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So they made their decision, everyone can move on. I just hope nobody forgets how prominent VCs behaved during the brief period of uncertainty. The idea of some

So they made their decision, everyone can move on. I just hope nobody forgets how prominent VCs behaved during the brief period of uncertainty. The idea of some noble class of investors championing disruption is dead. They're just a bunch of rent seekers like everybody else. For some silly reason I had some respect for the startup industry before this, now I see it as a joke. It's great at a personal level that "founders" and startup employees didn't have to do without. But it's important to remember that they no longer automatically deserve any credit for taking risks and doing something new. It might as well be a bunch of FAANG employees

lambic2 4y ago
I don't understand this comment. 1) SVB was not managed by VC's. 2) SVB went under because they bought US Treasuries, not because they took risky bets on startups.
- notfromhere 4y ago
  VCs started a bank run by telling all their portfolio companies to pull out
  - lambic2 4y ago
    That's just basic logic that anyone would follow to survive. VC's had nothing to do with SVB's bad money management.
    - hello_moto 4y ago
      They triggered the rush that exacerbate the downfall. If nobody is rushing, SVB could probably find ways to sell something before it's too late.
    - labster 4y ago
      I see it the other way around. The VCs started a panic. Name one other bank that could survive $42 billion in withdrawals in a single day. Other than Bank of Zimbabwe, obviously. Even Wells and JP Morgan would collapse under that strain. The VCs caused their own pain.
      - scopendo 4y ago
        The panic was started by SVB, not VCs. Abstract this to any other bank and the reaction would have been the same.
    - delfinom 4y ago
      No small or medium bank in the US can withstand a bank run
  - lxm 4y ago
    Yeah, but what are the specific cash amounts we are talking about? Such extreme exposure to interest rate risk would've blown up in some other ways - say, a large client processing a routine payroll, executing stock buyback, or investing in an entity that banks elsewhere.
  - epvgwwqe 4y ago
    No. SVB price crashed 50% in one day and got downrated by Moodys, which exposed a bunch of red flags that would have resulted in a bank run regardless of what VCs said.
    - mrangle 4y ago
      The stock crashed because of the initial pseudo bank run due to high interest rates on capital (at least that's the reason given for withdrawals), and the bank's subsequent failure to make up the difference after selling a treasuries portfolio. After which a real bank run occurred. Then the bank started down a path of a more desperate measure, and that's when they were shut down. At least that's what I got from an article.
  - vkou 4y ago
    VCs started a bank run because the bank they were using was insolvent. That's not their fault. Would you keep your money in an insolvent bank?
    - WanderPanda 4y ago
      I think they were solvent im the beginning of the week. But idk if it was just because they didn‘t have to mark their underwater investments to market
      - opportune 4y ago
        That’s a peculiar definition of “solvent”
        loeg 4y ago
        It's the one banks and regulators use, though!
  - ssnistfajen 4y ago
    SVB had risks, VCs did what they should do to respond to said risk. Would you blame regular working class people in a retail bank run scenario for wanting to save their money from potential risk?
- madelyn 4y ago
  I believe they're referring to the bailout YC (and others) were asking for- going so far as to arrange a petition last night.
  - seizethecheese 4y ago
    YC asked for exactly what just happened. (Depositors be made whole.) They did not ask for anything beyond what regulators ultimately deemed reasonable.
- JamisonM 4y ago
  "I just hope nobody forgets how prominent VCs behaved during the brief period of uncertainty." The point is that these VC's didn't act to support their investments, they flailed around begging for bailout (that they probably didn't need but they didn't understand banking well enough to know that or bother to consult any experts before making public statements). They behaved badly and should be embarrassed and everyone should remember it.
  - adastra22 4y ago
    ...why? For asking for government intervention to protect the innocent and avoid contagion? Why should that be embarrassing?
    - reaperducer 4y ago
      Why should that be embarrassing? Because they preached for years that regulation is bad, and the government shouldn't be involved in their financial affairs. Then when something went wrong, they begged for a bailout from the very regulators they disdained: https://www.ycombinator.com/blog/urgent-sign-the-petition-now-thousands-of-startups-and-hundreds-of-thousands-of-startup-jobs-are-at-risk/ https://www.ycombinator.com/blog/urgent-sign-the-petition-no...
    - wmf 4y ago
      VCs themselves could have fixed this problem (that they, in part, created) and some of them did but many did not.
    - arglebarnacle 4y ago
      Why do you find it believable that they asked for government intervention to protect "the innocent" as opposed to simply acting to protect their own private financial interests, which seems to be the simplest explanation? I'm not even convinced that the depositors made whole here were innocent--they accepted a known risk by exceeding the risk-free FDIC limit. The sad part is that in our society, we have no qualms about literally turning working people out into the street when they make financial missteps, but the already-wealthy receive prompt intervention from the highest levels to protect them and other wealthy people from the consequences of their investment decisions. What argument is really left for this kind of intervention, besides appeals to the trickle-down system where the rich must be vigilantly protected since the rest of our society is set up to be disrupted when they fail. The whole system is morally and politically bankrupt.
- n3rv 4y ago
  wasn't it ultra low interest investments, but very long term? They should have known it wasn't going to stay like that after the crazy 2020 ride. :/
  - DennisP 4y ago
