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I'm pretty baffled to see so much of this on HN. Like a whole lot of people here, I've worked at startups for my whole career. People here are effectively sugge

I'm pretty baffled to see so much of this on HN. Like a whole lot of people here, I've worked at startups for my whole career. People here are effectively suggesting that I shouldn't get my paycheck and that the company I work for should lose most of its money because our CEO used a well-reputed bank? Absolutely wipe out the equityholders of SVB. They deserve nothing, because that's what you should end up with if you own stock in a company that goes bankrupt. Claw back executive pay if that's something you can do. But kill a bunch of startups because of their choice of financial institution? I just don't get where that comes from.

belter 4y ago
It's coming from the same system that probably led you to work at Startups your whole career. High risk for high reward on a lightly regulated capitalist system. If your CEO or CFO put all the money in one risky bank, it was bad financial management.
- kemiller 4y ago
  Many were restricted by covenant with their investors to only use SVB.
  - grugagag 4y ago
    Id like to hear more about that.
    - roflyear 4y ago
      I've heard it was mostly they had credit agreements with svb that required them to bank exclusively with svb
      - eternalban 4y ago
        Is this correct then? : SVP gives easy credit to VC friends. VC friends use that credit as investment in startups who are told they must use SVP. So money moves from magic-money-printer -> SVP -> VC -> Startup -> SVP. Then SVP takes those deposits and invests it elsewhere. Now they are making money from loan to VC and reinvestment of those same monies that are deposited back. So a bank like SVP seems designed to enable VCs with easy credit to de-facto control an important (and balooning) niche of the economy and by their control over the beauty pageant of which startup idea gets money (and PR) they also control what kind of technology becomes dominant. (For example, these VCs share significant credit/blame for creating the surveillance tech. They share blame for creating an engineering culture that must serve full throttle growth business models. etc.) Is there a social graph of SVP and VCs involved? Are these people pals, friends, "effective" ideologues, etc.?
        belter 4y ago
        That social graph is the definition of the VC ecosystem.
        roflyear 4y ago
        > VC friends use that credit as investment in startups who are told they must use SVP. Maybe, but I was talking specifically about startups themselves being given loans by SVB then requiring the startup to bank there. But I am sure investors also pushed startups to SVB... if your investor (who maybe is highly invested in SVB ... ) says "you should use this bank" are you going to say no? The pressure is immense. > Is there a social graph of SVP and VCs involved? Are these people pals, friends, "effective" ideologues, etc.? I'd be more surprised if they weren't.
  - belter 4y ago
    Because it was providing loans to the VCs and they saw it convenient, to force their startups there. High risk for High reward... "The rise and stunning fall of Silicon Valley Bank" - https://www.axios.com/2023/03/11/silicon-valley-bank-rip https://www.axios.com/2023/03/11/silicon-valley-bank-rip
  - deleted 4y ago
    [deleted]
- DoneWithAllThat 4y ago
  It wasn’t a “risky bank”.
  - belter 4y ago
    Not according to JP Morgan... - https://am.jpmorgan.com/content/dam/jpm-am-aem/global/en/insights/eye-on-the-market/silicon-valley-bank-failure-amv.pdf https://am.jpmorgan.com/content/dam/jpm-am-aem/global/en/ins... "The liability issue: extreme reliance on institutional/VC funding rather than traditional retail deposits. ...While capital, wholesale funding and loan to deposit ratios improved for many US banks since 2008, there are exceptions. As shown in the first chart, SIVB was in a league of its own: a high level of loans plus securities as a percentage of deposits, and very low reliance on stickier retail deposits as a share of total deposits. Bottom line: SIVB carved out a distinct and riskier niche than other banks, setting itself up for large potential capital shortfalls in case of rising interest rates, deposit outflows and forced asset sales. [Note: This chart appeared in our 2023 Outlook in a discussion on risks related to deposits, rising rates and quantitative tightening]..."
  - capableweb 4y ago
    Everything is pointing towards that it was a risky bank, with a "unusually high reliance on corporate/VC funding". Maybe SVB themselves downplayed this? Take https://am.jpmorgan.com/content/dam/jpm-am-aem/global/en/insights/eye-on-the-market/silicon-valley-bank-failure-amv.pdf https://am.jpmorgan.com/content/dam/jpm-am-aem/global/en/ins... as an example: > The liabiity issue: extreme reliance on institutional/VC funding rather than traditional retail deposits > While capital, wholesale funding and loan to deposit ratios improved for many US banks since 2008, there are exceptions. As shown in the first chart, SIVB was in a league of its own: a high level of loans plus securities as a percentage of deposits, and very low reliance on stickier retail deposits as a share of total deposits. Bottom line: SIVB carved out a distinct and riskier niche than other banks, setting itself up for large potential capital shortfalls in case of rising interest rates, deposit outflows and forced asset sales.
  - newaccount2023 4y ago
    We have an existence proof to the contrary
- peter422 4y ago
  What bank do you use? When was the last time you went over their deposit base and asset allocation?
  - belter 4y ago
    > When was the last time you went over their deposit base and asset allocation? A few times but only for a short time and a small percentage of the capital. Was already a full grown adult in 2008, have good memory, and are still licking many old lion financial battle scars...
  - JumpCrisscross 4y ago
    > When was the last time you went over their deposit base and asset allocation Sweep account and credit rating. First is a one-time option. Second, an occasional check.
    - hedora 4y ago
      Sweep accounts are fine, but I’m not sure I’d bother with credit ratings. SVB’s was basically as high as possible even for a few hours after the run started and before they closed: https://ir.svb.com/shareholder-and-bondholder-information/credit-ratings/default.aspx https://ir.svb.com/shareholder-and-bondholder-information/cr...
      - JumpCrisscross 4y ago
        > SVB’s was basically as high as possible Borderline investment grade isn’t “high as possible.”
        hedora 4y ago
        I misread the table. Thanks.
  - massysett 4y ago
    I use an FDIC-insured bank. My deposits are under the limit for insurance. I don’t care about its deposit base or asset allocation because that’s the point of deposit insurance: to make retail depositors feel secure. On the other hand, a CFO with millions in cash is a professional whose job is to manage corporate risk. A competent CFO needs to account for things like bank failures, which do happen.
- JJMcJ 4y ago
  It wasn't risky as long as prime rate stayed super low. But that rate has been creeping up for months now. SVB was too small to qualify for risk assessment under the revised banking rules. So they could get away with money in volatile securities that were very interest rate sensitive. That said, SVB seemed very solid until Thursday morning.
  - Cthulhu_ 4y ago
    Would it have been better if the rate increases were further apart and there were strong declarations of intent?
  - chiefalchemist 4y ago
    To clarify, SVB's problems are the result of The Fed's change in direction. It just takes a while to see the affects of those decisions.
    - salawat 4y ago
      SVB's problems were the result of glutting on long maturation bonds instead of bills.
      - chiefalchemist 4y ago
        As it was explained to me, the Fed increasing interest rates impacted the value of the bonds held by SVB. As that value contracted SVBs was eventually in trouble.
  - tome 4y ago
    > It wasn't risky as long as prime rate stayed super low. That sounds a bit like "it's not risky to driver a motor vehicle as long as you don't get into an accident".
    - JJMcJ 4y ago
      That's true. The real risk was in imagining that the interest rates would stay super-low forever.
- dmix 4y ago
  You think consumer banking is lightly regulated? Or that VC should have their risk controls? Only conservative old school bankers should invest in startups? Or what exactly?
  - belter 4y ago
    No. Due to the previous crisis, is one part very well regulated. Here is what should happen...The emphasis below on unlikely is mine... "A: In the unlikely event of a bank failure, the FDIC responds in two capacities." "First, as the insurer of the bank's deposits, the FDIC pays insurance to depositors up to the insurance limit. Historically, the FDIC pays insurance within a few days after a bank closing, usually the next business day, by either 1) providing each depositor with a new account at another insured bank in an amount equal to the insured balance of their account at the failed bank, or 2) issuing a check to each depositor for the insured balance of their account at the failed bank.... ...In some cases—for example, deposits that exceed $250,000 and are linked to trust documents or deposits established by a third-party broker—the FDIC may need additional time to determine the amount of deposit insurance coverage and may request supplemental information from the depositor in order to complete the insurance determination..." "Second, as the receiver of the failed bank, the FDIC assumes the task of selling/collecting the assets of the failed bank and settling its debts, including claims for deposits in excess of the insured limit. If a depositor has uninsured funds (i.e., funds above the insured limit), they may recover some portion of their uninsured funds from the proceeds from the sale of failed bank assets. However, it can take several years to sell off the assets of a failed bank. As assets are sold, depositors who had uninsured funds usually receive periodic payments (on a pro-rata "cents on the dollar" basis) on their remaining claim." "Deposit Insurance FAQs" - https://www.fdic.gov/resources/deposit-insurance/faq/ https://www.fdic.gov/resources/deposit-insurance/faq/
tsimionescu 4y ago
First of all, even if the company you work for goes bankrupt, you're very likely to still receive your salary, as debts to workers are the highest priority in any bankruptcy case. So the risk to workers' livelihoods is being way overblown. Of course, if a substantial amount of your compensation was company stock, you may lose a lot on that, but that is par for the course with stock. Second of all, the purpose of having a limit to FDIC insured deposits is to limit the government's liability in case of bank failures to small-ish depositors. A company thag has millions of dollars to deposit also has more responsibility to evaluate the bank they are depositing in. Perhaps they shouldn't keep money in the bank in the first place, but find other uses for them. Note that the true FDIC insurance limit is much larger than the 250k that usually gets cited - since there are various facilities for business accounts which can take that up to a million $ or more (multiple signers on the same account, multiple types of accounts). Should be plenty for most startups to pay their employees' salary outright, even without going bankrupt.
- phamilton 4y ago
  > So the risk to workers' livelihoods is being way overblown If this were 2015 I would agree. But it's 2023 and thousands of software engineers are already struggling to find work after layoffs. Companies shutting down en masse because of SVB will soften what is already an employer's market for talent. This may hurt specific founders and VCs a lot, but total damages (in the form of a softer market for engineers) may hurt the average employee more, even if they aren't directly affected.
- mixologic 4y ago
  You get your last paycheck, sure, but you still lose your job which is definitely a threat to workers lively hoods. It's even more of a threat if the whole sector you're employed in suffers simultaneously, as it becomes difficult to continue to be employed in that sector.
  - JackFr 4y ago
    I say as a person who’s been laid off twice and worked for a company that went bankrupt — why is that my problem? Why should you get my money? (In the case of the company I worked for which went bankrupt — we were a fintech startup with a truly innovative and fantastic product. Our management made three bad decisions which led to our demise. Two were technical and would have been recoverable, the last was a strategic move which ultimately proved disastrous.)
ohgodplsno 4y ago
[flagged]
- tome 4y ago
  This comment sounds very harsh on first reading but I'm having trouble finding anything actually incorrect about it ... I just pray this doesn't hit the wider economy.
  - DonHopkins 4y ago
    Shitty ass dog feeders are connected with wifi, not bluetooth.
  - zdragnar 4y ago
    It overlooks everyone who is just starting out, everyone employed at these companies that isn't making techbro salary like the receptionists, custodial staff, QA, workers on visas, whatever. Simple fantasies for simple minds, no different than lazy racism or any other form of bigotry.
    - tome 4y ago
      That's a fair point.
    - ohgodplsno 4y ago
      Indeed, for that extremely minor part of companies that about noone on HN has ever cared about, except when it becomes practical to use them, it's troublesome. But since there still exists hundreds of billions of dollars ready to be wasted on bullshit endeavours,I have no doubt they will all find jobs soon in the next cloud cat feeder startup. Your mind immediately equating good old schadenfreude with lazy racism is indeed telling, but I'll refrain from saying anything, Americans have never been excellent at either context or nuance.
      - zdragnar 4y ago
        > but I'll refrain from saying anything Sounds like you did. In any case, schadenfreude typically falls into one of three categories: justice, rivalry or aggression. The OP sounds like they are experiencing the justice aspect- that these people who contribute so little are now enduring hardship. The problem is that "these people" is just another lazy stereotype- it is just another form of aggression; equating everyone who is hurt here as "easy jobs that can easily be replaced" is not unlike assuming everyone living in a ghetto neighborhood is a thug. The effects and scope of harm of the stereotype may be different, but both come from the same mental state of mind- these people are other, they don't live like I think they should, and they get what they deserve, despite the fact that the "they" in the sentiment is not representative of the people harmed by it.
