16 ms·

Etsy Delays Seller Payouts Due to Run on Silicon Valley Bank

193 points by O__________O 4y ago

Eumenes 4y ago
[flagged]
- wetpaws 4y ago
  It absolutely was a bank run in the most classic sense of this term.
  - kolbe 4y ago
    I think the classic sense is when a too many people withdraw, and even though the bank has sufficient assets to cover their liabilities, they don't have necessary cash to honor the withdrawals. SVB doesn't have enough assets, and has been insufficiently capitalized based on proper valuation techniques for quite some time. It's not just a cash on hand issue. You could say they're both different forms of bank runs, but in SVB's case, they've been essentially legally defrauding their depositors by misrepresenting their capital base. And people got wise to it. I'm not disagreeing with you, but saying that if someone else wants to make the distinction, I wouldn't quibble.
    - cududa 4y ago
      You have no idea what a bank run is do you
- yuliyp 4y ago
  Why the quotes? 25% of deposits being withdrawn within a day is pretty much the definition of a bank run, isn't it?
- taspeotis 4y ago
  People took out so much money they were insolvent. https://dfpi.ca.gov/2023/03/10/california-financial-regulator-takes-possession-of-silicon-valley-bank/ https://dfpi.ca.gov/2023/03/10/california-financial-regulato... > SAN FRANCISCO – The California Department of Financial Protection and Innovation (DFPI) announced today that, pursuant to California Financial Code section 592, it has taken possession of Silicon Valley Bank, citing inadequate liquidity and insolvency. The DFPI appointed the Federal Deposit Insurance Corporation (FDIC) as receiver of Silicon Valley Bank.
  - dahdum 4y ago
    IIUC, they were technically insolvent and desperately trying for an equity raise first, then people took out their money.
    - rnk 4y ago
      And this is well explained in many places. SVB had deposits, many over 250k. They bought long term us govt bonds with rates available at the time. Then rates went up quite a bit over a short term. The old bonds lost value, because new bonds had higher rates, making the old bonds with lower rates worth less. These were effectively losses that were not yet recognized. The bank must have bought new bonds with new deposits as rates went up. But they still have loses on their old bonds, those more than a year old or so. That could have been a lot of money. Then when lots of people starting taking their money out, they had to sell some of those lower rate, lower valued (losses) bonds to pay those people out. This increased as more people started taking their money out, eventually the bank lost all its capital through these "old bond w lower rates losses". This is fascinating, but also impactful because probably lots of banks have the same problem in the us.
mikekij 4y ago
The sentiment on Twitter seems to be “tough. You, Etsy seller, took a risk by selling on a platform that used a bank that made a bad investment. The tax payer shouldn’t bail out a bunch of rich pottery artists.” These sorts of effects (Etsy sellers not getting paid) are going to show up all through the ecosystem if 25% of venture backed companies can’t make payroll next week. SVB equity holders should go to zero. But it’s in our collective best interest to make sure that depositors have timely access to some meaningful portion of their deposits.
- UncleOxidant 4y ago
  > if 25% of venture backed companies can’t make payroll next week. That percentage seems really high. Is it likely that 25% of all venture backed companies had all of their money in SVB? Of the ones that did, many of the smaller ones could still meet payroll next week and possibly for a few weeks based on $250K that they'd still have access to. We found out that Roku, for example, had a large amount of money in SVB, but it was only about 25% of their cash meaning they had cash in other banks as well that are still liquid. Will Roku even lose all of that 25%? Probably not. They won't be able to access it for a while, but in the end they'll probably end up getting at least some of that back.
  - deleted 4y ago
    [deleted]
  - Beaver117 4y ago
    >Will Roku even lose all of that 25%? Probably not. They won't be able to access it for a while, but in the end they'll probably end up getting at least some of that back. How will they get it back? The bank is gone. FDIC will only give them $250k right?
    - hoofhearted 4y ago
      No. FDIC will initially write checks to everyone with an account for up to $250,000.. Once the dust has settled, they will return whatever they recover back to the account holders accordingly.