    Yes, long-term treasuries which for years had been at very low interest rates. You're certainly right that they shouldn't have done that, but it doesn't invalidate GP's point.
- somewhereoutth 4y ago
  My understanding is that it was in fact both: 1. If they had more short dated treasuries, they could have used them to fund drawdowns, and would not have had to sell their long dated treasuries, that went underwater as interest rates rise. 2. If they had not been overly exposed to one sector, a sector that largely existed due to 'free money' of zero interest rates, then large scale draw downs would not have happened as interest rates rise.
- ajross 4y ago
  > 1) SVB was not managed by VC's. I think this is very much in question. Silicon Valley Bank was absolutely part of a cohesive microeconomy. There's no other explanation for the absolutely uniformity with which all those startups were using it for what should have been 100% commodity banking services. Those startups all banked with SVB because their VCs told them to. And the VCs told their startups to bank with SVB because... we don't know yet. But any time you have a signal this strong, there's a driver. Add to that the fact that the moment all those startups seemed likely to lose banking services, however temporarily, those same VCs freaked the fuck out of their minds on twitter and started shrieking in all caps about the end of western capitalism. That's not mere concern for their poor startups (most of whom were going to fail anyway, after all -- they're startups!). These VCs were exposed to the SVB failure. They were leveraged somehow and about to get caught holding the bag. There was some kind of insider dealing going on with SVB. It wasn't just a bank. We for sure know that much. Whether we have criminal fraud or not is an open question.
  - belter 4y ago
    Bill Ackman publicly admitted on Twitter to be on the hook for at least 10% of his assets.
    - blackoil 4y ago
      That most probably means, he and his companies kept his cash in SIVB and not that he has stake in it.
  - nullc 4y ago
    One element is that the banking industry as a whole behaves pretty chaotically with 'unusual' customers. Big wire in from a fundraising round? Account frozen. Big wire out for an acquisition? Account frozen. Bank learns your customers include cryptocurrency companies? Account frozen. Bank account balance huge relative to your business' cashflow? Account frozen. Random bank staff doesn't understand what you're doing? Account frozen. In that kind of climate its almost inevitable that VC's would recommend a single bank known to not behave erratically for the activities that are usual for their investments.
- mbesto 4y ago
  > not because they took risky bets on startups. SVB regularly provides credit to risky startups, which is why they existed in the first place (because other banks wouldn't lend at those rates). So, yes, they sorta did place risky bets on startups.
  - lambic2 4y ago
    Source for this? All evidence show that their failure at least started with them owning a lot of "safe" bonds, whose value declined with increasing fed rates.
    - mbesto 4y ago
      https://www.svb.com/landing-pages/venture-debt https://www.svb.com/landing-pages/venture-debt
      - mbesto 4y ago
        To elaborate further with hard numbers. See #2: https://www.linkedin.com/posts/rich-falk-wallace_silicon-valley-bank-unit-economics-clarify-activity-7040705652658208768-GO00/ https://www.linkedin.com/posts/rich-falk-wallace_silicon-val... #1: Mortgage backed securities: $82B (83% residential) #2: Direct loans: $74B (55% short term loans to VCs & PE) #3: Liquid assets: $55B
giraffe_lady 4y ago
Does realizing this, that they were always like this change your perception of the last decade in any particular way? I'm genuinely very curious. I've always considered them a bunch of smarmy opportunistic cutthroats, but that shift must be jarring right? Again I don't mean this negatively, genuinely interested in how it changes your understanding of the "startup era," pandemic, etc.
tssva 4y ago
The thing I'm most confused about in this comment is that you ever believed that VC's and startups were some kind of noble class.
- deleted 4y ago
  [deleted]
- threeseed 4y ago
  I believed that VCs and startups were mostly good people trying to do the right thing. But what we've seen in the last few days is utterly despicable behaviour by many of the leading figures driven solely by greed and self-interest. I think increasingly startups will look to bootstrap in the coming years.
  - hello_moto 4y ago
    > I believed that VCs and startups were mostly good people trying to do the right thing. I have not seen one human being that didn't turn around because of greed. We are all vulnerable
    - threeseed 4y ago
      These aren't children. They are grown adults many in the later years of their life. Nobody is changing their stripes.
      - violenceislaw 4y ago
        [dead]
    - magpi3 4y ago
      I imagine you are not looking too hard. I have met many people who have dedicated their life to service and not greed. Richard Stillman is one if you need an example.
    - thelittleone 4y ago
duxup 4y ago
>how prominent VCs behaved How did they behave? Try to pull their money out of a failing bank? I would too ...
- anigbrowl 4y ago
  Running to the Fed for help as soon as shit got real; made a lot of the bootstrapping libertarian ethos stereotypically espoused by a certain of VC seem very hollow.
  - moose_is_loose 4y ago
    Can't wait to start seeing their tweets railing about how unfair student debt relief is.
    - sokoloff 4y ago
      Deposit money in a bank and expect to be able to withdraw it later as agreed seems compatible with borrow money for education and expect to pay it back later as agreed.
      - moose_is_loose 4y ago
        They benefited with White Glove treatment and easy access to loans. They weren't depositing it there out of the goodness of their hearts. That's why SVB was hunting for yield.
      - object-a 4y ago
        When you deposit money at a bank, it is made very clear to you that only $250K is protected by the FDIC. Any more, and you either buy insurance for it or take a risk on losing it in a bank failure. These depositors knew that and still acted irresponsibly, yet they are going to be made whole. It’s not that much different from taking out a loan you don’t understand.
