70-80 billion. That plus short t

by treis 4y ago

I don't understand why people are blowing this out of proportion. SVB had $100 billion of securities that are now worth about 70-80 billion. That plus short term securities means they've got $100 billion liquid against $170 billion in deposits. So ~60% of deposits are coming on Monday. They've got an additional ~70 billion in loans that are likely less liquid to fill the remaining 70 billion of deposits. It's less certain how much these are worth but they're at least worth something. Net result is that depositors are losing 0-40% of their money. Much more likely that it's 0-15%. Which sucks but it's not going to kill an otherwise healthy company.

bognition 4y ago
Ok. But who is ever going to put money in SVB after this.
- rwc 4y ago
  SVB is gone. Forever.
- nimbleplum40 4y ago
  Nobody? The bank no longer exists…
- rywalker 4y ago
  The bank formerly known as SVB is no longer, it's now called "Deposit Insurance National Bank of Santa Clara" as a sort of temporary organization.
postalrat 4y ago
It becomes a bigger deal with you need to pay your bills now and you can't access your money. Maybe for months.
- treis 4y ago
  Again, likely ~60% of the money is coming Monday with more trickling over the next few weeks.
  - lazide 4y ago
    It would be unusual for every person to get literally 60% of their balance (exactly) in perfectly liquid form. Some will have 100% (usually those with smaller balances), some will have zero %, or up to some amount (a million or so?). The big risk is that things stay frozen while this gets figured out (weeks to months), which will have major knock on effects if people don’t have alternative sources of liquidity. People put money in the bank because they need it liquid (generally!). That said, your overall point is correct, and previously the way this has been handled FDIC wise is that they have another, larger bank buy them out to provide the short term liquidity while asset sales happen.
    - treis 4y ago
      The ~60% is the easy to value marketable assets SVB owned. The FDIC will do the accounting over the weekend and pay out whatever they calculate is covered on Monday. The loans SVB made are less liquid and are harder to market. The FDIC will try to find a buyer and may agree to backstop some losses to get a deal done. This won't take more than a couple weeks and might get done this weekend too.
velcrovan 4y ago
Cashflow, what is it, how does it work
- bobleeswagger 4y ago
  Apparently we're blowing this out of proportion. What proportion is valid when the same problem keeps happening?
andsoitis 4y ago
> I don't understand why people are blowing this out of proportion. SVB collapsed and is the largest bank failure since the 2008 financial crisis. It is unlikely to cause contagion (though some disagree) which means luckily the Fed won't raise interest rates to mitigate that risk (unless they also think there's risk of contagion, like some experts do).
KidComputer 4y ago
It's when they get their money that matters, it may takes months. Can't pay employees, cloud bills, vendors, etc until then. The most they get out on Monday is $250k, how long it takes the government to make good on the receivership certificate is unknown. Startups will likely have to take an additional line of credit from somewhere fast.
- skeeter2020 4y ago
  it will definitely take longer than even months to fully resolve, but the regulators are well aware of the risk of a slow resolution spreading panic beyond the true magnitude, causing a self-fulfilling prophecy. A delay of a few days in getting paid causing mass financial hardship should be a damning indictment of our collective lifestyle more than anything.
- ncallaway 4y ago
  > The most they get out on Monday is $250k, how long it takes the government to make good on the receivership certificate is unknown This isn’t quite accurate. The FDIC statement said they would make an advance payment on uninsured deposits within the next week. So, there’s a guarantee that there is some money beyond 250k coming in less than a week. My guess is the other commenter’s analysis is close. The FDIC will determine the absolute floor of the value of assets that SVB had, and that will be the basis of the advance payments. That will be the foundation of liquidity that companies will have while they wait for the rest of the process to conclude.
fairity 4y ago
> I don't understand why people are blowing this out of proportion The media is blowing this out of proportion bc it generates clicks. The investors are blowing this out of proportion bc in the slim chance that the FDIC doesn’t get this resolved over the next week, their companies are at risk. And, helping their companies avoid that albeit small risk is their job. I agree with you though. The most likely outcome is that almost everyone gets access to most of their funds next week.
- willis936 4y ago
  Bullshit. I saw what happened 12 years ago and I can see what is happening now. No one is blowing anything out of proportion and least of all if they are they are not the reason I am nervous about my near and medium term situation. Many others here are the same. The 16th largest US bank disappearing in 24 hours is not a molehill, particularly when it is the one that is the source of the check you depend on in existing in 6 days. Hope is not a strategy.
bobleeswagger 4y ago
> I don't understand why people are blowing this out of proportion. I don't understand why people like you don't see the writing on the wall. Fractional reserve banking is the problem. If you don't see it, I don't have time to explain it.
- MrMan 4y ago
  I sincerely hope you get to live in a world without modern banking and you get a chance to reflect on how dumb this outlook is
  - bobleeswagger 4y ago
    At this rate, we're all headed for a world without modern banking, caused by modern banking. Keep defending the establishment, they'll never save you.
    - panick21_ 4y ago
      Yeah fractional reserve banking that has existed for many 100s of years 'caused' the situation we are now in. Pretty damn good track record.
    - ianbotham 4y ago
      [flagged]
- darkerside 4y ago
  This is a cowardly way to disagree
  - bobleeswagger 4y ago
    Think your response is brave? At least someone is speaking up for the minority.
    - darkerside 4y ago
labcomputer 4y ago
While I generally agree about people blowing this out of proportion, here's a hypothetical: SVB seems to have had a very concentrated set of customer relationships. For example, a startup might do its banking at SVB, and the startup's founder might do his/her banking at SVB. That include taking loans to buy houses as cars--because traditional banks don't "get" borrowers who look like a founder. Now that startups can't make payroll (and some of the founder's personal deposits might be frozen), what if startup founders start defaulting on their loans? So SVB's successor has to write down those assets... which makes it harder to pay out the deposits... which triggers more defaults... which results in writing down more assets. That could turn into a very nasty death spiral, particularly if it creates contagion that spreads to other banks.
darkerside 4y ago
You serious? Something tells me you wouldn't be so cavalier about losing 15% of your personal liquid assets.

