12 ms·

A Bank of One's Own

166 points by foundart 4y ago

foundart 4y ago
An interesting take on SVB
RcouF1uZ4gsC 4y ago
> But the only way they were able to participate in that world, and serve as a role model for others, was by quietly borrowing from a bank that understood what it meant to be a young venture capitalist with carry, but not enough savings. Using borrowed money for venture capital seems very risky and not something that a bank should be celebrated for enabling.
- margorczynski 4y ago
  Wasn't mixing "normal" banking with investment banking banned in the US after 2007? Or this is something else that doesn't fall into that category?
  - NERD_ALERT 4y ago
    Mixing commercial and investment banking was banned in 1933 by the Glass Steagall Act. The act was partially repealed in 1999 which allowed banks to engage in both commercial and investment banking again. As far as I know banks have been able to engage in both since then.
- WalterSear 4y ago
  It wasn't. It made bad bets on bonds and lost $2 billion dollars of the $200+ billion dollars it held in deposits. I must be missing something, because I fail to see how this is such a big deal, or why anyone will be taking much of a haircut on their deposits.
  - grey-area 4y ago
    The prices SVB and other banks use for their assets are not marked to market. Selling it all, today, would mean that they get back far less than the total deposits. Selling it over time or parking it with a temp bad bank would be fine though and that is what fdic will probably do.
    - WalterSear 4y ago
      That's to my point though: there's not going to be a fire sale.
      - grey-area 4y ago
        Well let’s hope not, and let’s hope they arrange an orderly process by 9AM Monday. Friday was not great and appeared to take them by surprise.
        WalterSear 4y ago
        Well, not everyone, given that the CEO's been selling shares :)
        grey-area 4y ago
        By them I meant the authorities who intervened midday which is unusual I think? I do feel the svb ceo/cfo etc should face consequences for their actions, bonuses should be clawed back, but really those are not the important actions here - providing stability to the entire banking system and making sure hundreds of businesses do not close at once because of a bank run are far more important. Otherwise there is significant systemic risk.
  - Danieru 4y ago
    2 Billion is only what they lost on the ATM portfolio. What triggered the attempted capital raise. The unrealized loses were a further 16Billion+. 18Billion lost of a capital base of 200Billion is clearly a big deal.
    - WalterSear 4y ago
      Yes, that is different.
breck 4y ago
> Silicon Valley Bank is not a bank for rich people. Dataset needed.
hn_throwaway_99 4y ago
I thought this was a great post. I've commented elsewhere that I'd be pissed at the moral hazard of unsecured depositors getting a federal bailout (though not if the feds just assist in finding a buyer or do as much as possible to ensure depositors can access their funds quickly), but at the same time I'm saddened by so much of the gleeful tribalism I see online (but not too saddened - many of the "dancing on your grave" posts stand out primarily for their stupidity). SVB was uniquely positioned to help the startup ecosystem in a way that larger banks were not. I hope something similar replaces them (albeit with better risk controls for their asset portfolio).
- roundandround 4y ago
  It seems to me like too much of the current situation has jurisdictional gaming. We complain that banks no longer want to take the risk of their traditional role in small business loans and have a lot of economic distortion from that. Silicon Valley apparently had better access to a bank that took risks and SVB seems to be the bank of over half of tech and public health startups.. Other jurisdictions should feel a bit cheated if their regulators didn't help their small business get the most out financing and FDIC bailouts.. Internationally, other countries have to question why they aren't giving some kind of handouts to gain more of the startup scene for occasional crises. Really a fine mess.
- erik_seaberg 4y ago
  The moral hazard of trusting a licensed bank? Do we want depositors to be hesitant to do that? The Fed won’t even allow “narrow banks” (that keep a 100% reserve ratio and cannot fail) because they think it’s crucial for our deposits to be available for loans and bonds.
  - obblekk 4y ago
    Depositors who hold more than 250k in checking? The probably should be expected to be sophisticated capital managers rather than kept on safety wheels. The alternative is scarier: infinite deposit insurance exposes government to larger and larger defaults requiring them to regulate banks down to which industries and loans they can work with or not.
deleted 4y ago
[deleted]
latchkey 4y ago
> I'm perplexed, then, to see so many people gleefully celebrate the collapse of an institution that helped level the playing field for people from all backgrounds. It isn't about being gleeful. This bank took massive risks, which were enabled by Trump changing the laws (and they supported), which then allowed them to take even more risky bets (aka: level the playing field). https://www.motherjones.com/politics/2023/03/silicon-valley-bank-greg-becker-dodd-frank/ https://www.motherjones.com/politics/2023/03/silicon-valley-... Now we get to see the fallout from all of that, which was even predicted by someone who was paying attention... https://seekingalpha.com/article/4565388-svb-financial-blow-up-risk https://seekingalpha.com/article/4565388-svb-financial-blow-... https://seekingalpha.com/article/4586033-svb-financial-blew-up-even-faster-than-i-expected https://seekingalpha.com/article/4586033-svb-financial-blew-... https://seekingalpha.com/article/4586342-svb-financial-today-wasnt-run-on-bank-it-was-sprint https://seekingalpha.com/article/4586342-svb-financial-today...