sourcecodeplz 4y ago
Talk about ripple effects.
- tedivm 4y ago
  Ripple actually got their payroll out late yesterday.
  - sp332 4y ago
    *Rippling (but lol)
einpoklum 4y ago
I once bought a ~40 USD item on Etsy, and it never arrived. Contacted the seller, they said they would resend, but that didn't happen and the seller went silent. Contacted customer support - never heard from them. Lesson learned: Can't used Etsy except when you have perfect trust in the seller. PS - This is the absolute opposite experience than what I've had on, say, AliExpress - where disputes may not always get settled in your favor, but they are settled in an orderly and timely manner.
- kevincrane 4y ago
  Do you think the seller failed to resend because they lost their funds due to SVB collapsing? Or is this anecdote related to the posted story in a different way I'm missing
- electrondood 4y ago
  One time I called customer support for AT&T. It was actually pretty good. So that's my story.
- MrStonedOne 4y ago
  [dead]
sql-spy 4y ago
[flagged]
- rufus_foreman 4y ago
  I have no idea, but is it legal to encourage a bank run?
  - deleted 4y ago
    [deleted]
  - ceejayoz 4y ago
    Yes, as long as it's with truthful, non-insider information and you don't have a fiduciary duty to the bank or its customers.
Asparagirl 4y ago
I have an Etsy shop. I have a teeny tiny side gig selling plants: homegrown dahlia tubers, tulip bulbs, unusual and super-hot chili peppers grown from seed, fancy-schmancy houseplants, etc. I may or may not be out $21 for the month, big whoop. But for a lot of people I know who sell on the platform, Etsy is the whole enchilada of their business. A lot of people stay with it, despite the fees they charge, because a centralized marketplace is a much better way to find a market than your own store, domain name, merchant account, search experience, customer services, etc... So, uh, asking for a friend: what banks do eBay, Shopify, OfferUp, Facebook Marketplace, and Stripe use? Because there's unfortunately no reason this problem can't happen again to others...
- colechristensen 4y ago
  (Hm guess I was wrong)
  - Asparagirl 4y ago
    > "regardless if it was over the insured limit" Sorry, dude, this is flat-out wrong. Please go find out what happened to depositors over the FDIC limits at IndyMac and Silver State, just a few years ago.
    - TMWNN 4y ago
      I don't know where this idea that "Everyone who has ever banked at a bank that went bust has gotten 100% of their money back" came from, but I keep seeing it in SVB-related discussions, so thank you for correctly citing IndyMac. ("Everyone who has ever banked at a bank that went bust has gotten 100% of the money FDIC guarantees" is correct, but that's not what they're saying.) Given that more than 90% of SVB accounts are larger than $250K, this is especially relevant!
      - colechristensen 4y ago
        Honestly it is difficult to find the correct information from reliable sources.
deleted 4y ago
[deleted]
flangola7 4y ago
So how are we supposed to avoid this? If you can't trust that your money in a bank will be there tomorrow, then where should we put it? I thought this was supposed to be impossible, besides total civilization collapse. You risk losing money when it's in the stock market, not when it's in a bank.
- bentlegen 4y ago
  This has literally been an issue with banks for all of modern society. FDIC insurance did not materialize randomly. There are many answers: multiple bank accounts, holding other securities like treasuries (which are guaranteed by the US government), bonds, stocks, etc.
tus666 4y ago
Misleading title. Correct title "Etsy stops paying sellers due to liquidity issues arising from SVB failure, may be about to go bust".
lightedman 4y ago
Etsy has done many things that made me leave the platform entirely. When I realized that money that should go directly to me just sits in Etsy's accounts so they (and whomever is holding the money) can gamble on it until payout time made me leave for good. You pay me IMMEDIATELY on my sales or you don't get my business and my money.
- galleywest200 4y ago
  You can choose to get your payouts daily. https://help.etsy.com/hc/en-us/articles/360046998234-How-to-Receive-Your-Etsy-Payments-Deposit?segment=selling#h_3ef1e246-0b57-4967-80c1-b945f676d0a0 https://help.etsy.com/hc/en-us/articles/360046998234-How-to-...
  - lightedman 4y ago
    It was not like that in the beginning, when they opened the floodgates to mass-produced stuff (despite promising they would not.)