        theGnuMe 4y ago
LewisVerstappen 4y ago
> prominent VCs behaved during the brief period of uncertainty A ton of the prominent VCs were writing out checks from their personal bank accounts so that founders could meet payroll. > For some silly reason I had some respect for the startup industry before this, now I see it as a joke Wait seriously? You somehow lost more faith from this than you did from - crypto - Adam Neumann - $100m seed rounds and like 30 other things??? > But it's important to remember that they no longer automatically deserve any credit for taking risks and doing something new. What are you even talking about? Having your bank account randomly disappear isn't one of the risks that anyone should have to take.
- unity1001 4y ago
  > Having your bank account randomly disappear isn't one of the risks that anyone should have to take. Then you put your funds in less risky banks who did not lobby to get an exemption from the regulations that protect against precisely this kind of thing. Even, spread it around safer banks. Putting all of one's money in a bank because they have better returns or other investment opportunities is business. Not something that someone can be safe at the public's expense. The public, because the public will pay for this one way or the other - if this is paid from the insurance that insures all banks like how the statement says, then it will cause all the banks who pay into this insurance pool to reflect it on their customers with fees. So every single person with a bank account in the US will pay. Its still public money, but it doesnt come directly from the US govt.'s pocked, so its 'okay'.
  - deleted 4y ago
    [deleted]
  - wpietri 4y ago
    Especially given that an adequate alternative to putting all your money in one bank is to put it into two banks. Unless you're already on thin ice, that solves the short-term cash flow problem. Historically, even in bank failures, depositors get most or all of their money back, it just takes a while. And if that isn't adequate for a given company, it sounds like it's time for them to hire a finance professional who has experience with cash management.
reducesuffering 4y ago
VC's and YC have burned a lot of credibility overnight with their tech employees during this mask-off moment. I wouldn't be surprised if this forum harbors long term resentment, lack of respect, and a more adversarial relationship going forward. I haven't ever seen such a large lack of respect for them as the past couple days. This industry has gone full Wall St. The next generation of individualist, regulation-disruption startup founders will be reconsidering the YC club a bit more...
- ldjkfkdsjnv 4y ago
  The post by Gary Tan on here yesterday was actually shocking for me.
  - macintux 4y ago
    Link?
    - syjer 4y ago
      I think it's this one: https://news.ycombinator.com/item?id=35114009 https://news.ycombinator.com/item?id=35114009
  - alismayilov 4y ago
    Would you mind to share the post?
  - flappyeagle 4y ago
    Why?
- adharmad 4y ago
  Now that the bailout is done, I hope these guys stop tweeting for the sake of everyone’s sanity.
- blackoil 4y ago
  > VC's and YC have burned a lot of credibility overnight with their tech employees during this mask-off moment Why? It should be other way round. They worked hard to make sure that payrolls are met and jobs are secure, that is my most important expectation from my management and investors.
huhneverthot 4y ago
Who would've thought post-hand-wringing-over-poor-300k-salary-tech-workers realizing their disposability that we would have another event reminding HN just how different the rules are for capital owners than the rest of us. Why is that tech workers, many of whom easily have earned over a million dollars in salary over the past few years can't be told to "live within their means"? Why is it that the same VCs that rallied against student debt relief think their poorly run bank should be bailed out? I know why, this thread is chalk full of it. "We were smart, we were playing the game with the advantage we were told made us untouchable, we can't fathom gasp 'negative consequences' whatever those are". I'm sick of it and thankful to see people seeing through this a bit more than usual. Downvoting isnt going to change a damn thing, click your hearts out and enjoy the dissonance. See ya in the next too-big-to-fail-as-a-result-of-unchecked-corporate-greed thread. lmao
- deleted 4y ago
  [deleted]
- DennisP 4y ago
  Yes, regular people get their bank accounts automatically protected, and the capital owners had to sweat for a few days. The bank is not bailed out, it's out of business, its shareholders get nothing, and its execs just lost their jobs. The bank's customers got bailed out.
  - stametseater 4y ago
    [dead]
- bart_spoon 4y ago
  How many startup employees do you believe are making 300k? That’s FAANG, big-tech companies that were in no way affected by SVB going under. If anything, startups are known for paying below market rate because they have tighter margins and compensate with the tenuous promise that more money might be made in the form of stock options if the company makes it big, which usually doesn’t pan out.
- birdymcbird 4y ago
seizethecheese 4y ago
Why the scare quote on “founders”? It makes your comment come across as motivated.
ComplexSystems 4y ago
> It's great at a personal level that "founders" and startup employees didn't have to do without. But it's important to remember that they no longer automatically deserve any credit for taking risks and doing something new. Mm hmm. Yes, after all is said and done, the main take away from this is that startup employees and founders no longer deserve credit for taking risks and doing something new. Glad our priorities are straight here on hackernews.
- KRAKRISMOTT 4y ago
  The founders and employees deserve credit, the VCs not so much. They were the ones primarily driving the fearmongering.
  - threeseed 4y ago
    The founders do need to wake up though. If you don't understand the basics of the US banking system then not sure you should be running a business.
    - KRAKRISMOTT 4y ago