- Convolutional 4y ago
  First, I shook my head at the same sentence. The railway union whose potential strike was recently broken by the government and railroads levels the playing field (and works to evert things like the Ohio toxic train derailment). Silicon Valley Bank does not level the playing field. The sob story about the partner at the VC firm did pull at my heart strings though. The CEO of SVB spent half a million dollars to roll back banking regulation five years ago. Hoisted by his own petard...well not really - bonuses went out hours before the seizure and he was selling shares like crazy before the collapse. Now David Sacks and all the tech bro libertarians want the taxpayer to bail out the SVB depositors beyond the FDIC limit.
  - monkeydreams 4y ago
    Libertarions really are the house cats that think they are lions.
- grey-area 4y ago
  This was a crisis of confidence. Most other US banks are just as exposed to long term bonds and mortgages and have also been hung out to dry by the fed raising rates after a decade of zirp and we distorted yields and prices. Yes this bank failed to hedge risk appropriately, but if customer confidence fails, all major US banks would be vulnerable to exactly the same situation. IMO share/bond holders should lose if all but depositors should lose nothing/very little (which is perfectly possible and not too expensive). Otherwise the risk of contagion is very real. Which fractional reserve bank is actually safe from a bank run without the implicit promise of an fdic backstop?
erik_seaberg 4y ago
It worries me that people assume SVB must have taken crazy risks on startups or crypto, when the actual mistakes were locking up so much money in long-term mortgage and Treasury bonds, and having clients who talk to each other.
- lazyeye 4y ago
  Other people are arguing that SVB spent too much time focusing on fashionable, non-core issues rather than the business of actually running a bank. Clearly they were not giving sufficient attention to the core business for one reason or another.
- swatcoder 4y ago
  From the bank’s perspective, uninsured depositors are essentially margin lenders who can call in their loan at any time. If your lenders are all from one especially volatile and incestuous industry, you put yourself at especially high risk of experiencing a run and defaulting. You need to manage risk and investments accordingly. They took a high-risk position with eyes wide open and have collapsed as a result.
  - cjalmeida 4y ago
    Exactly. They should’ve bought short term t-bills to match deposit maturities. But then how could they offer above market rate yields on their checking accounts, right?
- cscurmudgeon 4y ago
  This episode has taught me the random person on the street (on the left and the right) is horribly ignorant, has dirt-poor reading comprehension, and is seething with envy towards Silicon Valley.
  - salawat 4y ago
    ...So what have you done to help uplift the sullied masses? If the answer is nothing, then you now know why.
sql-spy 4y ago
[flagged]
- davidmr 4y ago
  Do you think that encouraging a run on a bank is truly the responsible thing to do today?
  - bryceacc 4y ago
    do you think having uninsured levels of money is a responsible thing to do ever?
- idlewords 4y ago
  When taking financial advice from this site, remember that green in the username means "go ahead and do what some stranger told you"
Osmose 4y ago
> I'm perplexed, then, to see so many people gleefully celebrate the collapse of an institution that helped level the playing field for people from all backgrounds. "Making loans to startups that otherwise wouldn't get a loan because they are too risky for traditional banks" does certainly grant more people access to the high-cost high-risk world of tech startups, but I dunno that it's a terribly compelling method to level the playing field because it does nothing to challenge the system itself, only gives new players a chance to spin the wheel. The backlash against tech in general stems from the system itself and the things it prioritizes, like massive scale at all costs in service to investors being a vehicle for the rich to become richer. If you start from a position like "tech billionaires and their antics are a significant source of problems in the world" then a bank like SVB that lets more "normal" folks participate doesn't do anything to stop those said billionaires from _also_ profiting off these new incoming startups, except making the pool to choose from even bigger. It's frustration with the system that drives these sentiments, not specifically SVB as the "secret backdoor for poors into the startup casino".
- eastbound 4y ago
  For the last two years on Youtube in France, we’ve had ads saying “DON’T HAVE MONEY? YOU CAN STILL BUY A HOME!” It’s the 3.6 Roentgen of banking. Everyone with no money was able to buy. Startups are too many being created. Flooding the economy with Covid money made that everyone had way too much money. Everything is in flames, we’re just merely discovering it. It’s gonna be a tough year.
photochemsyn 4y ago