JumpinJack_Cash 4y ago
> > I've worked at startups for my whole career HN has grown a lot and there are much more people who are not necessarily from SV. In the real world, if you live in SF, work in startups doing what you like, get paid well, not trapped in 9-5 etc. That's elite and nobody will ever feel sorry for you. As a general rule every guy should always expect nobody to feel sorry for them, but this particular set of circumstances and the area of the country where they unfolded scream 'millionaires problems' to those roaming in the interwebz. And now HN is part of the interwebz.
- oh_sigh 4y ago
  No one is asking anyone to feel sorry for them. They got punched in the nose, and they just don't want to be punched in the nose again.
  - JumpinJack_Cash 4y ago
    At the expense of taxpayers. That is the crux of the argument. People are stressing the 250k FDIC requirement which is Federal and thus equal for everybody and it's one of the very few things that is equal for everybody across the land regardless of you living in Mobile, AL or San Jose, CA. People are against the extra-insurance/safery-net/bailout being awarded to everything based in NYC and SF because everything in NYC and SF is supposedly too big and too important to fail. In this case it's not even failure but a minor inconvenience because as it stands the money is there, it's only tied up.
    - hedora 4y ago
      First of all, the FDIC has always arranged to make depositors whole when banks failed. This is why there weren’t massive runs on bank checking and savings accounts in 2008. Second, CA gets the least back in federal spending per dollar of taxes paid, and NY is close: https://worldpopulationreview.com/state-rankings/federal-spending-by-state https://worldpopulationreview.com/state-rankings/federal-spe... Pre pandemic, only 11 states were turning a profit: https://howmuch.net/articles/federal-budget-receipts-and-expenditures-across-the-united-states https://howmuch.net/articles/federal-budget-receipts-and-exp... The regions most upset about federal safety nets are also the ones that benefit the most from them. Third, it is not a minor inconvenience when $10M’s of investor money from a fundraising round gets permanently lowered to $250K (no “bailout”) or if a startup stops making payroll for 2 years (upper bound of the time range the FDIC has proposed).
JumpCrisscross 4y ago
> because our CEO used a well-reputed bank That didn’t have an investment grade rating, where $250k comes out of taxpayer coffers Monday morning, and where everyone has unemployment insurance? Yes. The assets of the bank should go to your company first. But the public purse should not be opened.
- tock 4y ago
  > $250k comes out of taxpayer coffers Monday morning This isn't coming out of taxpayer coffers. FDIC insurance premiums are paid by the banks.
  - JumpCrisscross 4y ago
    > isn't coming out of taxpayer coffers. FDIC insurance premiums are paid by the banks Fair enough. The FDIC is funded by premiums but backstopped by the Treasury. There is no private insurance function that pays out at this scale the next business day.
    - KptMarchewa 4y ago
      Which scale? 0 dollars? All of what will be paid on Monday will be paid out of SVB's assets, which are being liquidates as we speak.
      - JumpCrisscross 4y ago
        > what will be paid on Monday will be paid out of SVB's funds Possibly, but not necessarily. FDIC funds pay insured deposits before determinations about assets are made.
deleted 4y ago
[deleted]
lambo4bkfast 4y ago
I agree there are a lot of poorly thought out populist arguments for not making depositors whole. I for one prefer HN to not converge into another social forum like Reddit that has a lack of critical thinking in discussions.
JackFr 4y ago
> But kill a bunch of startups because of their choice of financial institution? I just don't get where that comes from. Because you want to take my money, and your justification for wanting my money is simply “My company made a mistake.”
- jtr1 4y ago
  How are they taking your money?
  - JackFr 4y ago
    FDIC receivership is not my money, it’s all self funded. Any bailout beyond that is taxpayer money. As a voter (and a guy who pays taxes) it is my money. I have a lot of opinions about how that money should be spent. A bailout beyond FDIC receivership is simply a payout to VCs. SVB’s resolution will be a solid measure of much political clout they have.
    - auntienomen 4y ago
      It's a noisy measure, since FDIC / Fed / Treasury are quite reasonably worried about this failure setting off a series of bank runs.
- tracer17 4y ago
  How is it your money? It's not a taxpayer funded bailout, the FDIC is just going to forcibly liquidate SVB's assets and pay back customers to the extent possible with those proceeds.
  - JackFr 4y ago
    I assumed the parent was referring to a government sponsored plan to make SVB depositors whole beyond ordinary FDIC receivership.
mcculley 4y ago
> kill a bunch of startups I don't see this as a fair statement. There is a difference between killing a startup and letting it die. Zero interest-rate policy allowed for the creation of investors and startups that never had to think about the realities of managing cash. Using FDIC insurance to keep them afloat is acceptable. Anything beyond that is silly.
- shjake 4y ago
  It seems that SVB had enough assets cover 80-90% of all depositors regardless if they fall under the FDIC limit or not
AmericanOP 4y ago
Before people get too excited about letting it all burn, I recommend everyone watch this talk by an economist on the 2008 recovery: https://www.youtube.com/watch?v=RrFSO62p0jk https://www.youtube.com/watch?v=RrFSO62p0jk Spoiler alert (18:30): It was entrepreneurship that turned the economy around. Not fed policy. SVB put their deposits in US Treasury Bonds. Commonly regarded as the safest investment vehicle there is. Then the fed raised interest rates, completely screwing over this strategy. Then VCs panicked, like sheep. So now we're in a situation where the most successful startups in the innovation sector are at risk of being wiped out while the US economy is being guided toward recession to cool inflation. Go watch that talk- then tell me you really think its a good idea to let it all burn.
- postexitus 4y ago
  US Treasury Bonds are one of the safest investment vehicles, IF you match the interest and maturity to your liabilities. You cannot go and buy bonds that will mature and give you 1% per annum in 10 years when you have a debtor awaiting payment in 90 days. That's the huge risk mismanagement SVB did. Having said that, I don't think startups will suffer big time - but they were the ones also who created the bankrun fueled by VC panic. However mismanaged SVB was, given enough time they had enough resources to turn this around.
  - Bluecobra 4y ago
    This needs to be sticked at top. It’s not that hard to build a Treasury ladder with three month bills. This is not complicated and you don’t need to be Warren Buffett to figure this out.
  - theRealMe 4y ago
    One thing to remember about your last point is that the startups and VC’s that DIDN’T cause the bank run are the ones that will be hurt by this. So if anyone is in here thinking “they shouldn’t have tried to withdraw their money, thereby creating a bank run, if they didn’t want to lose their money!” You have to realize that there two separate groups of people here: the ones that withdrew their money and caused the bank run, and the other ones that didn’t cause the bank run and lost their money. That said, I don’t blame anybody for causing the bank run. If I had a reason to believe that my personal bank might not be able to give me my money if I didn’t get it out right now, there is zero chance that I would leave my money there to vanish just to avoid causing a bank run for other people. Morals break down when my life savings and livelihood are on the line.
kamaal 4y ago
>>People here are effectively suggesting that I shouldn't get my paycheck and that the company I work for should lose most of its money I got no dog in this fight(as I'm an Indian, and stay in India). But I guess what they are saying is they don't want to be paying for it. They just want whoever is responsible to make somebody else pay for these problems. So bailout is ok, they just don't want to pay for it, and may be find other people(VCs, other billionaires) who can invest/bailout that bank on their terms.
- lotsofpulp 4y ago
  Colloquially, a bailout implies taxpayer funded. Otherwise, it is known as charity/donation/investment.
deleted 4y ago
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WanderPanda 4y ago
If your startup doesn't survive having only 50% in the bank account for one week and then 80-90% in the following weeks (appears to be the most likely outcome without any government money) it likely isn't viable to begin with (in a normal, non-zero interest environment). I think the believe that startups have to always be on the brink of bankruptcy is misleading because it worked in the last decade of endless money and in winner-take all industries. At this point I believe that "Blitzscaling" is a zero-sum game and that most value is created by non winner-takes all companies that grow steadily. It seems analogous to aerodynamic friction, the faster you try to go the less far you will be able to go with a certain amount of energy/money
- hedora 4y ago
  This is a strange strawman argument. The GP and parent comment you responded to are specifically referring to this sentiment: > “Depositors shouldn’t get anything beyond the insured $250,000”. What startup normally only has $500,000 in the bank? Anyway, cashflow can matter a lot. For instance, people that sell stuff on etsy might not be paid on time because of this. That creates a lot of customer uncertainty. Also, I can imagine a lot of B2B startup customers are looking for second sources all of a sudden.
  - flappyeagle 4y ago
    The person you’re replying to is referring to a well-founded rumor that depositors will receive 50% of the uninsured deposits beyond the 250k minimum this coming week and that SVB has assets worth at least 80% of all deposits, which will be recovered in time.
duxup 4y ago
> I'm pretty baffled to see so much of this on HN. HN comment quality, thoughtfulness, and etc seems to drop off with higher visibility…. and sadly generally too. The more visible the more comments resemble Reddit or the god awful knee jerk hot takes you get in local newspaper comment sections :( It’s a bummer as I’ve enjoyed the generally high comment quality on HN for a long time.
- plonk 4y ago
  Maybe @dang could accept monthly donations to pay for a couple moderators? Last I heard they were volunteers. Anyway, the fact that the top-voted comment now complains about the low quality of answers shows that moderation + voting still help.
  - duxup 4y ago
    I don't think it is an issue of moderation. The bad comments aren't rule breaking ... they're just bad.
- idopmstuff 4y ago
  I agree with you on this, but I'm thinking more as a matter of perspective. HN is just not a place where I expect to see vicious, anti-tech backlash given the demographics.
  - norwalkbear 4y ago
    It's because tech has become synonymous with woke
    - blululu 4y ago
      Except among left wing circles where tech has become synonymous with fascist. Most of the people I've seen calling for depositors to lose everything are leftwing of the woke variety. Of course both right and left seem to ignore that bailing out a bank and backing up depositors are really very different policies an different issues.
rqtwteye 4y ago
I think the backlash against tech comes from many years of tech celebrating themselves and being celebrated as “disrupters” for a lot of bullshit startups. And the amounts of money made with companies hat have no real business is just astonishing. It would be nice if it went back to focusing on creating sustainable businesses that make useful products that benefit their users and aren’t just another vehicle for mass surveillance.
- jjulius 4y ago
  It's this. I would also like to point out that it's perfectly okay to simultaneously take pleasure in an industry being culled of precisely what you described, while also feeling bad for some of those who may lose their jobs as a result. Ain't nuance neat?
  - idopmstuff 4y ago
    > I would also like to point out that it's perfectly okay to simultaneously take pleasure in an industry being culled of precisely what you described, while also feeling bad for some of those who may lose their jobs as a result. Ain't nuance neat? Absolutely. What's surprising to me is the absolute lack of that nuance on HN. It's all just BURN IT ALL TO THE GROUND over the last few days.
    - urbanhole 4y ago
      Internet people are garbage, and HN is not special in this regard. This is because people are garbage. People love tearing others down. This is the rule.
      - layer8 4y ago
        This comment is amusingly self-referential. (As is this one, I guess.)
    - matheusmoreira 4y ago
      Yes. We're absolutely not interested in seeing the US government bail out banks yet again, especially not banks that just happened to get fucked by their "safe investment strategy". I really have no idea why you are surprised.
m00dy 4y ago
Another thing to mention is that US Dollar is still world's reserve currency. Bailout (or government aids) could lead to unpredictable things. Last time Bitcoin was invented... This time I can't really imagine what would happen. Since entry barrier to Finance has became very low... Even I myself, became decentralised finance expert... I can't really imagine what would happen if this thing can't really managed well....
htag 4y ago
> They [shareholders] deserve nothing, because that's what you should end up with if you own stock in a company that goes bankrupt. During a bankruptcy creditors get paid first, and investors are only allowed access to what is left after creditors are paid off. Hopefully a company declares bankruptcy before their total liabilities becomes larger than their total assets, otherwise creditors cannot be paid in full. Bank bailouts were largely done so banking services are not disrupted. As valuable as SVB was to startups, it's small potatoes to what 2007/2008 bailouts prevented. "Too big to fail" clearly doesn't apply here.