      They don't have much agency in this. Go with a typical "small business account" meant for mom and pop shops at a bigger bank and you miss out on all the advantages of a more dynamic bank like SVB. Your investors would be asking questions. Collectively agree not to create a bank run, your investors would still ask questions. Unless you are fully bootstrapped with no major cashflow issues, there are no right answers to this.
      - wpietri 4y ago
        Oh, so they, wanting an advantage, made a choice that turned out to have some downsides as well? That sounds like a situation where they have plenty of agency to me. Especially when there are alternatives like putting their eggs in two baskets.
        4y ago
dpweb 4y ago
VC insider types won this one in some sense but at the cost of some credibility (those most hysterically yelling om twitter at least)
theLiminator 4y ago
Glorifying founders has always been stupid, they're all trying to get rich, not exactly a noble cause. It's not something to demonize them for either, but founder worship is kinda gross.
AYBABTME 4y ago
They might as well be FAANG employees if they're so risk averse that they can't deal with such casual occurrences as their dang banks failing.
bart_spoon 4y ago
Why should they not get credit for taking risks or doing something new? How is that related at all? The risks they take are based on the viability of their product. It was never (supposed to be) based on the risk of if their banking institution could provide them with their cash as needed. None of that has changed.
- ChatGTP 4y ago
  We’ll because taking risks by definition means you could end up in a negative situation and so it should be more of a personal decision? It seems like SVB took a risk and lost. If the majority of Americans voted for SVB taking higher risks it would be understandable but now who comes up with the missing money ? The government, which is tax payers who are already probably getting the raw end of the stick financially compare to silicon valleys. I think this bailout will see a lot of political backlash.
lopkeny12ko 4y ago
What did VCs do wrong here? They warned of impending solvency problems at SVB and told founders to withdraw their money ASAP. And indeed, the bank failed the next day. The companies in trouble are those who didn't listen to the VCs.
- hello_moto 4y ago
  VCs Group-A (who knew something) rushed the bank. VCs Group-B to Z were too late so they asked Govt to help them. It's not just founders who put their money there, VC funds are there as well and they are probably close to 100% uninsured (cause it's the Fund Series I - XXX). If you get your hands on the list of depositors, you'll see the list of Funds Series from VCs.
  - mattzito 4y ago
    Most VCs don’t keep a substantive amount of their dry powder on hand, just a percentage. When they need money they make a capital call to their LPs. (At least, that’s as I understand it from the VCs that I know it)
- maxilevi 4y ago
  Basically lobbying the government for a bailout so that their startup investments don't go to zero.
- deleted 4y ago
  [deleted]
- femiagbabiaka 4y ago
  Part of the issue is a common one: assigning blame for actions taken by individuals to the collective. It’s a nasty internet trope. But these things are true: - the crisis was at the most caused and at the least exacerbated to the point of no return by the advice that some firms gave - the general zeitgeist amongst certain firms and from particular individuals in firms leaned towards libertarian ideology, which seemed to go out the window when ish hit the fan. I can really only find one prominent example of this, so I don’t know if it’s fair to paint all of VC-land with the same brush - it is probably the case that there are members of firms in both group one and group two, which looks bad, because panicking at the last second looks bad, especially when your panic screws (for your own benefit) a business partner of decades who was essentially only in a risk zone because they chose to do business with you. That’s an oversimplification of course, but it all is
hello_moto 4y ago
> For some sily reason I had some respect for the startup industry before this, now I see it as a joke. 1. silly reason 2. It's a joke It looks like you just found your silly reason. The greed of startups have evolved to become bigger and bigger as years pass by. The romanticizing of startups came from propaganda. It's just that some of us were too young and naive to understand the puppetmaster while others had seen the puppeteer before...
lazzlazzlazz 4y ago
An equally silly error would be concluding that all VCs are like this. Although we heard absolutely unhinged and insane panic from a few (like Jason Calacanis), and some milquetoast statements from others (Redpoint), we heard no panic from the largest players. I won't reshare anecdotes here, but I heard stories over the weekend about intense and direct conversations between the largest VCs and the Fed.
- hypothesis 4y ago
  By any chance were those largest players part of bank run on SVB? [0] https://twitter.com/tomharari/status/1634577650856632321 https://twitter.com/tomharari/status/1634577650856632321
  - lazzlazzlazz 4y ago
    You can probably infer who I'm talking about simply by noticing which major VCs were not part of the histrionic crowd.
jongjong 4y ago
It's impossible to move on. There were insufficient funds to pay depositors; meaning, the money was gone - Since the money didn't vanish into thin air; somebody got that money through some scheme. Now taxpayers are going to be footing the bill... It's a government-ordained transfer of wealth from good, honest taxpayers to whatever (possibly malicious) entities got that money. It's theft. It's straight theft. Not even complicated. Theft is now legal depending on who you are.
- bradleyjg 4y ago
  It’s not strictly speaking taxpayers, it’s anyone with a bank account at a U.S. bank. But same effect.
- jurassic 4y ago
  > It's impossible to move on. There was insufficient funds to pay depositors; meaning, the money was gone - Since the money didn't vanish into thin air; somebody got that money through some scheme. There was no theft. The bank bought bonds that decreased in value rapidly due to rising interest rates. Pure mismanagement, but not theft.
  - ok_computer 4y ago