As an aside, this is a curious situation that points to capitalism (in its current form) being something of a continuation of aristocracy but by other means: > "Some employees can't afford to buy their equity at all, so that when their startup is acquired or goes public, they earn nothing from the outcome, looking on in silence while their colleagues become millionaires. The people who find themselves in this situation are, of course, disproportionately those who work in lower-paying roles, and who don't have family or friends to borrow from." A society in which each person is given something like a 'equity stake' at adulthood might work. It would be their decision as to how to use it - buy equity in a startup, pay for a college education, start a small business, etc. Maybe certain limitations on frivolous activities would make sense. It's similar to universal basic income, but more delivered in one chunk rather than as a pittance spread out over time. It would create a much more even playing field while still allowing for competitive success stories.
- paulddraper 4y ago
  I'm confused. RSUs cost nothing. ISOs are heavily discounted especially because they are offered years before IPO. Yes there is a case where employees give up equity entirely, but I would guess this is < 15%. And when the 16th percentile is the aristocracy...
  - phendrenad2 4y ago
    Probably very few startup employees can't afford to exercise SOME options, but how many can exercise ALL of their options? Most probably fall somewhere in-between, hence the existence of the high-interest loans mentioned in the article.
dools 4y ago
The obvious fact is that we don’t need private banks to run our payment system or provide deposit accounts. It can be done perfectly well by allowing individuals to have accounts at the central bank through a postal savings system. There is probably some value in having banks to do loan underwriting and allowing private credit creation but this whole thing if allowing private banks to run everything and then providing a federal guarantee of some deposits is absurd, just take that function away from the private sector.
- nightmarish 4y ago
  How do you handle fraud in this setup? Lol.
  - djbusby 4y ago
    Same way as now? Eventual Consistency that the current financial industry uses.
  - ghayes 4y ago
    The bank doesn’t need to perform those functions like debit and credit cards in this set-up. Transfer funds to a private bank for that. The public bank is just to secure deposits.
- gruez 4y ago
  >There is probably some value in having banks to do loan underwriting and allowing private credit creation but why would you ever put your money in a commercial bank when you can deposit at the federal reserve with 0 risk?
  - xboxnolifes 4y ago
    Interest
    - dools 4y ago
      I’m not an expert in the mechanics but I think there is also a way for private credit creation to run as a separate operation, similar to how loans were originated in the sub prime mortgage crisis and then immediately sold on. I’m not recommending that happen, but a similar system would allow private credit creation without the loan issuers being the primary deposit taking institution. But yes private banks could also operate term deposits and pay interest to attract deposits to satisfy net flows of funds with other institutions.
idk1 4y ago
This it a little tangental but a lot of the times when I see a title that says "An X of One's Own" and then see the content I wonder if it relates at all to Virginia Woolf's A Room of One's Own. For example I once read an Ikea blog post titled "A Storage Space of One's Own", and the content of the post was nothing at all to do with how women can achieve the same things as men if they are allowed the space to do so, the blog post was about Ikea's top five storage units. This was one was suspect until the end, and then I think it wraps up quite nicely. All people should be allowed to flourish. And we should take that positive note away from it.
morelisp 4y ago
> Several years into my time in San Francisco, someone explained to me how, as a partner at a venture capital firm, they were expected to commit personal capital to the fund, which is often several percentage points' worth of the total fund size. So I have been out of this mess for a long time, but at least at some point, this was literally the definition of being "a partner" in a firm (investment or otherwise). It's not a title you get by working hard. You buy in if you want the gains, and that means you're also taking on the risk. This whole essay feels like someone reckoning with the capitalist class, or difference between being rich and being wealthy, for the first time. "What do you mean risky investments don't always shake out fairly? That's not what I learned in my MBA!"
phendrenad2 4y ago
> They banked with SVB because it's one of only a handful of banks that was willing to align its financial products with the holistic levels of risk that are required to work in startups. I don't really understand what this means. What specifically did SVB offer that, say, Chase or BoA didn't?
- hahaxdxd123 4y ago