by treis 4y ago

bognition 4y ago

Ok. But who is ever going to put money in SVB after this.

rwc 4y ago
SVB is gone. Forever.
nimbleplum40 4y ago
Nobody? The bank no longer exists…
rywalker 4y ago
The bank formerly known as SVB is no longer, it's now called "Deposit Insurance National Bank of Santa Clara" as a sort of temporary organization.

postalrat 4y ago

It becomes a bigger deal with you need to pay your bills now and you can't access your money. Maybe for months.

treis 4y ago
Again, likely ~60% of the money is coming Monday with more trickling over the next few weeks.
- lazide 4y ago
  It would be unusual for every person to get literally 60% of their balance (exactly) in perfectly liquid form. Some will have 100% (usually those with smaller balances), some will have zero %, or up to some amount (a million or so?). The big risk is that things stay frozen while this gets figured out (weeks to months), which will have major knock on effects if people don’t have alternative sources of liquidity. People put money in the bank because they need it liquid (generally!). That said, your overall point is correct, and previously the way this has been handled FDIC wise is that they have another, larger bank buy them out to provide the short term liquidity while asset sales happen.
  - treis 4y ago
    The ~60% is the easy to value marketable assets SVB owned. The FDIC will do the accounting over the weekend and pay out whatever they calculate is covered on Monday. The loans SVB made are less liquid and are harder to market. The FDIC will try to find a buyer and may agree to backstop some losses to get a deal done. This won't take more than a couple weeks and might get done this weekend too.

velcrovan 4y ago

Cashflow, what is it, how does it work

bobleeswagger 4y ago
Apparently we're blowing this out of proportion. What proportion is valid when the same problem keeps happening?

andsoitis 4y ago

> I don't understand why people are blowing this out of proportion. SVB collapsed and is the largest bank failure since the 2008 financial crisis. It is unlikely to cause contagion (though some disagree) which means luckily the Fed won't raise interest rates to mitigate that risk (unless they also think there's risk of contagion, like some experts do).