193 points by O__________O 4y ago

Eumenes 4y ago

[flagged]

wetpaws 4y ago
It absolutely was a bank run in the most classic sense of this term.
- kolbe 4y ago
  I think the classic sense is when a too many people withdraw, and even though the bank has sufficient assets to cover their liabilities, they don't have necessary cash to honor the withdrawals. SVB doesn't have enough assets, and has been insufficiently capitalized based on proper valuation techniques for quite some time. It's not just a cash on hand issue. You could say they're both different forms of bank runs, but in SVB's case, they've been essentially legally defrauding their depositors by misrepresenting their capital base. And people got wise to it. I'm not disagreeing with you, but saying that if someone else wants to make the distinction, I wouldn't quibble.
  - cududa 4y ago
    You have no idea what a bank run is do you
yuliyp 4y ago
Why the quotes? 25% of deposits being withdrawn within a day is pretty much the definition of a bank run, isn't it?
taspeotis 4y ago
People took out so much money they were insolvent. https://dfpi.ca.gov/2023/03/10/california-financial-regulator-takes-possession-of-silicon-valley-bank/ https://dfpi.ca.gov/2023/03/10/california-financial-regulato... > SAN FRANCISCO – The California Department of Financial Protection and Innovation (DFPI) announced today that, pursuant to California Financial Code section 592, it has taken possession of Silicon Valley Bank, citing inadequate liquidity and insolvency. The DFPI appointed the Federal Deposit Insurance Corporation (FDIC) as receiver of Silicon Valley Bank.
- dahdum 4y ago
  IIUC, they were technically insolvent and desperately trying for an equity raise first, then people took out their money.
  - rnk 4y ago
    And this is well explained in many places. SVB had deposits, many over 250k. They bought long term us govt bonds with rates available at the time. Then rates went up quite a bit over a short term. The old bonds lost value, because new bonds had higher rates, making the old bonds with lower rates worth less. These were effectively losses that were not yet recognized. The bank must have bought new bonds with new deposits as rates went up. But they still have loses on their old bonds, those more than a year old or so. That could have been a lot of money. Then when lots of people starting taking their money out, they had to sell some of those lower rate, lower valued (losses) bonds to pay those people out. This increased as more people started taking their money out, eventually the bank lost all its capital through these "old bond w lower rates losses". This is fascinating, but also impactful because probably lots of banks have the same problem in the us.

mikekij 4y ago

The sentiment on Twitter seems to be “tough. You, Etsy seller, took a risk by selling on a platform that used a bank that made a bad investment. The tax payer shouldn’t bail out a bunch of rich pottery artists.” These sorts of effects (Etsy sellers not getting paid) are going to show up all through the ecosystem if 25% of venture backed companies can’t make payroll next week. SVB equity holders should go to zero. But it’s in our collective best interest to make sure that depositors have timely access to some meaningful portion of their deposits.

UncleOxidant 4y ago
> if 25% of venture backed companies can’t make payroll next week. That percentage seems really high. Is it likely that 25% of all venture backed companies had all of their money in SVB? Of the ones that did, many of the smaller ones could still meet payroll next week and possibly for a few weeks based on $250K that they'd still have access to. We found out that Roku, for example, had a large amount of money in SVB, but it was only about 25% of their cash meaning they had cash in other banks as well that are still liquid. Will Roku even lose all of that 25%? Probably not. They won't be able to access it for a while, but in the end they'll probably end up getting at least some of that back.
- deleted 4y ago
  [deleted]
- Beaver117 4y ago
  >Will Roku even lose all of that 25%? Probably not. They won't be able to access it for a while, but in the end they'll probably end up getting at least some of that back. How will they get it back? The bank is gone. FDIC will only give them $250k right?
  - hoofhearted 4y ago
    No. FDIC will initially write checks to everyone with an account for up to $250,000.. Once the dust has settled, they will return whatever they recover back to the account holders accordingly.

sourcecodeplz 4y ago

Talk about ripple effects.