  > My only other option, I learned, was to work with an employee equity "fund" – essentially, loan sharks – that lend money to startup employees if they don't have the cash to buy their options. In exchange, they would take more than 50% of my payout, if it ever came to pass. After weighing these options, I decided to choke down my fears, cash out my savings and buy myself one big chip, which I placed in front of the roulette wheel and held my breath as it spun. > When a founder goes to the bank to get a mortgage, it's difficult to explain to someone at, say, Bank of America that yes, their savings and income don't look very impressive, but they do have a lot of equity in a promising company – which, by the way, isn't yet profitable, but it will be! (Maybe.) A Big Banker doesn't look at that story and see a potential high earner. They just see someone who is incredibly cash poor and risky. > "Boo hoo," you might think. "Pity the poor venture capitalist who can't afford to buy into their fund." But this person did not come from a wealthy or privileged background. They were relatively young. They didn't have family who could advance them the cash. They offer loans and financial products to employees, founders, and VCs (new to me), that are cash poor but have equity in presumably valuable companies. A relationship that is supposedly hard to forge with other banks.
- vivegi 4y ago
  A few years ago, I evaluated launching my startup in the US through Stripe-Atlas. SVB was the banking partner at that time. I did not go through with it. If I recall correctly Stripe-Atlas launched around 2017 or so. So, in the last 5 years, many startups that did not already have a banking relationship with another bank and had chosen Stripe-Atlas for launching would have likely lined up with SVB. So, ease of banking access, for one thing, led to the unique mix of SVB clientele. Edit: Currently, after SVB's demise there is Mercury and Novo, I believe, that are banking partners of Stripe-Atlas.
chernevik 4y ago
I expect there is a story to be told about SVB's relations with the VC community. Clearly it was providing financial services structured for the startup ecosystem, and there is great value in that. Wanting a relationship with SVB makes sense. But allowing that relationship to prevent you from properly managing your risk is a mistake. It looks like a LOT of VCs made that mistake.
koolba 4y ago
> I've seen a number of people ask why so many startups banked with SVB, as if this should have been a red flag somehow. The answer is not that tech doesn't want to work with traditional banks, or because they were greedy and looking for better rates. They banked with SVB because it's one of only a handful of banks that was willing to align its financial products with the holistic levels of risk that are required to work in startups. This is completely bullshit. Unless SVB was subsidizing loans to risky startup employees by lending assets at longer durations, the risks they were taking with those mismatched durations has nothing to do with altruism or philosophy. It’s just greed and lack of foresight to risk the rate hikes.
rossdavidh 4y ago
"I'm perplexed, then, to see so many people gleefully celebrate the collapse of an institution..." Huh? I live well outside SV, and have for over two decades, and I have encountered zero examples of this. Are people inside SV "gleefully celebrating"? So far, no one I have mentioned this to had heard of it happening before I told them.
- hn_throwaway_99 4y ago
  I understand Twitter is not real life, but yes, there are tons of gleeful "own the libs"-style posts there.
- atdrummond 4y ago
  It’s mainly an online phenomenon.
- girvo 4y ago
  There are plenty of people meeting that description on Reddit and Twitter, though quite why anyone would take their opinions seriously is beyond me. They’re literal fandoms opining on something they didn’t know existed until a few days prior.
Apocryphon 4y ago
Ali Taylor, co-founder at Venture Studio: “just got first founder email saying they are looking at moving their capital out of *all banks* due to contagion risk” https://twitter.com/_ali_taylor/status/1634266779592585216 https://twitter.com/_ali_taylor/status/1634266779592585216
lbayes 4y ago
This. So much this. I've been bootstrapping my startup with Regions bank for 3 years and it has been one unending nightmare after another. It's been like having an active and hateful adversary at every single moment when you need help most. I was extremely fortunate to be able to open an account with SVB late last year and it had been an enormous relief. The unreasonable delays, hostile policies, nickel and diming, obvious incompetence, all gone. Fast loading web experiences, instant transfers, employee credit cards, full service treatment, everything has been seamless with SVB. My account is below the FDIC threshold, so I'm optimistic about Monday, but the loss is so huge and so much more than the money.
NortySpock 4y ago
Shout out to all the credit unions out there! * Owned by those who bank there * Non-profit organization -- "Excess" profit is typically returned to members as a dividend * Savings from your accounts are used to invest in mortgages and bonds and securities in your community * Deposits up to $250k are insured by the National Credit Union Share Insurance Fund (is all of this sounding familiar?) signed, a happy credit union member
DoreenMichele 4y ago
This was a good read. I learned something. But I can't help but think that part of the problem is the American lifestyle that does a poor job of allowing people to live both well and frugally while fully participating in life. We have a gun to our head to own a car, to have a large home, etc. There's a cost to that, both individually and societally.
isitmadeofglass 4y ago
[dead]
tpoacher 4y ago
> "After weighing these options, I decided to choke down my fears, cash out my savings and buy myself one big chip, which I placed in front of the roulette wheel and held my breath as it spun." Wth man, you cant throw a bomb like that and not say what the outcome was!