    The bonds are good to yield on the stated timeframe. You need to hold them to maturity. They bought long term bonds and tried to sell them after newer higher yielding bonds came out. Bad decision. Also lobbying to avoid stress testing below 250B instead of 50B. They could have kept deposits as cash and watched the value erode like a dumb retail consumer has an option to do. But that’d look bad for bank investors. So now the Fed and Treasury are responsible for negative yield on bad bets if that account crosses 100B. Cool. I only have about 100B to go before the US government cares about my negative position. 401K takes an L because interest rate rises and the SP500 being a stock buyback circus. That’s on me I guess. Anyone saying well it’s not using taxpayer dollars. Whatever, it is using our feds time. This whole thing is now J Powell and Yellen focusing on a cottage industry serving billionaire interests instead of using their time and agency to work for that dumb aforementioned retail consumer undergoing inflation and a pending recession. In an agency where any intervention sets a precedent this is now telling regional banks to go ahead and yolo your balance sheet. We got you. I want the startups to get their money through liquidation of the bank at whatever discount that comes to. 80c on the dollar, whatever it isn’t your money anyway it’s VC money. All savings accounts come with 250k FDIC insured. So play by those rules.
bloodyplonker22 4y ago
You're going too far by calling VCs "rent seekers". They do provide value with other peoples' money to build companies. No matter how much people love to hate them, they are a necessary part of the startup ecosystem. Most of them fail and end up in tears in the long run -- it's just the nature of VC. There's no need to punch them when they're down.
- kazen44 4y ago
  in my personal opinion most if not all modern startups are seeking to create a system in which rent seeking behaviour is the end goal. The stereotypical SV playbook is to enter a market, don't give a crap about the local regulation or laws, try to get big by using your cheap money to outstrip to competition and do rent-seeking when you are the largest. Also, a lot of startups are solving non fundemental problems. We should be spending all that engineering effort fixing things like climate change, food security for the global south and a way to deal with the aging population in the western world instead of thinking about algorithms to get more clicks on ads.
  - molsongolden 4y ago
    A few companies have done this but calling it the stereotypical playbook is a bit over the top. Also, there are many startups building stupid junk to capture a piece of the pie but also many startups working on real problems. This whole comment is a reductive cliche at this point. Please start a company to work on fixing climate change, food security, aging, etc.
florakel 4y ago
There is nothing but economic interest. If you want to predict how any company, startup or not, will behave just look at how they make money. In 99% of the cases companies act according to their business model. It is that simple, there is nothing else. All the "we will make the world a better place" rhetoric and mission statements are just recruiting and PR BS.
Fede_V 4y ago
Joe Weisenthal (who is always worth listening too in matters of finance) put it well here: https://twitter.com/thestalwart/status/1634985524007157760?s=46&t=P7y2mV1WVqYHHZAviaV-dg https://twitter.com/thestalwart/status/1634985524007157760?s... Some VCs were definitely better than others: the very worse was probably the All In Crew who were trying to spread a bank run to tie the government's hand. Truly despicable.
- birdymcbird 4y ago
  saw their all in episode. definitely did not get signal you described.
- MaxHoppersGhost 4y ago
  The All In Crew are the kings of rent seekers. Chamath himself made billions off the SPAC boom which should tell you all you need to know about them. Mr Libertarian himself David Sacks crying for govt intervention was hilarious. What a clown.
  - WanderPanda 4y ago
    Yes, this and his Solana pump (and dump?) really showed his true face to a point where I have to start questioning his qualities as a capital allocator
- WanderPanda 4y ago
  Agreed, I‘m a big fan of the all in podcast but this really showed them (especially Sacks) from their worst side. They clearly pressured the regulators by saying that everyone who has more than the amount insured by the FDIC in their account at a regional bank is stupid and reckless if they don‘t transfer it to one of the top four banks on Monday. The situation at SVB seemed very manageable but even a small chance of this „mind virus“ spreading would be so devastating that they decided to backstop the situation.
skwirl 4y ago
The people I lost respect for was a large portion of HN commenters calling on bank depositors - largely small businesses - to be snuffed out because there was a run on their bank. The comments have largely been factually wrong, misleading, and downright psychopathic. I am glad our government is not controlled by such people, but I question the value of this forum going forward given the large portion of it that is so incredibly toxic and so poorly informed.
- AlchemistCamp 4y ago
  [flagged]
  - greenyoda 4y ago
    I'm pretty sure that calling your fellow commenters "trolls" and accusing them of having "psychological issues" also violates HN Guidelines, which say: > Be kind. Don't be snarky. Converse curiously; don't cross-examine. Edit out swipes. > Please don't fulminate. Please don't sneer, including at the rest of the community. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
    - AlchemistCamp 4y ago
      I suppose that might run afoul of the guidelines, though I did not call out any specific commenters and I think we can all agree there were some trolls on that thread. You can look for yourself and see some newly created and quickly banned green accounts on it. The comment you're replying to was my honest assessment of the situation, given the many dozens of comments hoping for people to lose their bank deposits and for their businesses (or those that employ them) to fail.
- tomato_123 4y ago
  All of these companies could have sold their uninsured deposits at a discount, made payroll, and let their equity holders take the loss. This is what equity holders are supposed to do. Instead they went on an embarrassing twitter begging campaign and unfortunately succeeded. The whole "workers missing mortgage payments" or "destroying a generation of innovation" is an insane, buck-passing take.