KidComputer 4y ago

It's when they get their money that matters, it may takes months. Can't pay employees, cloud bills, vendors, etc until then. The most they get out on Monday is $250k, how long it takes the government to make good on the receivership certificate is unknown. Startups will likely have to take an additional line of credit from somewhere fast.

skeeter2020 4y ago
it will definitely take longer than even months to fully resolve, but the regulators are well aware of the risk of a slow resolution spreading panic beyond the true magnitude, causing a self-fulfilling prophecy. A delay of a few days in getting paid causing mass financial hardship should be a damning indictment of our collective lifestyle more than anything.
ncallaway 4y ago
> The most they get out on Monday is $250k, how long it takes the government to make good on the receivership certificate is unknown This isn’t quite accurate. The FDIC statement said they would make an advance payment on uninsured deposits within the next week. So, there’s a guarantee that there is some money beyond 250k coming in less than a week. My guess is the other commenter’s analysis is close. The FDIC will determine the absolute floor of the value of assets that SVB had, and that will be the basis of the advance payments. That will be the foundation of liquidity that companies will have while they wait for the rest of the process to conclude.

fairity 4y ago

> I don't understand why people are blowing this out of proportion The media is blowing this out of proportion bc it generates clicks. The investors are blowing this out of proportion bc in the slim chance that the FDIC doesn’t get this resolved over the next week, their companies are at risk. And, helping their companies avoid that albeit small risk is their job. I agree with you though. The most likely outcome is that almost everyone gets access to most of their funds next week.

willis936 4y ago
Bullshit. I saw what happened 12 years ago and I can see what is happening now. No one is blowing anything out of proportion and least of all if they are they are not the reason I am nervous about my near and medium term situation. Many others here are the same. The 16th largest US bank disappearing in 24 hours is not a molehill, particularly when it is the one that is the source of the check you depend on in existing in 6 days. Hope is not a strategy.

bobleeswagger 4y ago

> I don't understand why people are blowing this out of proportion. I don't understand why people like you don't see the writing on the wall. Fractional reserve banking is the problem. If you don't see it, I don't have time to explain it.

MrMan 4y ago
I sincerely hope you get to live in a world without modern banking and you get a chance to reflect on how dumb this outlook is
- bobleeswagger 4y ago
  At this rate, we're all headed for a world without modern banking, caused by modern banking. Keep defending the establishment, they'll never save you.
  - panick21_ 4y ago
    Yeah fractional reserve banking that has existed for many 100s of years 'caused' the situation we are now in. Pretty damn good track record.
  - ianbotham 4y ago
    [flagged]
darkerside 4y ago
This is a cowardly way to disagree
- bobleeswagger 4y ago
  Think your response is brave? At least someone is speaking up for the minority.
  - darkerside 4y ago

labcomputer 4y ago

While I generally agree about people blowing this out of proportion, here's a hypothetical: SVB seems to have had a very concentrated set of customer relationships. For example, a startup might do its banking at SVB, and the startup's founder might do his/her banking at SVB. That include taking loans to buy houses as cars--because traditional banks don't "get" borrowers who look like a founder. Now that startups can't make payroll (and some of the founder's personal deposits might be frozen), what if startup founders start defaulting on their loans? So SVB's successor has to write down those assets... which makes it harder to pay out the deposits... which triggers more defaults... which results in writing down more assets. That could turn into a very nasty death spiral, particularly if it creates contagion that spreads to other banks.

darkerside 4y ago

You serious? Something tells me you wouldn't be so cavalier about losing 15% of your personal liquid assets.