166 points by foundart 4y ago

An interesting take on SVB

> But the only way they were able to participate in that world, and serve as a role model for others, was by quietly borrowing from a bank that understood what it meant to be a young venture capitalist with carry, but not enough savings. Using borrowed money for venture capital seems very risky and not something that a bank should be celebrated for enabling.

margorczynski 4y ago
Wasn't mixing "normal" banking with investment banking banned in the US after 2007? Or this is something else that doesn't fall into that category?
- NERD_ALERT 4y ago
  Mixing commercial and investment banking was banned in 1933 by the Glass Steagall Act. The act was partially repealed in 1999 which allowed banks to engage in both commercial and investment banking again. As far as I know banks have been able to engage in both since then.
WalterSear 4y ago
It wasn't. It made bad bets on bonds and lost $2 billion dollars of the $200+ billion dollars it held in deposits. I must be missing something, because I fail to see how this is such a big deal, or why anyone will be taking much of a haircut on their deposits.
- grey-area 4y ago
  The prices SVB and other banks use for their assets are not marked to market. Selling it all, today, would mean that they get back far less than the total deposits. Selling it over time or parking it with a temp bad bank would be fine though and that is what fdic will probably do.
  - WalterSear 4y ago
    That's to my point though: there's not going to be a fire sale.
    - grey-area 4y ago
      Well let’s hope not, and let’s hope they arrange an orderly process by 9AM Monday. Friday was not great and appeared to take them by surprise.
      - WalterSear 4y ago
        Well, not everyone, given that the CEO's been selling shares :)
        grey-area 4y ago
        By them I meant the authorities who intervened midday which is unusual I think? I do feel the svb ceo/cfo etc should face consequences for their actions, bonuses should be clawed back, but really those are not the important actions here - providing stability to the entire banking system and making sure hundreds of businesses do not close at once because of a bank run are far more important. Otherwise there is significant systemic risk.
- Danieru 4y ago
  2 Billion is only what they lost on the ATM portfolio. What triggered the attempted capital raise. The unrealized loses were a further 16Billion+. 18Billion lost of a capital base of 200Billion is clearly a big deal.
  - WalterSear 4y ago
    Yes, that is different.

breck 4y ago

> Silicon Valley Bank is not a bank for rich people. Dataset needed.

hn_throwaway_99 4y ago

I thought this was a great post. I've commented elsewhere that I'd be pissed at the moral hazard of unsecured depositors getting a federal bailout (though not if the feds just assist in finding a buyer or do as much as possible to ensure depositors can access their funds quickly), but at the same time I'm saddened by so much of the gleeful tribalism I see online (but not too saddened - many of the "dancing on your grave" posts stand out primarily for their stupidity). SVB was uniquely positioned to help the startup ecosystem in a way that larger banks were not. I hope something similar replaces them (albeit with better risk controls for their asset portfolio).

roundandround 4y ago
It seems to me like too much of the current situation has jurisdictional gaming. We complain that banks no longer want to take the risk of their traditional role in small business loans and have a lot of economic distortion from that. Silicon Valley apparently had better access to a bank that took risks and SVB seems to be the bank of over half of tech and public health startups.. Other jurisdictions should feel a bit cheated if their regulators didn't help their small business get the most out financing and FDIC bailouts.. Internationally, other countries have to question why they aren't giving some kind of handouts to gain more of the startup scene for occasional crises. Really a fine mess.
erik_seaberg 4y ago
The moral hazard of trusting a licensed bank? Do we want depositors to be hesitant to do that? The Fed won’t even allow “narrow banks” (that keep a 100% reserve ratio and cannot fail) because they think it’s crucial for our deposits to be available for loans and bonds.
- obblekk 4y ago
  Depositors who hold more than 250k in checking? The probably should be expected to be sophisticated capital managers rather than kept on safety wheels. The alternative is scarier: infinite deposit insurance exposes government to larger and larger defaults requiring them to regulate banks down to which industries and loans they can work with or not.

deleted 4y ago

[deleted]

latchkey 4y ago

> I'm perplexed, then, to see so many people gleefully celebrate the collapse of an institution that helped level the playing field for people from all backgrounds. It isn't about being gleeful. This bank took massive risks, which were enabled by Trump changing the laws (and they supported), which then allowed them to take even more risky bets (aka: level the playing field). https://www.motherjones.com/politics/2023/03/silicon-valley-bank-greg-becker-dodd-frank/ https://www.motherjones.com/politics/2023/03/silicon-valley-... Now we get to see the fallout from all of that, which was even predicted by someone who was paying attention... https://seekingalpha.com/article/4565388-svb-financial-blow-up-risk https://seekingalpha.com/article/4565388-svb-financial-blow-... https://seekingalpha.com/article/4586033-svb-financial-blew-up-even-faster-than-i-expected https://seekingalpha.com/article/4586033-svb-financial-blew-... https://seekingalpha.com/article/4586342-svb-financial-today-wasnt-run-on-bank-it-was-sprint https://seekingalpha.com/article/4586342-svb-financial-today...