wilde 4y ago
Just think of this moment as a great interview question during the next upcycle
antibasilisk 4y ago
i don't think there's going to be very much 'moving on', in fact i think alot of 'moving backwards' is about to happen
dccoolgai 4y ago
Now they are going to see the light and give the employees the same "bailout" they got when times got tough in the form of "not getting laid off" right? .... Right? Because everyone deserves a break, right?
ah765 4y ago
Absolutely. People like Garry Tan, Sam Altman, Michael Seibel, Paul Graham, Mark Cuban, all pushed hard to keep their money, not caring if it's at taxpayer expense. Rich people tend to only care about helping others when it aligns with helping their own pockets. This may have been the most prudent decision by the government, though it'll be hard to say what would've happened otherwise. But in the end, it sounds like the average person will still be negatively affected, by having small accounts under the $250k limit subsidize insurance for larger accounts.
- garry 4y ago
  [flagged]
  - actuator 4y ago
    Oh please, these are just excuses. If you want to reap the benefits of capitalism, you should also get punishment for not doing the job well. Getting a haircut above the insured amount was the sensible thing here.
    - throwawaysleep 4y ago
      The problem is that everyone now thinks of the haircut and flees any bank that its a fortress to make sure they don't face a haircut. I.e. you have a bank run on every bank under the largest 10.
      - actuator 4y ago
        If we are so fearful of this, and banks are so core to the economy, why not just have government owned banks then, since it seems like government has to subsidize mismanagement.
    - adharmad 4y ago
      Capitalism without bankruptcy is a bit like Christianity without hell.
tempsy 4y ago
the long term fallout was never going to come from only getting 90 cents on the dollar vs 100% it’s the fact that the lender most willing to work with non traditional borrowers eg tech startups is now gone, and there’s no bank or lender that will replace them. if anything this will mean lending standards will tighten, and it will be very difficult for any customer with a SVB credit line to find another bank willing to lend to them on the same terms. this is also coming at a time when more startups relied on debt to fund their companies because the equity raising environment is so tough, so now many founders might be forced to attempt to raise equity in a tech bear market on very bad terms if they can at all
paulddraper 4y ago
I learned that VCs are protective of their investments. Which, as an investee, is exactly what I want.
lanza 4y ago
> I just hope nobody forgets how prominent VCs behaved during the brief period of uncertainty. The idea of some noble class of investors championing disruption is dead. They're just a bunch of rent seekers like everybody else. For some silly reason I had some respect for the startup industry before this, now I see it as a joke. You have some serious disillusion.
jraines 4y ago
> they no longer deserve credit for taking risks and doing something new What on earth. Putting money in the bank was never a risk founders were lauded for, nor should it be on the titanic list of things they have to worry about. We can brawl in the peanut gallery over FDIC limits and precedents and moral hazard (which lies with the banks, btw) but at the end of the day there can only be one “best country to start a startup” and whatever that is, it’s definitionally one where you don’t have to worry about getting rugged by the bank because someone you wouldn’t know from Adam made a bad bond trade.
FooBarBizBazz 4y ago
What are you on about? The final decision was eminently reasonable. The bank's shareholders are getting wiped out. The depositors are protected. Banks -- who depend on the continued faith of the public -- chip in a little more in insurance. The taxpayer pays nothing. A bunch of software companies get to succeed or fail now on the basis of whether their business models and execution make any sense, as opposed to whether their bank bought enough interest-rate swaps. Small regional banks can continue to exist. This will not necessitate even more consolidation in American capitalism. And there will be no follow-on bank runs to jeopardize grandma's CDs. Seriously, what is there to complain about? The government did its job here. It governed. Fairly and competently.
- dns_snek 4y ago
  > The taxpayer pays nothing. Money to cover deposits that didn't previously didn't exist, suddenly exists, and there are people like you trying to tell everyone else that everything is rosy and that it's not going to cost the taxpayers anything. It sounds like a revolutionary system that you're working with and if it truly costs "nothing", may I ask where I can sign up to have my bad financial investments refunded for free?
  - FooBarBizBazz 4y ago
    FDIC insurance is paid for by FDIC members (i.e., by banks), via an insurance premium. In this case, the FDIC is providing extra coverage, and charging member banks an extra assessment to pay for it. So the money comes from all the other banks. "The taxpayer will pay for it" only in the sense that maybe member banks will try to pass this on in the form of fees. "Bad financial investments" are almost 100% not being "refunded" to the bank shareholders. Their shares are, I assume, going to zero. The only way in which they are being protected -- the "almost" -- is in the fact that their shares go only to zero, and do not become liabilities. Let us also consider what the investments were that went bad: Government bonds. So you could say that value flowed from the bank to "the taxpayer" (or to "the government") the minute those bonds lost value, i.e., the minute the Fed devalued them by hiking rates on newly-issued bonds. In that sense, the bank was already the bagholder for the Fed ("the taxpayer").
fullshark 4y ago
I will never forget, they revealed their true faces. All these CEOs also. It's a big game, words are just tools to manipulate others into doing what you want them to do, nothing more.
anonu 4y ago
why conflate "startups" with "VC"?