roflyear 4y ago
I think I lean towards you, but what people are actually suggesting is that these startups shouldn't be bailed out when they went with a bank with super-high promised rates, while they of course knew their deposits over $250k were uninsured.
- tsunamifury 4y ago
  They haven’t lost the money yet. Read and understand before you comment. The banks assets lost 10-20% value not 100%
  - roflyear 4y ago
    That's very rude. I haven't implied they lost money, to start, and 80% today or this week is much different than 80% in months.
- jurassic 4y ago
  I haven’t heard anything about high rates being the primary thing drawing people to SVB. The trap seems to have been giving startups access to credit that other banks would not provide, but only if you agree to do all your banking with SVB. That, and also several big VCs that required their portfolio companies to bank there. These things are what herded everyone into the building before it caught fire.
  - roflyear 4y ago
    I agree and have heard the same as you have, but SVB's website still does say a 4.5% yield. So the yields were quite attractive.
reilly3000 4y ago
>I just don't get where that comes from. YEARS of disinformation about "Personal Responsibility" and not a lot of critical thinking in the interim. I'm not specifically talking about the parent comment. Your point is sound and seems obvious to me. I also spent several years studying and fighting coordinated inauthentic content its effects on the brain. Whether coordinated or not, hearing the same message over and over again gets internalized such that it becomes reflexive to parrot. What happens when you give every single high school senior $1000 scholarship to read Ayn Rand? What happens in a society when hyper-capitalists, their politicians, and their media narratives leave no room to consider things that are beautiful and human? What happens when STEM education starves all of the humanities of oxygen? If it isn't this, I don't know what it is, but we're all about to find out.
matheusmoreira 4y ago
It's likely startups only exist to begin with due to low federal interest rates. It is obvious that if those rates are low investors will look elsewhere. Startups are one of those elsewheres. Now that rates are on the way up, there's no need for investors to risk their money on startups anymore. So startups no longer have one of the pre-conditions for their existence. Namely, free investor money literally pouring in and paying for all their expenses. Such is life in the free market. Looks like the US government disrupted you. Doesn't mean the US taxpayer has to bail you out.
- tsunamifury 4y ago
  This is a dramatic misunderstanding of those two categories if investing, their motivations, and end goals. It’s like saying an F1 team will now buy family economy cars to race with since their prices are down now. You invest in a startup fund for extremely high risk high reward outcomes. You invest in interest rate bonds etc for guaranteed low outcome. HN has become ridiculous.
  - matheusmoreira 4y ago
    You say I'm "ridiculous" and "detached from reality" yet the economy pretty much screeched to a halt when the Fed rased interest rates. The money stopped flowing freely, the massive layoffs began... Now we have literal banks failing. Yeah.
    - polio 4y ago
      Nothing screeched to a halt. Money stopped flowing as freely as it once did. The layoffs are relatively massive, but the companies involved are still enormous organizations. Things have slowed down, and things are fraying at the edges, but the economy is still largely fine. This is the intended outcome of the present monetary policy.
- theRealMe 4y ago
  This is the exact lack of nuance that OP is talking about. Do you understand what is actually happening here? A bank is going under and potentially taking a ton of startups with it, not because of any poor decisions or lack of legit business model by the startups. It’s purely due to an internal implementation detail of the (until now) we’ll respected bank that holds their money. I swear if it was called “generic bank” instead of “Silicon Valley Bank”, we wouldn’t be seeing all of these knee-jerk “good because they’re bad” responses.
curtisblaine 4y ago
From the fact that, if money for bail out comes from taxpayers' pockets, they don't want to be the ones to ultimately pay for this.
throw0101c 4y ago
> […] because our CEO used a well-reputed bank? I'm just a Regular Joe, and I have saving and chequing accounts at two banks in case there's an account discrepancy / disagreement with one, I still have some funds I can pay bills with until things get sorted out. Stuff happens: * https://en.wikipedia.org/wiki/2012_RBS_Group_computer_system_problems https://en.wikipedia.org/wiki/2012_RBS_Group_computer_system... I also have a couple of hundred dollars worth of cash (e.g, in case of power outages). If you're a multi-million dollar operation, why do you have a single point of failure with regards to finances? (And this has nothing to do with 'deserve': if you play golf during a thunderstorm, would you be surprised if you got zapped?)
- rmilk 4y ago
  Exactly this point. Every single offering brochure on those business checking accounts notes the FDIC limit. If they’re interest checking accounts, they are money market backed and clearly state no guaranteed return rate or even guarantee of capital. Heck, even my not savvy mother knows to keep her money market retirement accounts in different banks just like you describe. How can we possibly allow the CFO of these companies to get away with not managing finance risk, no matter how small. That was their only job, to manage finance risk. No business continuity insurance? Lines of credit with other banks? Convertible instruments that could be sold on Monday AM to raise cash? So many other ways a CFO can manage cash and risk but did not.
  - akrymski 4y ago
    SVB had no Chief Risk Officer for much of 2022 at all, which they failed to disclose. The previous one left in a hurry after selling $4m worth of stock, along with the CEO.
    - throw0101c 4y ago
      We're not talking about SVB: we're talking about the customers of SVB. If you're a not-small company (many dozens of people, which a few million in assets), why would you put all your financial eggs in one basket? Even if they're generally well-run, any institution can be hit with 'bad luck' like ransomware by some zero-day. Just by having (say) one-quarter of your assets at another institution it makes sure you can make payroll and pay your bills for some period of time while things are sorted out at the 'primary'.
deleted 4y ago
[deleted]
SMAAART 4y ago
I second your point and add: what's at stake here is not just SVB's customers, but the reputation of the entire US Banking system. The shareholders should lose all of their investment, that is a no-brainer, but the depositors should not lose 1 penny, and their funds be available on Monday morning. Here's an overlooked deadline: 6:00 PM EST, that is when Sydney (Australia)'s stock market opens. If that opens a lot lower, it will be the start of a free-fall cascade of stock markets worldwide. So, we have less than 5 hours as of this writing for an official FDIC/Federal Reserve statement. Wait for it.
- dehrmann 4y ago
  > but the reputation of the entire US Banking system Agreed. Advanced economies work because there are things you can take for granted, and you gain efficiencies from that. There are plenty of countries where the currency collapses every decade and banks don't work well. None one looks up to them, no one aspires to start a business there, and they're not leaders in anything other than maybe a commodity. They're places smart people leave.
wpietri 4y ago
As a long-time tech person and someone who has started multiple companies, including one venture-backed one, I'm happy to explain why I think uninsured depositholders should not have their losses subsidized by taxpayers. One, anybody with a bank account has heard about the FDIC and the FDIC insurance limits. Presumably anybody smart enough to raise millions of dollars know that if part of something is insured, the rest is uninsured. There are in fact good systemic reasons both for the FDIC to exist and for the limit to be high for individuals but low for companies. Two, the tech industry, especially the VC-funded end, is forever crowing about the power of the marketplace. How regulation stifles valuable innovation. How government intervention is a problem, not a solution. Three, among startups, market-driven disruption is practically a religion. Startups destroy existing companies all the time. Quite often it's an explicit goal, where startup X lists existing players A and B as companies whose lunches will get eaten because they are making bad choices. Four, there has been endless puffery and chest-thumping among VCs and tech startups how their genius justifies pocketing billions and billions of dollars when times are good. Best and brightest, incredibly hard workers, blah blah blah. Including a special tax exemption for VCs, because they're just such amazing financial wizards. Five, startup go under all the time. Which, having experienced it, definitely sucks. But when a startup goes under due to bad choices or bad luck, that's the game. So when I put this together, I firmly believe that startups with bad treasury management should not be subsidized by taxpayers. If we're so smart and amazing that we get to reshape segments of the economy, we're smart enough to follow basic financial advice like "don't put all your eggs in one basket". If we choose to play the game that might make us rich, we should not suddenly complain about the rules when we lose. In practice, the likely outcome here is that depositors either take no haircut or a modest one. Anybody going out of business because of that was already on the edge. And that will be partly because their investors will not see them as worthy of a bridge loan or an accelerated next round. Which, again, sucks for the people involved. But it's not a problem for taxpayers to solve. If we're going to spend billions of dollars on improving the safety net, I think startups are way, way down the list of priorities.
- nullc 4y ago
  > Two, the tech industry, especially the VC-funded end, is forever crowing ... there has been endless puffery and chest-thumping among VCs and tech startups When you find yourself cheering for collective punishment you should know that you are absolutely the bad guy.
PragmaticPulp 4y ago
> Like a whole lot of people here, I've worked at startups for my whole career. People here are effectively suggesting that I shouldn't get my paycheck and that the company I work for should lose most of its money because our CEO used a well-reputed bank? Cynicism reigns supreme on social media right now, and HN comments are a type of social media. There is also a deeply engrained “us versus them” mentality baked into a lot of the anger. The SVB scenario has more people identifying the “us” part as taxpayers (who would presumably foot the bill for backstopping losses) and the “them” part as VCs and investors. Interestingly, if this was rephrased as an “Ask HN” post where someone was concerned about their next paycheck because their startup’s bank failed, I suspect the sentiment would be completely reversed. The more relatable the story, the kinder the comments.
- nerdponx 4y ago
  Why should taxpayers pay for all of it? It's not like SVB had $0 in assets. Liquidation will hopefully cover enough to keep the lights on at smaller companies with uninsured deposits. The big depositors like Roku might lose something. Lest we forget that even TARP was actually a net profit for taxpayers.
- rmilk 4y ago
  I get what you’re saying, but how many well-intentioned startups have imploded and ran out of money the day before payday due to some unlikely risk? Lots (I was in 1-2 of them). Should we also try to salvage them? “Well-reputed bank” is not the same as zero risk money management. Look at the fine print of every one of those business checking accounts and you see there is clearly some risk, including loss of capital if you’re over the $250k limit. Everyone who has a retirement account in money markets at a “well-reputed bank” knows about this risk, so how can we let the CFO slide on finance risk management that was clearly their most important responsibility? Business continuity insurance, lines of credit, investor infusion, etc. Debt sales, etc. There are ways to get around an unexpected cash crunch. But there’s no excuse for not knowing the risk and expecting a $1M checking account to work like your personal checking account. This was the CFOs job at every one of the companies that is now in a crunch.
- simonh 4y ago
shadowgovt 4y ago
Over 50% of startups fail. If you factor in acquisitions as failures, the number is closer to 90%. HN has been around awhile and has been a hotbed of the same starry-eyed startup dream for a couple generations of young people getting on the carousel now, so I guess I'm not terribly surprised if the attitude "welcome to the club, we would print you a t-shirt but our printer startup went out of business" shows up around these parts from the folk who have been on the ride awhile. There are a lot of folks who read HN who had their dream crushed for a lot stupider reasons. ETA: that is something I'd like to see more of here though. There's a lot of folks who have been through a bust cycle and survived it and even stayed in the industry. What kept you going? How did you come out the other side? Was it as scary as it feels when you haven't done it before?
nullc 4y ago
almost every online discussion these days seems to get filled with bloodthirsty people, HN is no exception.
balves 4y ago
I wonder how much of this saltiness -- both on HN, reddit, and mainstream media -- is due solely to the name of the bank. If the headline was "California Regional Mutual Bank and Trust fails" (I made up the name, I don't know anything about banking, don't nitpick the terms) it surely would have still been newsworthy because of the size of the bank, but I suspect there would be less vitriol around the situation with the Silicon Valley connotation removed from it.
iancmceachern 4y ago