Convolutional 4y ago
First, I shook my head at the same sentence. The railway union whose potential strike was recently broken by the government and railroads levels the playing field (and works to evert things like the Ohio toxic train derailment). Silicon Valley Bank does not level the playing field. The sob story about the partner at the VC firm did pull at my heart strings though. The CEO of SVB spent half a million dollars to roll back banking regulation five years ago. Hoisted by his own petard...well not really - bonuses went out hours before the seizure and he was selling shares like crazy before the collapse. Now David Sacks and all the tech bro libertarians want the taxpayer to bail out the SVB depositors beyond the FDIC limit.
- monkeydreams 4y ago
  Libertarions really are the house cats that think they are lions.
grey-area 4y ago
This was a crisis of confidence. Most other US banks are just as exposed to long term bonds and mortgages and have also been hung out to dry by the fed raising rates after a decade of zirp and we distorted yields and prices. Yes this bank failed to hedge risk appropriately, but if customer confidence fails, all major US banks would be vulnerable to exactly the same situation. IMO share/bond holders should lose if all but depositors should lose nothing/very little (which is perfectly possible and not too expensive). Otherwise the risk of contagion is very real. Which fractional reserve bank is actually safe from a bank run without the implicit promise of an fdic backstop?

erik_seaberg 4y ago

It worries me that people assume SVB must have taken crazy risks on startups or crypto, when the actual mistakes were locking up so much money in long-term mortgage and Treasury bonds, and having clients who talk to each other.

lazyeye 4y ago
Other people are arguing that SVB spent too much time focusing on fashionable, non-core issues rather than the business of actually running a bank. Clearly they were not giving sufficient attention to the core business for one reason or another.
swatcoder 4y ago
From the bank’s perspective, uninsured depositors are essentially margin lenders who can call in their loan at any time. If your lenders are all from one especially volatile and incestuous industry, you put yourself at especially high risk of experiencing a run and defaulting. You need to manage risk and investments accordingly. They took a high-risk position with eyes wide open and have collapsed as a result.
- cjalmeida 4y ago
  Exactly. They should’ve bought short term t-bills to match deposit maturities. But then how could they offer above market rate yields on their checking accounts, right?
cscurmudgeon 4y ago
This episode has taught me the random person on the street (on the left and the right) is horribly ignorant, has dirt-poor reading comprehension, and is seething with envy towards Silicon Valley.
- salawat 4y ago
  ...So what have you done to help uplift the sullied masses? If the answer is nothing, then you now know why.

sql-spy 4y ago

[flagged]

davidmr 4y ago
Do you think that encouraging a run on a bank is truly the responsible thing to do today?
- bryceacc 4y ago
  do you think having uninsured levels of money is a responsible thing to do ever?
idlewords 4y ago
When taking financial advice from this site, remember that green in the username means "go ahead and do what some stranger told you"

Osmose 4y ago

> I'm perplexed, then, to see so many people gleefully celebrate the collapse of an institution that helped level the playing field for people from all backgrounds. "Making loans to startups that otherwise wouldn't get a loan because they are too risky for traditional banks" does certainly grant more people access to the high-cost high-risk world of tech startups, but I dunno that it's a terribly compelling method to level the playing field because it does nothing to challenge the system itself, only gives new players a chance to spin the wheel. The backlash against tech in general stems from the system itself and the things it prioritizes, like massive scale at all costs in service to investors being a vehicle for the rich to become richer. If you start from a position like "tech billionaires and their antics are a significant source of problems in the world" then a bank like SVB that lets more "normal" folks participate doesn't do anything to stop those said billionaires from _also_ profiting off these new incoming startups, except making the pool to choose from even bigger. It's frustration with the system that drives these sentiments, not specifically SVB as the "secret backdoor for poors into the startup casino".

eastbound 4y ago
For the last two years on Youtube in France, we’ve had ads saying “DON’T HAVE MONEY? YOU CAN STILL BUY A HOME!” It’s the 3.6 Roentgen of banking. Everyone with no money was able to buy. Startups are too many being created. Flooding the economy with Covid money made that everyone had way too much money. Everything is in flames, we’re just merely discovering it. It’s gonna be a tough year.