lambic2 4y ago

I don't understand this comment. 1) SVB was not managed by VC's. 2) SVB went under because they bought US Treasuries, not because they took risky bets on startups.

notfromhere 4y ago
VCs started a bank run by telling all their portfolio companies to pull out
- lambic2 4y ago
  That's just basic logic that anyone would follow to survive. VC's had nothing to do with SVB's bad money management.
  - hello_moto 4y ago
    They triggered the rush that exacerbate the downfall. If nobody is rushing, SVB could probably find ways to sell something before it's too late.
  - labster 4y ago
    I see it the other way around. The VCs started a panic. Name one other bank that could survive $42 billion in withdrawals in a single day. Other than Bank of Zimbabwe, obviously. Even Wells and JP Morgan would collapse under that strain. The VCs caused their own pain.
    - scopendo 4y ago
      The panic was started by SVB, not VCs. Abstract this to any other bank and the reaction would have been the same.
  - delfinom 4y ago
    No small or medium bank in the US can withstand a bank run
- lxm 4y ago
  Yeah, but what are the specific cash amounts we are talking about? Such extreme exposure to interest rate risk would've blown up in some other ways - say, a large client processing a routine payroll, executing stock buyback, or investing in an entity that banks elsewhere.
- epvgwwqe 4y ago
  No. SVB price crashed 50% in one day and got downrated by Moodys, which exposed a bunch of red flags that would have resulted in a bank run regardless of what VCs said.
  - mrangle 4y ago
    The stock crashed because of the initial pseudo bank run due to high interest rates on capital (at least that's the reason given for withdrawals), and the bank's subsequent failure to make up the difference after selling a treasuries portfolio. After which a real bank run occurred. Then the bank started down a path of a more desperate measure, and that's when they were shut down. At least that's what I got from an article.
- vkou 4y ago
  VCs started a bank run because the bank they were using was insolvent. That's not their fault. Would you keep your money in an insolvent bank?
  - WanderPanda 4y ago
    I think they were solvent im the beginning of the week. But idk if it was just because they didn‘t have to mark their underwater investments to market
    - opportune 4y ago
      That’s a peculiar definition of “solvent”
      - loeg 4y ago
        It's the one banks and regulators use, though!
- ssnistfajen 4y ago
  SVB had risks, VCs did what they should do to respond to said risk. Would you blame regular working class people in a retail bank run scenario for wanting to save their money from potential risk?
madelyn 4y ago
I believe they're referring to the bailout YC (and others) were asking for- going so far as to arrange a petition last night.
- seizethecheese 4y ago
  YC asked for exactly what just happened. (Depositors be made whole.) They did not ask for anything beyond what regulators ultimately deemed reasonable.
JamisonM 4y ago
"I just hope nobody forgets how prominent VCs behaved during the brief period of uncertainty." The point is that these VC's didn't act to support their investments, they flailed around begging for bailout (that they probably didn't need but they didn't understand banking well enough to know that or bother to consult any experts before making public statements). They behaved badly and should be embarrassed and everyone should remember it.
- adastra22 4y ago
  ...why? For asking for government intervention to protect the innocent and avoid contagion? Why should that be embarrassing?
  - reaperducer 4y ago
    Why should that be embarrassing? Because they preached for years that regulation is bad, and the government shouldn't be involved in their financial affairs. Then when something went wrong, they begged for a bailout from the very regulators they disdained: https://www.ycombinator.com/blog/urgent-sign-the-petition-now-thousands-of-startups-and-hundreds-of-thousands-of-startup-jobs-are-at-risk/ https://www.ycombinator.com/blog/urgent-sign-the-petition-no...
  - wmf 4y ago
    VCs themselves could have fixed this problem (that they, in part, created) and some of them did but many did not.
  - arglebarnacle 4y ago
    Why do you find it believable that they asked for government intervention to protect "the innocent" as opposed to simply acting to protect their own private financial interests, which seems to be the simplest explanation? I'm not even convinced that the depositors made whole here were innocent--they accepted a known risk by exceeding the risk-free FDIC limit. The sad part is that in our society, we have no qualms about literally turning working people out into the street when they make financial missteps, but the already-wealthy receive prompt intervention from the highest levels to protect them and other wealthy people from the consequences of their investment decisions. What argument is really left for this kind of intervention, besides appeals to the trickle-down system where the rich must be vigilantly protected since the rest of our society is set up to be disrupted when they fail. The whole system is morally and politically bankrupt.
n3rv 4y ago
wasn't it ultra low interest investments, but very long term? They should have known it wasn't going to stay like that after the crazy 2020 ride. :/
- DennisP 4y ago
  Yes, long-term treasuries which for years had been at very low interest rates. You're certainly right that they shouldn't have done that, but it doesn't invalidate GP's point.
somewhereoutth 4y ago
My understanding is that it was in fact both: 1. If they had more short dated treasuries, they could have used them to fund drawdowns, and would not have had to sell their long dated treasuries, that went underwater as interest rates rise. 2. If they had not been overly exposed to one sector, a sector that largely existed due to 'free money' of zero interest rates, then large scale draw downs would not have happened as interest rates rise.
ajross 4y ago
> 1) SVB was not managed by VC's. I think this is very much in question. Silicon Valley Bank was absolutely part of a cohesive microeconomy. There's no other explanation for the absolutely uniformity with which all those startups were using it for what should have been 100% commodity banking services. Those startups all banked with SVB because their VCs told them to. And the VCs told their startups to bank with SVB because... we don't know yet. But any time you have a signal this strong, there's a driver. Add to that the fact that the moment all those startups seemed likely to lose banking services, however temporarily, those same VCs freaked the fuck out of their minds on twitter and started shrieking in all caps about the end of western capitalism. That's not mere concern for their poor startups (most of whom were going to fail anyway, after all -- they're startups!). These VCs were exposed to the SVB failure. They were leveraged somehow and about to get caught holding the bag. There was some kind of insider dealing going on with SVB. It wasn't just a bank. We for sure know that much. Whether we have criminal fraud or not is an open question.
- belter 4y ago
  Bill Ackman publicly admitted on Twitter to be on the hook for at least 10% of his assets.
  - blackoil 4y ago
    That most probably means, he and his companies kept his cash in SIVB and not that he has stake in it.
- nullc 4y ago
  One element is that the banking industry as a whole behaves pretty chaotically with 'unusual' customers. Big wire in from a fundraising round? Account frozen. Big wire out for an acquisition? Account frozen. Bank learns your customers include cryptocurrency companies? Account frozen. Bank account balance huge relative to your business' cashflow? Account frozen. Random bank staff doesn't understand what you're doing? Account frozen. In that kind of climate its almost inevitable that VC's would recommend a single bank known to not behave erratically for the activities that are usual for their investments.
mbesto 4y ago
> not because they took risky bets on startups. SVB regularly provides credit to risky startups, which is why they existed in the first place (because other banks wouldn't lend at those rates). So, yes, they sorta did place risky bets on startups.
- lambic2 4y ago
  Source for this? All evidence show that their failure at least started with them owning a lot of "safe" bonds, whose value declined with increasing fed rates.
  - mbesto 4y ago
    https://www.svb.com/landing-pages/venture-debt https://www.svb.com/landing-pages/venture-debt
    - mbesto 4y ago
      To elaborate further with hard numbers. See #2: https://www.linkedin.com/posts/rich-falk-wallace_silicon-valley-bank-unit-economics-clarify-activity-7040705652658208768-GO00/ https://www.linkedin.com/posts/rich-falk-wallace_silicon-val... #1: Mortgage backed securities: $82B (83% residential) #2: Direct loans: $74B (55% short term loans to VCs & PE) #3: Liquid assets: $55B