The issue is it wasn't pension money. It was VC money, that's money intentionally being gambled in high risk endeavors. It's not right for thr tax payers to bail out rich VCs who gambles their money. On the flip side, I also have worked in startups much of my career, and think I and people like me should be paid for our work. I think we should help the startups out, bail them out, but without helping the VCs. I think what that means is the startups effected should get their money back, but the VC owned shares of the company then become government assets that can be sold in the future to offset the cost of the buyout. It's simply not right for government money to bail them out, but fornthe VCs to profit from it years from now. Edited to add: In the end the point I'm trying to make is that it's not right for us to take money from average non-rich Americans to pay back VCs (rich americans) who gambled their money. If the bailout comes from people that earn more than 500k a year exclusively then I'm all for it. But taking public money that was taken from a single mom who is barely getting by to do so is wrong.
- nerdponx 4y ago
  That's just spiteful. I would rather keep the startups in business than punish the VCs by making them lose money on their current investments.
  - iancmceachern 4y ago
    The VCs caused the run on the bank is what I'm reading.
    - hackerlight 4y ago
      A run on the bank is a social phenomenon, and "VCs" aren't a singular monolith that acts in concert. The "VCs" didn't want this to happen any more than others.
      - iancmceachern 4y ago
        But they benefit from the upside. It's their gamble, not ours.
sangnoir 4y ago
> People here are effectively suggesting that I shouldn't get my paycheck and that the company I work for should lose most of its money because our CEO used a well-reputed bank? I am suggesting that your CEO not adequately insuring the companies bank deposit is negligent. If your CEO does not insure your HQ against fire, and it burns down, should it be bailed out by the government just so that you're not out of a job? Or is it not their fault that the CEO didn't use a "well-reputed landlord with adequate fire suppression?"
oldgradstudent 4y ago
> People here are effectively suggesting that I shouldn't get my paycheck and that the company I work for should lose most of its money because our CEO used a well-reputed bank? If you want to be paid by the government, you should be aware that salaries are significantly lower, and perks are non-existent. The government regulates banks and provides deposit insurance to to 250K. The whole point of deposit insurance is to prevent retail bank runs by the general public. Beyond that, it is the job of your CFO to manage risks, including the risk bank failure. The last large wave of bank failures happened barely over a decade ago. These things happen. Also, it sounds like your company will lose at most a fraction of its deposits.
- GenerWork 4y ago
  >and perks are non-existent. I thought that government perks were a major way to attract people in order to make up for the lower pay (pensions, more vacation, etc).
  - oldgradstudent 4y ago
    These are more benefits than perks. Still, total compensation is way lower for most government jobs.
sbaiddn 4y ago
Your company is the equity holder. You loosing last months paycheck is no different than what happens in the rest of the country any time an employer declares insolvency. Also, I don't think people in SV appreciate how much rancor and resentment their behavior has generated in the last fifteen years.
- nerdponx 4y ago
  Plenty of people not in SV, engaging in actual productive enterprise, were also using SVB.
  - sbaiddn 4y ago
    While I sympathize with them more than I would a tech bro, the principle is the same. What would happen if this happened to an employer's bank in Indiana? Your company's assets don't exist any more and you're insolvent. US bankruptcy protection is very generous, apply for it and try and to regroup.
    - nerdponx 4y ago
      > What would happen if this happened to an employer's bank in Indiana? Literally the same thing would happen, and people wouldn't be making such a big deal about it being a handout to greedy convenience store owners who didn't perform exhaustive diligence on the bank up the street.
- s1artibartfast 4y ago
  I dont understand the hate against SV/ tech bros. What did they ever do to anyone else? Is it purely jealousy, or do people feel harmed?
  - sbaiddn 4y ago
    Aside from weaponizing the internet to help DC censor people it deemed icky? Taibbi testified in Congress just this week about it. Or, if in a touristy area, flooding their residential neighborhood with unregulated AirBnBs? If bicycle/motorcycle rider, putting "self/driving" cars they knew cant detect two wheeled vehicles? Adding a police detector to continue providing illegal taxi service in cities? Having a business model where our personal information is syphoned off and commoditized? Creating social media creating new, widespread, psychological diseases? Creating the infrastructure for mass surveillance through by selling access to their product through government partnerships? This is HN... all these stories well documented here.
theGnuMe 4y ago
Yes it sucks but rules are rules. Existential risk management.
iguana_lawyer 4y ago
I don’t see what’s so hard to understand. Everyone else is one poor decision away from destitution. Why should you get special treatment?
aeternum 4y ago
The proper call should be to increase FDIC insurance to 10mil or something then. It is incredibly unfair to be saying that depositors here deserve to be made whole because they are startup companies that somehow matter more to the economy. Everyone agrees that shareholders and bondholders should we wiped out. Everyone agrees that deposits under 250k can and will be made whole due to FDIC. The disagreement if there is one is the 250k+, why should there be an exception just because these are tech startups?
- idopmstuff 4y ago
  I absolutely agree the FDIC limit should go way up. > The disagreement if there is one is the 250k+, why should there be an exception just because these are tech startups? That's not what I'm suggesting, nor is it what I think most people who think depositors should be made whole are suggesting. In basically any bank run scenario in which depositors had behaved reasonably (which is like 99% of companies putting their money in banks), I would support depositors being made whole. Regardless of the specifics of the situation, I think the upside of maintaining our collective faith that bank deposits are safe is much larger than the downside of whatever needs to be done to achieve that.
tptacek 4y ago
Very little of these discussions have anything to do with serious policy debate. They're a prism through which the whole site† filters their preexisting beliefs about venture capital and the startup industry. When you internalize that, it's much easier to look at an 800-comment third- or fourth- order HN thread about SVB and just nope out. There are no stakes to these threads. They're just here because the community needs to vent its reaction to the news and its valence. † (50% of which is outside the of the US, and a majority of which is people who don't work for "big tech", which ironically isn't much at all directly impacted by SVB)
MrMan 4y ago
the depositors shouldn't get paid beyond what remains of the assets of the bank!!!
steve76 4y ago
[dead]
anon291 4y ago
> People here are effectively suggesting that I shouldn't get my paycheck and that the company I work for should lose most of its money because our CEO used a well-reputed bank? I'm in the same position as you but this is a terrible take. No one thinks we deserve to lose money or jobs. They simply do not believe that other American taxpayers who likely make less than you should have to spend their hard earned money (or risk having it devalued by printing) in order to bail you out. And they are broadly correct. It is wrong to demand other people's money due to your own misfortune, especially when the misfortune is a lost business or job, versus something more existential. The reality is that most tech workers will be fine.
foobiekr 4y ago
The problem is that the valley culture wants it both ways. It is a largely libertarian, rules-breaking environment. They want to ignore laws and decry regulations while at the same time having the government step in and bail them out whenever anything goes against them. I, too, have worked for startups much of my life. Sometimes you show up for work one day and the doors are locked because the place is done. It is part of the deal. There are lots of reasons this can occur - hey, we just couldn't close another round, the economy hit a speed bump, etc. 2008 happened. Worldcom and Cable and Wireless just declared bankruptcy and they were our lead customers. etc. It is part of the startup cycle. If something like this this had managed to kill AirBnb, Uber and Lyft before they did the damage they did, the world would be better off.
truthwhisperer 4y ago
[dead]
handsclean 4y ago
It comes from the way lower class Americans are treated. The hardship that might be ahead for some otherwise extremely rich and privileged people is actually far less than befalls tens of millions of lower class Americans every single day, and choosing a “move fast and break things” bank is actually a far less “unfair” reason than, say, the circumstances of your birth. The vicious, lifelong message from mainstream society to those most in need has always been “nobody owes anybody anything, that would be socialism”. That’s why those people are angry to see people far better off receive help just because “not doing it would be unfair and hurt them”.
roenxi 4y ago
There have been losses. The order of people who have to feel the pain for that is: 1. Decision makers (the equity holders). 2. Active enablers (eg, certain creditors, possibly management). 3. Passive enablers (eg, other creditors, the startups who held money in the bank). 4. Bystanders (eg, taxpayers).
prewett 4y ago
I'm beginning to wonder if a lot of the posters to these kind of thins are just young. When I was 25 I thought I had well-reasoned and insightful opinions, and I certainly had forceful opinions. But I had no depth of knowledge in things like finance and politics, and thus, had no way of knowing how much I didn't know. A few years ago I watched Ian Shapiro's lectures on "Politics in the Modern World" (a course from Yale, developed from a request to help explain the rise of Trump). I realized that I thought I had insightful opinions, but really it was just rubbish because I had no understanding of political science, recent history, or even different forms of government and their different failings. I also felt differently about money when I was 25, because obviously I didn't have any. There was no way I could have any, because I had only been working for a few years (and junior devs were paid a lot less in those days). It seems like it would have been easy to be jealous of rich people at 25. Or just jealous of startup-employees who, judging by HN posts (/s), are all making 400k/year. In fact, I think some HN posts have claimed junior dev salaries more than what I was making after 20 years in the industry, which I could see might lead to some jealousy. Particularly if combined with a lack of perspective.
shrimpx 4y ago
It’s more subtle, because these startups exist due to VC investment. Those VCs probably recommended and even set up their portfolio startups with SVB accounts. And a high percentage of these companies were heading to failure due to the nature of these ventures. I’m not so sure taxpayers should be responsible here. Why don’t VCs double down and make their investees whole? They’re the ones who bankroll and believe in these ideas, and stand to make 1000x profits in their successful exits.
louloulou 4y ago
> the company I work for should lose most of its money because our CEO used a well-reputed bank Why should I lose my money because I bought the stock of "a well-reputed bank"?
phs318u 4y ago
> just because of their choice of financial institution There’s a moral hazard to all choices made in business. Making a choice based on insufficient due diligence is a hazard. Chasing higher rewards at higher risk is a hazard. Are you saying the government should indemnify businesses for their choices? My understanding is that SVB avoided some restrictions placed on other banks. It’s not clear to me the why’s and wherefor’s of this but there are only two options. Either malfeasance on the part of SVB, or ignorance/risk-taking on the part of the customers. The scahdenfreude I believe comes because it’s assumed many customers would be from the “this time it’s different” school of business, in which case there’s a lesson akin to caveat emptor begging to be learnt.
Khaine 4y ago
No. People don't want you to get special treatment. Your firm should have insurance to cover the deposits over 250K, or split the money across several banks. It didn't as such it should deal with the consequences. Which are it may not get all of its deposits back. When a building company, building my house goes bust. The government doesn't step in to get someone to finish building it. When I order goods from a company and it goes bust, the government doesn't step in to ensure I get my goods.
jongjong 4y ago
This was a rare event when, for once, elites would learn that it's possible to do everything right and still fail catastrophically due to systemic factors. This has been the case for the majority of people over the past decade. The only reason regular people accepted their own situation over the past decade is that they thought "rules are rules." But no, rules are not rules, it turns out. Only plebs need to take the consequences of silly or unjust rules. The elites are immune to unjust rules. When a pesky inconvenient rule affects the elites, it can simply be waived away. Why did I have to learn my lesson about the flawed system and the acceptance of tough luck, but politically-connected people didn't? What we have today is a 2-class society. It's the word of law above all... Unless you're politically connected; then suddenly the word of law yields to common sense.
georgeplusplus 4y ago
The anger is coming from citizens who are being asked to bail you out when they are already stretched to their financial limits and any such idea will surely make inflation go up. Sorry to hear about your situation I really am. I'm personally in the camp that we as a collective country have made bad fiscal choices knowingly or unknowingly. It's time to start paying for these choices and stop looking to others else we drown in these bad choices.