photochemsyn 4y ago

As an aside, this is a curious situation that points to capitalism (in its current form) being something of a continuation of aristocracy but by other means: > "Some employees can't afford to buy their equity at all, so that when their startup is acquired or goes public, they earn nothing from the outcome, looking on in silence while their colleagues become millionaires. The people who find themselves in this situation are, of course, disproportionately those who work in lower-paying roles, and who don't have family or friends to borrow from." A society in which each person is given something like a 'equity stake' at adulthood might work. It would be their decision as to how to use it - buy equity in a startup, pay for a college education, start a small business, etc. Maybe certain limitations on frivolous activities would make sense. It's similar to universal basic income, but more delivered in one chunk rather than as a pittance spread out over time. It would create a much more even playing field while still allowing for competitive success stories.

paulddraper 4y ago
I'm confused. RSUs cost nothing. ISOs are heavily discounted especially because they are offered years before IPO. Yes there is a case where employees give up equity entirely, but I would guess this is < 15%. And when the 16th percentile is the aristocracy...
- phendrenad2 4y ago
  Probably very few startup employees can't afford to exercise SOME options, but how many can exercise ALL of their options? Most probably fall somewhere in-between, hence the existence of the high-interest loans mentioned in the article.

dools 4y ago

The obvious fact is that we don’t need private banks to run our payment system or provide deposit accounts. It can be done perfectly well by allowing individuals to have accounts at the central bank through a postal savings system. There is probably some value in having banks to do loan underwriting and allowing private credit creation but this whole thing if allowing private banks to run everything and then providing a federal guarantee of some deposits is absurd, just take that function away from the private sector.

nightmarish 4y ago
How do you handle fraud in this setup? Lol.
- djbusby 4y ago
  Same way as now? Eventual Consistency that the current financial industry uses.
- ghayes 4y ago
  The bank doesn’t need to perform those functions like debit and credit cards in this set-up. Transfer funds to a private bank for that. The public bank is just to secure deposits.
gruez 4y ago
>There is probably some value in having banks to do loan underwriting and allowing private credit creation but why would you ever put your money in a commercial bank when you can deposit at the federal reserve with 0 risk?
- xboxnolifes 4y ago
  Interest
  - dools 4y ago
    I’m not an expert in the mechanics but I think there is also a way for private credit creation to run as a separate operation, similar to how loans were originated in the sub prime mortgage crisis and then immediately sold on. I’m not recommending that happen, but a similar system would allow private credit creation without the loan issuers being the primary deposit taking institution. But yes private banks could also operate term deposits and pay interest to attract deposits to satisfy net flows of funds with other institutions.

idk1 4y ago

This it a little tangental but a lot of the times when I see a title that says "An X of One's Own" and then see the content I wonder if it relates at all to Virginia Woolf's A Room of One's Own. For example I once read an Ikea blog post titled "A Storage Space of One's Own", and the content of the post was nothing at all to do with how women can achieve the same things as men if they are allowed the space to do so, the blog post was about Ikea's top five storage units. This was one was suspect until the end, and then I think it wraps up quite nicely. All people should be allowed to flourish. And we should take that positive note away from it.

morelisp 4y ago

> Several years into my time in San Francisco, someone explained to me how, as a partner at a venture capital firm, they were expected to commit personal capital to the fund, which is often several percentage points' worth of the total fund size. So I have been out of this mess for a long time, but at least at some point, this was literally the definition of being "a partner" in a firm (investment or otherwise). It's not a title you get by working hard. You buy in if you want the gains, and that means you're also taking on the risk. This whole essay feels like someone reckoning with the capitalist class, or difference between being rich and being wealthy, for the first time. "What do you mean risky investments don't always shake out fairly? That's not what I learned in my MBA!"

phendrenad2 4y ago

> They banked with SVB because it's one of only a handful of banks that was willing to align its financial products with the holistic levels of risk that are required to work in startups. I don't really understand what this means. What specifically did SVB offer that, say, Chase or BoA didn't?