tedivm 4y ago
Ripple actually got their payroll out late yesterday.
- sp332 4y ago
  *Rippling (but lol)

einpoklum 4y ago

I once bought a ~40 USD item on Etsy, and it never arrived. Contacted the seller, they said they would resend, but that didn't happen and the seller went silent. Contacted customer support - never heard from them. Lesson learned: Can't used Etsy except when you have perfect trust in the seller. PS - This is the absolute opposite experience than what I've had on, say, AliExpress - where disputes may not always get settled in your favor, but they are settled in an orderly and timely manner.

kevincrane 4y ago
Do you think the seller failed to resend because they lost their funds due to SVB collapsing? Or is this anecdote related to the posted story in a different way I'm missing
electrondood 4y ago
One time I called customer support for AT&T. It was actually pretty good. So that's my story.
MrStonedOne 4y ago
[dead]

sql-spy 4y ago

[flagged]

rufus_foreman 4y ago
I have no idea, but is it legal to encourage a bank run?
- deleted 4y ago
  [deleted]
- ceejayoz 4y ago
  Yes, as long as it's with truthful, non-insider information and you don't have a fiduciary duty to the bank or its customers.

Asparagirl 4y ago

I have an Etsy shop. I have a teeny tiny side gig selling plants: homegrown dahlia tubers, tulip bulbs, unusual and super-hot chili peppers grown from seed, fancy-schmancy houseplants, etc. I may or may not be out $21 for the month, big whoop. But for a lot of people I know who sell on the platform, Etsy is the whole enchilada of their business. A lot of people stay with it, despite the fees they charge, because a centralized marketplace is a much better way to find a market than your own store, domain name, merchant account, search experience, customer services, etc... So, uh, asking for a friend: what banks do eBay, Shopify, OfferUp, Facebook Marketplace, and Stripe use? Because there's unfortunately no reason this problem can't happen again to others...

colechristensen 4y ago
(Hm guess I was wrong)
- Asparagirl 4y ago
  > "regardless if it was over the insured limit" Sorry, dude, this is flat-out wrong. Please go find out what happened to depositors over the FDIC limits at IndyMac and Silver State, just a few years ago.
  - TMWNN 4y ago
    I don't know where this idea that "Everyone who has ever banked at a bank that went bust has gotten 100% of their money back" came from, but I keep seeing it in SVB-related discussions, so thank you for correctly citing IndyMac. ("Everyone who has ever banked at a bank that went bust has gotten 100% of the money FDIC guarantees" is correct, but that's not what they're saying.) Given that more than 90% of SVB accounts are larger than $250K, this is especially relevant!
    - colechristensen 4y ago
      Honestly it is difficult to find the correct information from reliable sources.

deleted 4y ago

[deleted]

flangola7 4y ago

So how are we supposed to avoid this? If you can't trust that your money in a bank will be there tomorrow, then where should we put it? I thought this was supposed to be impossible, besides total civilization collapse. You risk losing money when it's in the stock market, not when it's in a bank.

bentlegen 4y ago
This has literally been an issue with banks for all of modern society. FDIC insurance did not materialize randomly. There are many answers: multiple bank accounts, holding other securities like treasuries (which are guaranteed by the US government), bonds, stocks, etc.

tus666 4y ago

Misleading title. Correct title "Etsy stops paying sellers due to liquidity issues arising from SVB failure, may be about to go bust".

lightedman 4y ago

Etsy has done many things that made me leave the platform entirely. When I realized that money that should go directly to me just sits in Etsy's accounts so they (and whomever is holding the money) can gamble on it until payout time made me leave for good. You pay me IMMEDIATELY on my sales or you don't get my business and my money.

galleywest200 4y ago
You can choose to get your payouts daily. https://help.etsy.com/hc/en-us/articles/360046998234-How-to-Receive-Your-Etsy-Payments-Deposit?segment=selling#h_3ef1e246-0b57-4967-80c1-b945f676d0a0 https://help.etsy.com/hc/en-us/articles/360046998234-How-to-...
- lightedman 4y ago
  It was not like that in the beginning, when they opened the floodgates to mass-produced stuff (despite promising they would not.)