belter 4y ago

It's coming from the same system that probably led you to work at Startups your whole career. High risk for high reward on a lightly regulated capitalist system. If your CEO or CFO put all the money in one risky bank, it was bad financial management.

kemiller 4y ago
Many were restricted by covenant with their investors to only use SVB.
- grugagag 4y ago
  Id like to hear more about that.
  - roflyear 4y ago
    I've heard it was mostly they had credit agreements with svb that required them to bank exclusively with svb
    - eternalban 4y ago
      Is this correct then? : SVP gives easy credit to VC friends. VC friends use that credit as investment in startups who are told they must use SVP. So money moves from magic-money-printer -> SVP -> VC -> Startup -> SVP. Then SVP takes those deposits and invests it elsewhere. Now they are making money from loan to VC and reinvestment of those same monies that are deposited back. So a bank like SVP seems designed to enable VCs with easy credit to de-facto control an important (and balooning) niche of the economy and by their control over the beauty pageant of which startup idea gets money (and PR) they also control what kind of technology becomes dominant. (For example, these VCs share significant credit/blame for creating the surveillance tech. They share blame for creating an engineering culture that must serve full throttle growth business models. etc.) Is there a social graph of SVP and VCs involved? Are these people pals, friends, "effective" ideologues, etc.?
      - belter 4y ago
        That social graph is the definition of the VC ecosystem.
      - roflyear 4y ago
        > VC friends use that credit as investment in startups who are told they must use SVP. Maybe, but I was talking specifically about startups themselves being given loans by SVB then requiring the startup to bank there. But I am sure investors also pushed startups to SVB... if your investor (who maybe is highly invested in SVB ... ) says "you should use this bank" are you going to say no? The pressure is immense. > Is there a social graph of SVP and VCs involved? Are these people pals, friends, "effective" ideologues, etc.? I'd be more surprised if they weren't.
- belter 4y ago
  Because it was providing loans to the VCs and they saw it convenient, to force their startups there. High risk for High reward... "The rise and stunning fall of Silicon Valley Bank" - https://www.axios.com/2023/03/11/silicon-valley-bank-rip https://www.axios.com/2023/03/11/silicon-valley-bank-rip
- deleted 4y ago
  [deleted]
DoneWithAllThat 4y ago
It wasn’t a “risky bank”.
- belter 4y ago
  Not according to JP Morgan... - https://am.jpmorgan.com/content/dam/jpm-am-aem/global/en/insights/eye-on-the-market/silicon-valley-bank-failure-amv.pdf https://am.jpmorgan.com/content/dam/jpm-am-aem/global/en/ins... "The liability issue: extreme reliance on institutional/VC funding rather than traditional retail deposits. ...While capital, wholesale funding and loan to deposit ratios improved for many US banks since 2008, there are exceptions. As shown in the first chart, SIVB was in a league of its own: a high level of loans plus securities as a percentage of deposits, and very low reliance on stickier retail deposits as a share of total deposits. Bottom line: SIVB carved out a distinct and riskier niche than other banks, setting itself up for large potential capital shortfalls in case of rising interest rates, deposit outflows and forced asset sales. [Note: This chart appeared in our 2023 Outlook in a discussion on risks related to deposits, rising rates and quantitative tightening]..."
- capableweb 4y ago
  Everything is pointing towards that it was a risky bank, with a "unusually high reliance on corporate/VC funding". Maybe SVB themselves downplayed this? Take https://am.jpmorgan.com/content/dam/jpm-am-aem/global/en/insights/eye-on-the-market/silicon-valley-bank-failure-amv.pdf https://am.jpmorgan.com/content/dam/jpm-am-aem/global/en/ins... as an example: > The liabiity issue: extreme reliance on institutional/VC funding rather than traditional retail deposits > While capital, wholesale funding and loan to deposit ratios improved for many US banks since 2008, there are exceptions. As shown in the first chart, SIVB was in a league of its own: a high level of loans plus securities as a percentage of deposits, and very low reliance on stickier retail deposits as a share of total deposits. Bottom line: SIVB carved out a distinct and riskier niche than other banks, setting itself up for large potential capital shortfalls in case of rising interest rates, deposit outflows and forced asset sales.
- newaccount2023 4y ago
  We have an existence proof to the contrary
peter422 4y ago
What bank do you use? When was the last time you went over their deposit base and asset allocation?
- belter 4y ago
  > When was the last time you went over their deposit base and asset allocation? A few times but only for a short time and a small percentage of the capital. Was already a full grown adult in 2008, have good memory, and are still licking many old lion financial battle scars...
- JumpCrisscross 4y ago
  > When was the last time you went over their deposit base and asset allocation Sweep account and credit rating. First is a one-time option. Second, an occasional check.
  - hedora 4y ago
    Sweep accounts are fine, but I’m not sure I’d bother with credit ratings. SVB’s was basically as high as possible even for a few hours after the run started and before they closed: https://ir.svb.com/shareholder-and-bondholder-information/credit-ratings/default.aspx https://ir.svb.com/shareholder-and-bondholder-information/cr...
    - JumpCrisscross 4y ago
      > SVB’s was basically as high as possible Borderline investment grade isn’t “high as possible.”
      - hedora 4y ago
        I misread the table. Thanks.
- massysett 4y ago
  I use an FDIC-insured bank. My deposits are under the limit for insurance. I don’t care about its deposit base or asset allocation because that’s the point of deposit insurance: to make retail depositors feel secure. On the other hand, a CFO with millions in cash is a professional whose job is to manage corporate risk. A competent CFO needs to account for things like bank failures, which do happen.
JJMcJ 4y ago
It wasn't risky as long as prime rate stayed super low. But that rate has been creeping up for months now. SVB was too small to qualify for risk assessment under the revised banking rules. So they could get away with money in volatile securities that were very interest rate sensitive. That said, SVB seemed very solid until Thursday morning.
- Cthulhu_ 4y ago
  Would it have been better if the rate increases were further apart and there were strong declarations of intent?
- chiefalchemist 4y ago
  To clarify, SVB's problems are the result of The Fed's change in direction. It just takes a while to see the affects of those decisions.
  - salawat 4y ago
    SVB's problems were the result of glutting on long maturation bonds instead of bills.
    - chiefalchemist 4y ago
      As it was explained to me, the Fed increasing interest rates impacted the value of the bonds held by SVB. As that value contracted SVBs was eventually in trouble.
- tome 4y ago
  > It wasn't risky as long as prime rate stayed super low. That sounds a bit like "it's not risky to driver a motor vehicle as long as you don't get into an accident".
  - JJMcJ 4y ago
    That's true. The real risk was in imagining that the interest rates would stay super-low forever.
dmix 4y ago
You think consumer banking is lightly regulated? Or that VC should have their risk controls? Only conservative old school bankers should invest in startups? Or what exactly?
- belter 4y ago
  No. Due to the previous crisis, is one part very well regulated. Here is what should happen...The emphasis below on unlikely is mine... "A: In the unlikely event of a bank failure, the FDIC responds in two capacities." "First, as the insurer of the bank's deposits, the FDIC pays insurance to depositors up to the insurance limit. Historically, the FDIC pays insurance within a few days after a bank closing, usually the next business day, by either 1) providing each depositor with a new account at another insured bank in an amount equal to the insured balance of their account at the failed bank, or 2) issuing a check to each depositor for the insured balance of their account at the failed bank.... ...In some cases—for example, deposits that exceed $250,000 and are linked to trust documents or deposits established by a third-party broker—the FDIC may need additional time to determine the amount of deposit insurance coverage and may request supplemental information from the depositor in order to complete the insurance determination..." "Second, as the receiver of the failed bank, the FDIC assumes the task of selling/collecting the assets of the failed bank and settling its debts, including claims for deposits in excess of the insured limit. If a depositor has uninsured funds (i.e., funds above the insured limit), they may recover some portion of their uninsured funds from the proceeds from the sale of failed bank assets. However, it can take several years to sell off the assets of a failed bank. As assets are sold, depositors who had uninsured funds usually receive periodic payments (on a pro-rata "cents on the dollar" basis) on their remaining claim." "Deposit Insurance FAQs" - https://www.fdic.gov/resources/deposit-insurance/faq/ https://www.fdic.gov/resources/deposit-insurance/faq/

tsimionescu 4y ago

First of all, even if the company you work for goes bankrupt, you're very likely to still receive your salary, as debts to workers are the highest priority in any bankruptcy case. So the risk to workers' livelihoods is being way overblown. Of course, if a substantial amount of your compensation was company stock, you may lose a lot on that, but that is par for the course with stock. Second of all, the purpose of having a limit to FDIC insured deposits is to limit the government's liability in case of bank failures to small-ish depositors. A company thag has millions of dollars to deposit also has more responsibility to evaluate the bank they are depositing in. Perhaps they shouldn't keep money in the bank in the first place, but find other uses for them. Note that the true FDIC insurance limit is much larger than the 250k that usually gets cited - since there are various facilities for business accounts which can take that up to a million $ or more (multiple signers on the same account, multiple types of accounts). Should be plenty for most startups to pay their employees' salary outright, even without going bankrupt.

phamilton 4y ago
> So the risk to workers' livelihoods is being way overblown If this were 2015 I would agree. But it's 2023 and thousands of software engineers are already struggling to find work after layoffs. Companies shutting down en masse because of SVB will soften what is already an employer's market for talent. This may hurt specific founders and VCs a lot, but total damages (in the form of a softer market for engineers) may hurt the average employee more, even if they aren't directly affected.
mixologic 4y ago
You get your last paycheck, sure, but you still lose your job which is definitely a threat to workers lively hoods. It's even more of a threat if the whole sector you're employed in suffers simultaneously, as it becomes difficult to continue to be employed in that sector.
- JackFr 4y ago
  I say as a person who’s been laid off twice and worked for a company that went bankrupt — why is that my problem? Why should you get my money? (In the case of the company I worked for which went bankrupt — we were a fintech startup with a truly innovative and fantastic product. Our management made three bad decisions which led to our demise. Two were technical and would have been recoverable, the last was a strategic move which ultimately proved disastrous.)

ohgodplsno 4y ago

[flagged]

tome 4y ago
This comment sounds very harsh on first reading but I'm having trouble finding anything actually incorrect about it ... I just pray this doesn't hit the wider economy.
- DonHopkins 4y ago
  Shitty ass dog feeders are connected with wifi, not bluetooth.
- zdragnar 4y ago
  It overlooks everyone who is just starting out, everyone employed at these companies that isn't making techbro salary like the receptionists, custodial staff, QA, workers on visas, whatever. Simple fantasies for simple minds, no different than lazy racism or any other form of bigotry.
  - tome 4y ago
    That's a fair point.
  - ohgodplsno 4y ago
    Indeed, for that extremely minor part of companies that about noone on HN has ever cared about, except when it becomes practical to use them, it's troublesome. But since there still exists hundreds of billions of dollars ready to be wasted on bullshit endeavours,I have no doubt they will all find jobs soon in the next cloud cat feeder startup. Your mind immediately equating good old schadenfreude with lazy racism is indeed telling, but I'll refrain from saying anything, Americans have never been excellent at either context or nuance.
    - zdragnar 4y ago
      > but I'll refrain from saying anything Sounds like you did. In any case, schadenfreude typically falls into one of three categories: justice, rivalry or aggression. The OP sounds like they are experiencing the justice aspect- that these people who contribute so little are now enduring hardship. The problem is that "these people" is just another lazy stereotype- it is just another form of aggression; equating everyone who is hurt here as "easy jobs that can easily be replaced" is not unlike assuming everyone living in a ghetto neighborhood is a thug. The effects and scope of harm of the stereotype may be different, but both come from the same mental state of mind- these people are other, they don't live like I think they should, and they get what they deserve, despite the fact that the "they" in the sentiment is not representative of the people harmed by it.