hahaxdxd123 4y ago
> My only other option, I learned, was to work with an employee equity "fund" – essentially, loan sharks – that lend money to startup employees if they don't have the cash to buy their options. In exchange, they would take more than 50% of my payout, if it ever came to pass. After weighing these options, I decided to choke down my fears, cash out my savings and buy myself one big chip, which I placed in front of the roulette wheel and held my breath as it spun. > When a founder goes to the bank to get a mortgage, it's difficult to explain to someone at, say, Bank of America that yes, their savings and income don't look very impressive, but they do have a lot of equity in a promising company – which, by the way, isn't yet profitable, but it will be! (Maybe.) A Big Banker doesn't look at that story and see a potential high earner. They just see someone who is incredibly cash poor and risky. > "Boo hoo," you might think. "Pity the poor venture capitalist who can't afford to buy into their fund." But this person did not come from a wealthy or privileged background. They were relatively young. They didn't have family who could advance them the cash. They offer loans and financial products to employees, founders, and VCs (new to me), that are cash poor but have equity in presumably valuable companies. A relationship that is supposedly hard to forge with other banks.
vivegi 4y ago
A few years ago, I evaluated launching my startup in the US through Stripe-Atlas. SVB was the banking partner at that time. I did not go through with it. If I recall correctly Stripe-Atlas launched around 2017 or so. So, in the last 5 years, many startups that did not already have a banking relationship with another bank and had chosen Stripe-Atlas for launching would have likely lined up with SVB. So, ease of banking access, for one thing, led to the unique mix of SVB clientele. Edit: Currently, after SVB's demise there is Mercury and Novo, I believe, that are banking partners of Stripe-Atlas.

chernevik 4y ago

I expect there is a story to be told about SVB's relations with the VC community. Clearly it was providing financial services structured for the startup ecosystem, and there is great value in that. Wanting a relationship with SVB makes sense. But allowing that relationship to prevent you from properly managing your risk is a mistake. It looks like a LOT of VCs made that mistake.

koolba 4y ago

> I've seen a number of people ask why so many startups banked with SVB, as if this should have been a red flag somehow. The answer is not that tech doesn't want to work with traditional banks, or because they were greedy and looking for better rates. They banked with SVB because it's one of only a handful of banks that was willing to align its financial products with the holistic levels of risk that are required to work in startups. This is completely bullshit. Unless SVB was subsidizing loans to risky startup employees by lending assets at longer durations, the risks they were taking with those mismatched durations has nothing to do with altruism or philosophy. It’s just greed and lack of foresight to risk the rate hikes.

rossdavidh 4y ago

"I'm perplexed, then, to see so many people gleefully celebrate the collapse of an institution..." Huh? I live well outside SV, and have for over two decades, and I have encountered zero examples of this. Are people inside SV "gleefully celebrating"? So far, no one I have mentioned this to had heard of it happening before I told them.

hn_throwaway_99 4y ago
I understand Twitter is not real life, but yes, there are tons of gleeful "own the libs"-style posts there.
atdrummond 4y ago
It’s mainly an online phenomenon.
girvo 4y ago
There are plenty of people meeting that description on Reddit and Twitter, though quite why anyone would take their opinions seriously is beyond me. They’re literal fandoms opining on something they didn’t know existed until a few days prior.

Apocryphon 4y ago

Ali Taylor, co-founder at Venture Studio: “just got first founder email saying they are looking at moving their capital out of *all banks* due to contagion risk” https://twitter.com/_ali_taylor/status/1634266779592585216 https://twitter.com/_ali_taylor/status/1634266779592585216

lbayes 4y ago

This. So much this. I've been bootstrapping my startup with Regions bank for 3 years and it has been one unending nightmare after another. It's been like having an active and hateful adversary at every single moment when you need help most. I was extremely fortunate to be able to open an account with SVB late last year and it had been an enormous relief. The unreasonable delays, hostile policies, nickel and diming, obvious incompetence, all gone. Fast loading web experiences, instant transfers, employee credit cards, full service treatment, everything has been seamless with SVB. My account is below the FDIC threshold, so I'm optimistic about Monday, but the loss is so huge and so much more than the money.

NortySpock 4y ago

Shout out to all the credit unions out there! * Owned by those who bank there * Non-profit organization -- "Excess" profit is typically returned to members as a dividend * Savings from your accounts are used to invest in mortgages and bonds and securities in your community * Deposits up to $250k are insured by the National Credit Union Share Insurance Fund (is all of this sounding familiar?) signed, a happy credit union member

DoreenMichele 4y ago

This was a good read. I learned something. But I can't help but think that part of the problem is the American lifestyle that does a poor job of allowing people to live both well and frugally while fully participating in life. We have a gun to our head to own a car, to have a large home, etc. There's a cost to that, both individually and societally.

isitmadeofglass 4y ago

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tpoacher 4y ago

> "After weighing these options, I decided to choke down my fears, cash out my savings and buy myself one big chip, which I placed in front of the roulette wheel and held my breath as it spun." Wth man, you cant throw a bomb like that and not say what the outcome was!