JumpinJack_Cash 4y ago

> > I've worked at startups for my whole career HN has grown a lot and there are much more people who are not necessarily from SV. In the real world, if you live in SF, work in startups doing what you like, get paid well, not trapped in 9-5 etc. That's elite and nobody will ever feel sorry for you. As a general rule every guy should always expect nobody to feel sorry for them, but this particular set of circumstances and the area of the country where they unfolded scream 'millionaires problems' to those roaming in the interwebz. And now HN is part of the interwebz.

oh_sigh 4y ago
No one is asking anyone to feel sorry for them. They got punched in the nose, and they just don't want to be punched in the nose again.
- JumpinJack_Cash 4y ago
  At the expense of taxpayers. That is the crux of the argument. People are stressing the 250k FDIC requirement which is Federal and thus equal for everybody and it's one of the very few things that is equal for everybody across the land regardless of you living in Mobile, AL or San Jose, CA. People are against the extra-insurance/safery-net/bailout being awarded to everything based in NYC and SF because everything in NYC and SF is supposedly too big and too important to fail. In this case it's not even failure but a minor inconvenience because as it stands the money is there, it's only tied up.
  - hedora 4y ago
    First of all, the FDIC has always arranged to make depositors whole when banks failed. This is why there weren’t massive runs on bank checking and savings accounts in 2008. Second, CA gets the least back in federal spending per dollar of taxes paid, and NY is close: https://worldpopulationreview.com/state-rankings/federal-spending-by-state https://worldpopulationreview.com/state-rankings/federal-spe... Pre pandemic, only 11 states were turning a profit: https://howmuch.net/articles/federal-budget-receipts-and-expenditures-across-the-united-states https://howmuch.net/articles/federal-budget-receipts-and-exp... The regions most upset about federal safety nets are also the ones that benefit the most from them. Third, it is not a minor inconvenience when $10M’s of investor money from a fundraising round gets permanently lowered to $250K (no “bailout”) or if a startup stops making payroll for 2 years (upper bound of the time range the FDIC has proposed).

JumpCrisscross 4y ago

> because our CEO used a well-reputed bank That didn’t have an investment grade rating, where $250k comes out of taxpayer coffers Monday morning, and where everyone has unemployment insurance? Yes. The assets of the bank should go to your company first. But the public purse should not be opened.

tock 4y ago
> $250k comes out of taxpayer coffers Monday morning This isn't coming out of taxpayer coffers. FDIC insurance premiums are paid by the banks.
- JumpCrisscross 4y ago
  > isn't coming out of taxpayer coffers. FDIC insurance premiums are paid by the banks Fair enough. The FDIC is funded by premiums but backstopped by the Treasury. There is no private insurance function that pays out at this scale the next business day.
  - KptMarchewa 4y ago
    Which scale? 0 dollars? All of what will be paid on Monday will be paid out of SVB's assets, which are being liquidates as we speak.
    - JumpCrisscross 4y ago
      > what will be paid on Monday will be paid out of SVB's funds Possibly, but not necessarily. FDIC funds pay insured deposits before determinations about assets are made.

deleted 4y ago

[deleted]

lambo4bkfast 4y ago

I agree there are a lot of poorly thought out populist arguments for not making depositors whole. I for one prefer HN to not converge into another social forum like Reddit that has a lack of critical thinking in discussions.

JackFr 4y ago

> But kill a bunch of startups because of their choice of financial institution? I just don't get where that comes from. Because you want to take my money, and your justification for wanting my money is simply “My company made a mistake.”

jtr1 4y ago
How are they taking your money?
- JackFr 4y ago
  FDIC receivership is not my money, it’s all self funded. Any bailout beyond that is taxpayer money. As a voter (and a guy who pays taxes) it is my money. I have a lot of opinions about how that money should be spent. A bailout beyond FDIC receivership is simply a payout to VCs. SVB’s resolution will be a solid measure of much political clout they have.
  - auntienomen 4y ago
    It's a noisy measure, since FDIC / Fed / Treasury are quite reasonably worried about this failure setting off a series of bank runs.
tracer17 4y ago
How is it your money? It's not a taxpayer funded bailout, the FDIC is just going to forcibly liquidate SVB's assets and pay back customers to the extent possible with those proceeds.
- JackFr 4y ago
  I assumed the parent was referring to a government sponsored plan to make SVB depositors whole beyond ordinary FDIC receivership.

mcculley 4y ago

> kill a bunch of startups I don't see this as a fair statement. There is a difference between killing a startup and letting it die. Zero interest-rate policy allowed for the creation of investors and startups that never had to think about the realities of managing cash. Using FDIC insurance to keep them afloat is acceptable. Anything beyond that is silly.

shjake 4y ago
It seems that SVB had enough assets cover 80-90% of all depositors regardless if they fall under the FDIC limit or not

AmericanOP 4y ago

Before people get too excited about letting it all burn, I recommend everyone watch this talk by an economist on the 2008 recovery: https://www.youtube.com/watch?v=RrFSO62p0jk https://www.youtube.com/watch?v=RrFSO62p0jk Spoiler alert (18:30): It was entrepreneurship that turned the economy around. Not fed policy. SVB put their deposits in US Treasury Bonds. Commonly regarded as the safest investment vehicle there is. Then the fed raised interest rates, completely screwing over this strategy. Then VCs panicked, like sheep. So now we're in a situation where the most successful startups in the innovation sector are at risk of being wiped out while the US economy is being guided toward recession to cool inflation. Go watch that talk- then tell me you really think its a good idea to let it all burn.

postexitus 4y ago
US Treasury Bonds are one of the safest investment vehicles, IF you match the interest and maturity to your liabilities. You cannot go and buy bonds that will mature and give you 1% per annum in 10 years when you have a debtor awaiting payment in 90 days. That's the huge risk mismanagement SVB did. Having said that, I don't think startups will suffer big time - but they were the ones also who created the bankrun fueled by VC panic. However mismanaged SVB was, given enough time they had enough resources to turn this around.
- Bluecobra 4y ago
  This needs to be sticked at top. It’s not that hard to build a Treasury ladder with three month bills. This is not complicated and you don’t need to be Warren Buffett to figure this out.
- theRealMe 4y ago
  One thing to remember about your last point is that the startups and VC’s that DIDN’T cause the bank run are the ones that will be hurt by this. So if anyone is in here thinking “they shouldn’t have tried to withdraw their money, thereby creating a bank run, if they didn’t want to lose their money!” You have to realize that there two separate groups of people here: the ones that withdrew their money and caused the bank run, and the other ones that didn’t cause the bank run and lost their money. That said, I don’t blame anybody for causing the bank run. If I had a reason to believe that my personal bank might not be able to give me my money if I didn’t get it out right now, there is zero chance that I would leave my money there to vanish just to avoid causing a bank run for other people. Morals break down when my life savings and livelihood are on the line.

kamaal 4y ago

>>People here are effectively suggesting that I shouldn't get my paycheck and that the company I work for should lose most of its money I got no dog in this fight(as I'm an Indian, and stay in India). But I guess what they are saying is they don't want to be paying for it. They just want whoever is responsible to make somebody else pay for these problems. So bailout is ok, they just don't want to pay for it, and may be find other people(VCs, other billionaires) who can invest/bailout that bank on their terms.

lotsofpulp 4y ago
Colloquially, a bailout implies taxpayer funded. Otherwise, it is known as charity/donation/investment.

deleted 4y ago

[deleted]

WanderPanda 4y ago

If your startup doesn't survive having only 50% in the bank account for one week and then 80-90% in the following weeks (appears to be the most likely outcome without any government money) it likely isn't viable to begin with (in a normal, non-zero interest environment). I think the believe that startups have to always be on the brink of bankruptcy is misleading because it worked in the last decade of endless money and in winner-take all industries. At this point I believe that "Blitzscaling" is a zero-sum game and that most value is created by non winner-takes all companies that grow steadily. It seems analogous to aerodynamic friction, the faster you try to go the less far you will be able to go with a certain amount of energy/money

hedora 4y ago
This is a strange strawman argument. The GP and parent comment you responded to are specifically referring to this sentiment: > “Depositors shouldn’t get anything beyond the insured $250,000”. What startup normally only has $500,000 in the bank? Anyway, cashflow can matter a lot. For instance, people that sell stuff on etsy might not be paid on time because of this. That creates a lot of customer uncertainty. Also, I can imagine a lot of B2B startup customers are looking for second sources all of a sudden.
- flappyeagle 4y ago
  The person you’re replying to is referring to a well-founded rumor that depositors will receive 50% of the uninsured deposits beyond the 250k minimum this coming week and that SVB has assets worth at least 80% of all deposits, which will be recovered in time.

duxup 4y ago

> I'm pretty baffled to see so much of this on HN. HN comment quality, thoughtfulness, and etc seems to drop off with higher visibility…. and sadly generally too. The more visible the more comments resemble Reddit or the god awful knee jerk hot takes you get in local newspaper comment sections :( It’s a bummer as I’ve enjoyed the generally high comment quality on HN for a long time.

plonk 4y ago
Maybe @dang could accept monthly donations to pay for a couple moderators? Last I heard they were volunteers. Anyway, the fact that the top-voted comment now complains about the low quality of answers shows that moderation + voting still help.
- duxup 4y ago
  I don't think it is an issue of moderation. The bad comments aren't rule breaking ... they're just bad.
idopmstuff 4y ago
I agree with you on this, but I'm thinking more as a matter of perspective. HN is just not a place where I expect to see vicious, anti-tech backlash given the demographics.
- norwalkbear 4y ago
  It's because tech has become synonymous with woke
  - blululu 4y ago
    Except among left wing circles where tech has become synonymous with fascist. Most of the people I've seen calling for depositors to lose everything are leftwing of the woke variety. Of course both right and left seem to ignore that bailing out a bank and backing up depositors are really very different policies an different issues.

rqtwteye 4y ago

I think the backlash against tech comes from many years of tech celebrating themselves and being celebrated as “disrupters” for a lot of bullshit startups. And the amounts of money made with companies hat have no real business is just astonishing. It would be nice if it went back to focusing on creating sustainable businesses that make useful products that benefit their users and aren’t just another vehicle for mass surveillance.

jjulius 4y ago
It's this. I would also like to point out that it's perfectly okay to simultaneously take pleasure in an industry being culled of precisely what you described, while also feeling bad for some of those who may lose their jobs as a result. Ain't nuance neat?
- idopmstuff 4y ago
  > I would also like to point out that it's perfectly okay to simultaneously take pleasure in an industry being culled of precisely what you described, while also feeling bad for some of those who may lose their jobs as a result. Ain't nuance neat? Absolutely. What's surprising to me is the absolute lack of that nuance on HN. It's all just BURN IT ALL TO THE GROUND over the last few days.
  - urbanhole 4y ago
    Internet people are garbage, and HN is not special in this regard. This is because people are garbage. People love tearing others down. This is the rule.
    - layer8 4y ago
      This comment is amusingly self-referential. (As is this one, I guess.)
  - matheusmoreira 4y ago
    Yes. We're absolutely not interested in seeing the US government bail out banks yet again, especially not banks that just happened to get fucked by their "safe investment strategy". I really have no idea why you are surprised.

m00dy 4y ago

Another thing to mention is that US Dollar is still world's reserve currency. Bailout (or government aids) could lead to unpredictable things. Last time Bitcoin was invented... This time I can't really imagine what would happen. Since entry barrier to Finance has became very low... Even I myself, became decentralised finance expert... I can't really imagine what would happen if this thing can't really managed well....

htag 4y ago

> They [shareholders] deserve nothing, because that's what you should end up with if you own stock in a company that goes bankrupt. During a bankruptcy creditors get paid first, and investors are only allowed access to what is left after creditors are paid off. Hopefully a company declares bankruptcy before their total liabilities becomes larger than their total assets, otherwise creditors cannot be paid in full. Bank bailouts were largely done so banking services are not disrupted. As valuable as SVB was to startups, it's small potatoes to what 2007/2008 bailouts prevented. "Too big to fail" clearly doesn't apply here.

roflyear 4y ago

I think I lean towards you, but what people are actually suggesting is that these startups shouldn't be bailed out when they went with a bank with super-high promised rates, while they of course knew their deposits over $250k were uninsured.

tsunamifury 4y ago
They haven’t lost the money yet. Read and understand before you comment. The banks assets lost 10-20% value not 100%
- roflyear 4y ago
  That's very rude. I haven't implied they lost money, to start, and 80% today or this week is much different than 80% in months.
jurassic 4y ago
I haven’t heard anything about high rates being the primary thing drawing people to SVB. The trap seems to have been giving startups access to credit that other banks would not provide, but only if you agree to do all your banking with SVB. That, and also several big VCs that required their portfolio companies to bank there. These things are what herded everyone into the building before it caught fire.
- roflyear 4y ago
  I agree and have heard the same as you have, but SVB's website still does say a 4.5% yield. So the yields were quite attractive.

reilly3000 4y ago

>I just don't get where that comes from. YEARS of disinformation about "Personal Responsibility" and not a lot of critical thinking in the interim. I'm not specifically talking about the parent comment. Your point is sound and seems obvious to me. I also spent several years studying and fighting coordinated inauthentic content its effects on the brain. Whether coordinated or not, hearing the same message over and over again gets internalized such that it becomes reflexive to parrot. What happens when you give every single high school senior $1000 scholarship to read Ayn Rand? What happens in a society when hyper-capitalists, their politicians, and their media narratives leave no room to consider things that are beautiful and human? What happens when STEM education starves all of the humanities of oxygen? If it isn't this, I don't know what it is, but we're all about to find out.

matheusmoreira 4y ago

It's likely startups only exist to begin with due to low federal interest rates. It is obvious that if those rates are low investors will look elsewhere. Startups are one of those elsewheres. Now that rates are on the way up, there's no need for investors to risk their money on startups anymore. So startups no longer have one of the pre-conditions for their existence. Namely, free investor money literally pouring in and paying for all their expenses. Such is life in the free market. Looks like the US government disrupted you. Doesn't mean the US taxpayer has to bail you out.

tsunamifury 4y ago
This is a dramatic misunderstanding of those two categories if investing, their motivations, and end goals. It’s like saying an F1 team will now buy family economy cars to race with since their prices are down now. You invest in a startup fund for extremely high risk high reward outcomes. You invest in interest rate bonds etc for guaranteed low outcome. HN has become ridiculous.
- matheusmoreira 4y ago
  You say I'm "ridiculous" and "detached from reality" yet the economy pretty much screeched to a halt when the Fed rased interest rates. The money stopped flowing freely, the massive layoffs began... Now we have literal banks failing. Yeah.
  - polio 4y ago
    Nothing screeched to a halt. Money stopped flowing as freely as it once did. The layoffs are relatively massive, but the companies involved are still enormous organizations. Things have slowed down, and things are fraying at the edges, but the economy is still largely fine. This is the intended outcome of the present monetary policy.
theRealMe 4y ago
This is the exact lack of nuance that OP is talking about. Do you understand what is actually happening here? A bank is going under and potentially taking a ton of startups with it, not because of any poor decisions or lack of legit business model by the startups. It’s purely due to an internal implementation detail of the (until now) we’ll respected bank that holds their money. I swear if it was called “generic bank” instead of “Silicon Valley Bank”, we wouldn’t be seeing all of these knee-jerk “good because they’re bad” responses.

curtisblaine 4y ago

From the fact that, if money for bail out comes from taxpayers' pockets, they don't want to be the ones to ultimately pay for this.

throw0101c 4y ago

> […] because our CEO used a well-reputed bank? I'm just a Regular Joe, and I have saving and chequing accounts at two banks in case there's an account discrepancy / disagreement with one, I still have some funds I can pay bills with until things get sorted out. Stuff happens: * https://en.wikipedia.org/wiki/2012_RBS_Group_computer_system_problems https://en.wikipedia.org/wiki/2012_RBS_Group_computer_system... I also have a couple of hundred dollars worth of cash (e.g, in case of power outages). If you're a multi-million dollar operation, why do you have a single point of failure with regards to finances? (And this has nothing to do with 'deserve': if you play golf during a thunderstorm, would you be surprised if you got zapped?)

rmilk 4y ago
Exactly this point. Every single offering brochure on those business checking accounts notes the FDIC limit. If they’re interest checking accounts, they are money market backed and clearly state no guaranteed return rate or even guarantee of capital. Heck, even my not savvy mother knows to keep her money market retirement accounts in different banks just like you describe. How can we possibly allow the CFO of these companies to get away with not managing finance risk, no matter how small. That was their only job, to manage finance risk. No business continuity insurance? Lines of credit with other banks? Convertible instruments that could be sold on Monday AM to raise cash? So many other ways a CFO can manage cash and risk but did not.
- akrymski 4y ago
  SVB had no Chief Risk Officer for much of 2022 at all, which they failed to disclose. The previous one left in a hurry after selling $4m worth of stock, along with the CEO.
  - throw0101c 4y ago
    We're not talking about SVB: we're talking about the customers of SVB. If you're a not-small company (many dozens of people, which a few million in assets), why would you put all your financial eggs in one basket? Even if they're generally well-run, any institution can be hit with 'bad luck' like ransomware by some zero-day. Just by having (say) one-quarter of your assets at another institution it makes sure you can make payroll and pay your bills for some period of time while things are sorted out at the 'primary'.

deleted 4y ago

[deleted]

SMAAART 4y ago

I second your point and add: what's at stake here is not just SVB's customers, but the reputation of the entire US Banking system. The shareholders should lose all of their investment, that is a no-brainer, but the depositors should not lose 1 penny, and their funds be available on Monday morning. Here's an overlooked deadline: 6:00 PM EST, that is when Sydney (Australia)'s stock market opens. If that opens a lot lower, it will be the start of a free-fall cascade of stock markets worldwide. So, we have less than 5 hours as of this writing for an official FDIC/Federal Reserve statement. Wait for it.

dehrmann 4y ago
> but the reputation of the entire US Banking system Agreed. Advanced economies work because there are things you can take for granted, and you gain efficiencies from that. There are plenty of countries where the currency collapses every decade and banks don't work well. None one looks up to them, no one aspires to start a business there, and they're not leaders in anything other than maybe a commodity. They're places smart people leave.

wpietri 4y ago

As a long-time tech person and someone who has started multiple companies, including one venture-backed one, I'm happy to explain why I think uninsured depositholders should not have their losses subsidized by taxpayers. One, anybody with a bank account has heard about the FDIC and the FDIC insurance limits. Presumably anybody smart enough to raise millions of dollars know that if part of something is insured, the rest is uninsured. There are in fact good systemic reasons both for the FDIC to exist and for the limit to be high for individuals but low for companies. Two, the tech industry, especially the VC-funded end, is forever crowing about the power of the marketplace. How regulation stifles valuable innovation. How government intervention is a problem, not a solution. Three, among startups, market-driven disruption is practically a religion. Startups destroy existing companies all the time. Quite often it's an explicit goal, where startup X lists existing players A and B as companies whose lunches will get eaten because they are making bad choices. Four, there has been endless puffery and chest-thumping among VCs and tech startups how their genius justifies pocketing billions and billions of dollars when times are good. Best and brightest, incredibly hard workers, blah blah blah. Including a special tax exemption for VCs, because they're just such amazing financial wizards. Five, startup go under all the time. Which, having experienced it, definitely sucks. But when a startup goes under due to bad choices or bad luck, that's the game. So when I put this together, I firmly believe that startups with bad treasury management should not be subsidized by taxpayers. If we're so smart and amazing that we get to reshape segments of the economy, we're smart enough to follow basic financial advice like "don't put all your eggs in one basket". If we choose to play the game that might make us rich, we should not suddenly complain about the rules when we lose. In practice, the likely outcome here is that depositors either take no haircut or a modest one. Anybody going out of business because of that was already on the edge. And that will be partly because their investors will not see them as worthy of a bridge loan or an accelerated next round. Which, again, sucks for the people involved. But it's not a problem for taxpayers to solve. If we're going to spend billions of dollars on improving the safety net, I think startups are way, way down the list of priorities.

nullc 4y ago
> Two, the tech industry, especially the VC-funded end, is forever crowing ... there has been endless puffery and chest-thumping among VCs and tech startups When you find yourself cheering for collective punishment you should know that you are absolutely the bad guy.

PragmaticPulp 4y ago

> Like a whole lot of people here, I've worked at startups for my whole career. People here are effectively suggesting that I shouldn't get my paycheck and that the company I work for should lose most of its money because our CEO used a well-reputed bank? Cynicism reigns supreme on social media right now, and HN comments are a type of social media. There is also a deeply engrained “us versus them” mentality baked into a lot of the anger. The SVB scenario has more people identifying the “us” part as taxpayers (who would presumably foot the bill for backstopping losses) and the “them” part as VCs and investors. Interestingly, if this was rephrased as an “Ask HN” post where someone was concerned about their next paycheck because their startup’s bank failed, I suspect the sentiment would be completely reversed. The more relatable the story, the kinder the comments.

nerdponx 4y ago
Why should taxpayers pay for all of it? It's not like SVB had $0 in assets. Liquidation will hopefully cover enough to keep the lights on at smaller companies with uninsured deposits. The big depositors like Roku might lose something. Lest we forget that even TARP was actually a net profit for taxpayers.
rmilk 4y ago
I get what you’re saying, but how many well-intentioned startups have imploded and ran out of money the day before payday due to some unlikely risk? Lots (I was in 1-2 of them). Should we also try to salvage them? “Well-reputed bank” is not the same as zero risk money management. Look at the fine print of every one of those business checking accounts and you see there is clearly some risk, including loss of capital if you’re over the $250k limit. Everyone who has a retirement account in money markets at a “well-reputed bank” knows about this risk, so how can we let the CFO slide on finance risk management that was clearly their most important responsibility? Business continuity insurance, lines of credit, investor infusion, etc. Debt sales, etc. There are ways to get around an unexpected cash crunch. But there’s no excuse for not knowing the risk and expecting a $1M checking account to work like your personal checking account. This was the CFOs job at every one of the companies that is now in a crunch.
simonh 4y ago

shadowgovt 4y ago

Over 50% of startups fail. If you factor in acquisitions as failures, the number is closer to 90%. HN has been around awhile and has been a hotbed of the same starry-eyed startup dream for a couple generations of young people getting on the carousel now, so I guess I'm not terribly surprised if the attitude "welcome to the club, we would print you a t-shirt but our printer startup went out of business" shows up around these parts from the folk who have been on the ride awhile. There are a lot of folks who read HN who had their dream crushed for a lot stupider reasons. ETA: that is something I'd like to see more of here though. There's a lot of folks who have been through a bust cycle and survived it and even stayed in the industry. What kept you going? How did you come out the other side? Was it as scary as it feels when you haven't done it before?

nullc 4y ago

almost every online discussion these days seems to get filled with bloodthirsty people, HN is no exception.

balves 4y ago

I wonder how much of this saltiness -- both on HN, reddit, and mainstream media -- is due solely to the name of the bank. If the headline was "California Regional Mutual Bank and Trust fails" (I made up the name, I don't know anything about banking, don't nitpick the terms) it surely would have still been newsworthy because of the size of the bank, but I suspect there would be less vitriol around the situation with the Silicon Valley connotation removed from it.

iancmceachern 4y ago

The issue is it wasn't pension money. It was VC money, that's money intentionally being gambled in high risk endeavors. It's not right for thr tax payers to bail out rich VCs who gambles their money. On the flip side, I also have worked in startups much of my career, and think I and people like me should be paid for our work. I think we should help the startups out, bail them out, but without helping the VCs. I think what that means is the startups effected should get their money back, but the VC owned shares of the company then become government assets that can be sold in the future to offset the cost of the buyout. It's simply not right for government money to bail them out, but fornthe VCs to profit from it years from now. Edited to add: In the end the point I'm trying to make is that it's not right for us to take money from average non-rich Americans to pay back VCs (rich americans) who gambled their money. If the bailout comes from people that earn more than 500k a year exclusively then I'm all for it. But taking public money that was taken from a single mom who is barely getting by to do so is wrong.

nerdponx 4y ago
That's just spiteful. I would rather keep the startups in business than punish the VCs by making them lose money on their current investments.
- iancmceachern 4y ago
  The VCs caused the run on the bank is what I'm reading.
  - hackerlight 4y ago
    A run on the bank is a social phenomenon, and "VCs" aren't a singular monolith that acts in concert. The "VCs" didn't want this to happen any more than others.
    - iancmceachern 4y ago
      But they benefit from the upside. It's their gamble, not ours.

sangnoir 4y ago

> People here are effectively suggesting that I shouldn't get my paycheck and that the company I work for should lose most of its money because our CEO used a well-reputed bank? I am suggesting that your CEO not adequately insuring the companies bank deposit is negligent. If your CEO does not insure your HQ against fire, and it burns down, should it be bailed out by the government just so that you're not out of a job? Or is it not their fault that the CEO didn't use a "well-reputed landlord with adequate fire suppression?"

oldgradstudent 4y ago

> People here are effectively suggesting that I shouldn't get my paycheck and that the company I work for should lose most of its money because our CEO used a well-reputed bank? If you want to be paid by the government, you should be aware that salaries are significantly lower, and perks are non-existent. The government regulates banks and provides deposit insurance to to 250K. The whole point of deposit insurance is to prevent retail bank runs by the general public. Beyond that, it is the job of your CFO to manage risks, including the risk bank failure. The last large wave of bank failures happened barely over a decade ago. These things happen. Also, it sounds like your company will lose at most a fraction of its deposits.

GenerWork 4y ago
>and perks are non-existent. I thought that government perks were a major way to attract people in order to make up for the lower pay (pensions, more vacation, etc).
- oldgradstudent 4y ago
  These are more benefits than perks. Still, total compensation is way lower for most government jobs.

sbaiddn 4y ago

Your company is the equity holder. You loosing last months paycheck is no different than what happens in the rest of the country any time an employer declares insolvency. Also, I don't think people in SV appreciate how much rancor and resentment their behavior has generated in the last fifteen years.

nerdponx 4y ago
Plenty of people not in SV, engaging in actual productive enterprise, were also using SVB.
- sbaiddn 4y ago
  While I sympathize with them more than I would a tech bro, the principle is the same. What would happen if this happened to an employer's bank in Indiana? Your company's assets don't exist any more and you're insolvent. US bankruptcy protection is very generous, apply for it and try and to regroup.
  - nerdponx 4y ago
    > What would happen if this happened to an employer's bank in Indiana? Literally the same thing would happen, and people wouldn't be making such a big deal about it being a handout to greedy convenience store owners who didn't perform exhaustive diligence on the bank up the street.
s1artibartfast 4y ago
I dont understand the hate against SV/ tech bros. What did they ever do to anyone else? Is it purely jealousy, or do people feel harmed?
- sbaiddn 4y ago
  Aside from weaponizing the internet to help DC censor people it deemed icky? Taibbi testified in Congress just this week about it. Or, if in a touristy area, flooding their residential neighborhood with unregulated AirBnBs? If bicycle/motorcycle rider, putting "self/driving" cars they knew cant detect two wheeled vehicles? Adding a police detector to continue providing illegal taxi service in cities? Having a business model where our personal information is syphoned off and commoditized? Creating social media creating new, widespread, psychological diseases? Creating the infrastructure for mass surveillance through by selling access to their product through government partnerships? This is HN... all these stories well documented here.

theGnuMe 4y ago

Yes it sucks but rules are rules. Existential risk management.

iguana_lawyer 4y ago

I don’t see what’s so hard to understand. Everyone else is one poor decision away from destitution. Why should you get special treatment?

aeternum 4y ago

The proper call should be to increase FDIC insurance to 10mil or something then. It is incredibly unfair to be saying that depositors here deserve to be made whole because they are startup companies that somehow matter more to the economy. Everyone agrees that shareholders and bondholders should we wiped out. Everyone agrees that deposits under 250k can and will be made whole due to FDIC. The disagreement if there is one is the 250k+, why should there be an exception just because these are tech startups?

idopmstuff 4y ago
I absolutely agree the FDIC limit should go way up. > The disagreement if there is one is the 250k+, why should there be an exception just because these are tech startups? That's not what I'm suggesting, nor is it what I think most people who think depositors should be made whole are suggesting. In basically any bank run scenario in which depositors had behaved reasonably (which is like 99% of companies putting their money in banks), I would support depositors being made whole. Regardless of the specifics of the situation, I think the upside of maintaining our collective faith that bank deposits are safe is much larger than the downside of whatever needs to be done to achieve that.

tptacek 4y ago

Very little of these discussions have anything to do with serious policy debate. They're a prism through which the whole site† filters their preexisting beliefs about venture capital and the startup industry. When you internalize that, it's much easier to look at an 800-comment third- or fourth- order HN thread about SVB and just nope out. There are no stakes to these threads. They're just here because the community needs to vent its reaction to the news and its valence. † (50% of which is outside the of the US, and a majority of which is people who don't work for "big tech", which ironically isn't much at all directly impacted by SVB)

MrMan 4y ago

the depositors shouldn't get paid beyond what remains of the assets of the bank!!!

steve76 4y ago

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anon291 4y ago

> People here are effectively suggesting that I shouldn't get my paycheck and that the company I work for should lose most of its money because our CEO used a well-reputed bank? I'm in the same position as you but this is a terrible take. No one thinks we deserve to lose money or jobs. They simply do not believe that other American taxpayers who likely make less than you should have to spend their hard earned money (or risk having it devalued by printing) in order to bail you out. And they are broadly correct. It is wrong to demand other people's money due to your own misfortune, especially when the misfortune is a lost business or job, versus something more existential. The reality is that most tech workers will be fine.

foobiekr 4y ago

The problem is that the valley culture wants it both ways. It is a largely libertarian, rules-breaking environment. They want to ignore laws and decry regulations while at the same time having the government step in and bail them out whenever anything goes against them. I, too, have worked for startups much of my life. Sometimes you show up for work one day and the doors are locked because the place is done. It is part of the deal. There are lots of reasons this can occur - hey, we just couldn't close another round, the economy hit a speed bump, etc. 2008 happened. Worldcom and Cable and Wireless just declared bankruptcy and they were our lead customers. etc. It is part of the startup cycle. If something like this this had managed to kill AirBnb, Uber and Lyft before they did the damage they did, the world would be better off.

truthwhisperer 4y ago

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handsclean 4y ago

It comes from the way lower class Americans are treated. The hardship that might be ahead for some otherwise extremely rich and privileged people is actually far less than befalls tens of millions of lower class Americans every single day, and choosing a “move fast and break things” bank is actually a far less “unfair” reason than, say, the circumstances of your birth. The vicious, lifelong message from mainstream society to those most in need has always been “nobody owes anybody anything, that would be socialism”. That’s why those people are angry to see people far better off receive help just because “not doing it would be unfair and hurt them”.

roenxi 4y ago

There have been losses. The order of people who have to feel the pain for that is: 1. Decision makers (the equity holders). 2. Active enablers (eg, certain creditors, possibly management). 3. Passive enablers (eg, other creditors, the startups who held money in the bank). 4. Bystanders (eg, taxpayers).

prewett 4y ago

I'm beginning to wonder if a lot of the posters to these kind of thins are just young. When I was 25 I thought I had well-reasoned and insightful opinions, and I certainly had forceful opinions. But I had no depth of knowledge in things like finance and politics, and thus, had no way of knowing how much I didn't know. A few years ago I watched Ian Shapiro's lectures on "Politics in the Modern World" (a course from Yale, developed from a request to help explain the rise of Trump). I realized that I thought I had insightful opinions, but really it was just rubbish because I had no understanding of political science, recent history, or even different forms of government and their different failings. I also felt differently about money when I was 25, because obviously I didn't have any. There was no way I could have any, because I had only been working for a few years (and junior devs were paid a lot less in those days). It seems like it would have been easy to be jealous of rich people at 25. Or just jealous of startup-employees who, judging by HN posts (/s), are all making 400k/year. In fact, I think some HN posts have claimed junior dev salaries more than what I was making after 20 years in the industry, which I could see might lead to some jealousy. Particularly if combined with a lack of perspective.

shrimpx 4y ago

It’s more subtle, because these startups exist due to VC investment. Those VCs probably recommended and even set up their portfolio startups with SVB accounts. And a high percentage of these companies were heading to failure due to the nature of these ventures. I’m not so sure taxpayers should be responsible here. Why don’t VCs double down and make their investees whole? They’re the ones who bankroll and believe in these ideas, and stand to make 1000x profits in their successful exits.

louloulou 4y ago

> the company I work for should lose most of its money because our CEO used a well-reputed bank Why should I lose my money because I bought the stock of "a well-reputed bank"?

phs318u 4y ago

> just because of their choice of financial institution There’s a moral hazard to all choices made in business. Making a choice based on insufficient due diligence is a hazard. Chasing higher rewards at higher risk is a hazard. Are you saying the government should indemnify businesses for their choices? My understanding is that SVB avoided some restrictions placed on other banks. It’s not clear to me the why’s and wherefor’s of this but there are only two options. Either malfeasance on the part of SVB, or ignorance/risk-taking on the part of the customers. The scahdenfreude I believe comes because it’s assumed many customers would be from the “this time it’s different” school of business, in which case there’s a lesson akin to caveat emptor begging to be learnt.

Khaine 4y ago

No. People don't want you to get special treatment. Your firm should have insurance to cover the deposits over 250K, or split the money across several banks. It didn't as such it should deal with the consequences. Which are it may not get all of its deposits back. When a building company, building my house goes bust. The government doesn't step in to get someone to finish building it. When I order goods from a company and it goes bust, the government doesn't step in to ensure I get my goods.

jongjong 4y ago

This was a rare event when, for once, elites would learn that it's possible to do everything right and still fail catastrophically due to systemic factors. This has been the case for the majority of people over the past decade. The only reason regular people accepted their own situation over the past decade is that they thought "rules are rules." But no, rules are not rules, it turns out. Only plebs need to take the consequences of silly or unjust rules. The elites are immune to unjust rules. When a pesky inconvenient rule affects the elites, it can simply be waived away. Why did I have to learn my lesson about the flawed system and the acceptance of tough luck, but politically-connected people didn't? What we have today is a 2-class society. It's the word of law above all... Unless you're politically connected; then suddenly the word of law yields to common sense.

georgeplusplus 4y ago

The anger is coming from citizens who are being asked to bail you out when they are already stretched to their financial limits and any such idea will surely make inflation go up. Sorry to hear about your situation I really am. I'm personally in the camp that we as a collective country have made bad fiscal choices knowingly or unknowingly. It's time to start paying for these choices and stop looking to others else we drown in these bad choices.