giraffe_lady 4y ago

Does realizing this, that they were always like this change your perception of the last decade in any particular way? I'm genuinely very curious. I've always considered them a bunch of smarmy opportunistic cutthroats, but that shift must be jarring right? Again I don't mean this negatively, genuinely interested in how it changes your understanding of the "startup era," pandemic, etc.

tssva 4y ago

The thing I'm most confused about in this comment is that you ever believed that VC's and startups were some kind of noble class.

deleted 4y ago
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threeseed 4y ago
I believed that VCs and startups were mostly good people trying to do the right thing. But what we've seen in the last few days is utterly despicable behaviour by many of the leading figures driven solely by greed and self-interest. I think increasingly startups will look to bootstrap in the coming years.
- hello_moto 4y ago
  > I believed that VCs and startups were mostly good people trying to do the right thing. I have not seen one human being that didn't turn around because of greed. We are all vulnerable
  - threeseed 4y ago
    These aren't children. They are grown adults many in the later years of their life. Nobody is changing their stripes.
    - violenceislaw 4y ago
      [dead]
  - magpi3 4y ago
    I imagine you are not looking too hard. I have met many people who have dedicated their life to service and not greed. Richard Stillman is one if you need an example.
  - thelittleone 4y ago

duxup 4y ago

>how prominent VCs behaved How did they behave? Try to pull their money out of a failing bank? I would too ...

anigbrowl 4y ago
Running to the Fed for help as soon as shit got real; made a lot of the bootstrapping libertarian ethos stereotypically espoused by a certain of VC seem very hollow.
- moose_is_loose 4y ago
  Can't wait to start seeing their tweets railing about how unfair student debt relief is.
  - sokoloff 4y ago
    Deposit money in a bank and expect to be able to withdraw it later as agreed seems compatible with borrow money for education and expect to pay it back later as agreed.
    - moose_is_loose 4y ago
      They benefited with White Glove treatment and easy access to loans. They weren't depositing it there out of the goodness of their hearts. That's why SVB was hunting for yield.
    - object-a 4y ago
      When you deposit money at a bank, it is made very clear to you that only $250K is protected by the FDIC. Any more, and you either buy insurance for it or take a risk on losing it in a bank failure. These depositors knew that and still acted irresponsibly, yet they are going to be made whole. It’s not that much different from taking out a loan you don’t understand.
      - theGnuMe 4y ago

LewisVerstappen 4y ago

> prominent VCs behaved during the brief period of uncertainty A ton of the prominent VCs were writing out checks from their personal bank accounts so that founders could meet payroll. > For some silly reason I had some respect for the startup industry before this, now I see it as a joke Wait seriously? You somehow lost more faith from this than you did from - crypto - Adam Neumann - $100m seed rounds and like 30 other things??? > But it's important to remember that they no longer automatically deserve any credit for taking risks and doing something new. What are you even talking about? Having your bank account randomly disappear isn't one of the risks that anyone should have to take.

unity1001 4y ago
> Having your bank account randomly disappear isn't one of the risks that anyone should have to take. Then you put your funds in less risky banks who did not lobby to get an exemption from the regulations that protect against precisely this kind of thing. Even, spread it around safer banks. Putting all of one's money in a bank because they have better returns or other investment opportunities is business. Not something that someone can be safe at the public's expense. The public, because the public will pay for this one way or the other - if this is paid from the insurance that insures all banks like how the statement says, then it will cause all the banks who pay into this insurance pool to reflect it on their customers with fees. So every single person with a bank account in the US will pay. Its still public money, but it doesnt come directly from the US govt.'s pocked, so its 'okay'.
- deleted 4y ago
  [deleted]
- wpietri 4y ago
  Especially given that an adequate alternative to putting all your money in one bank is to put it into two banks. Unless you're already on thin ice, that solves the short-term cash flow problem. Historically, even in bank failures, depositors get most or all of their money back, it just takes a while. And if that isn't adequate for a given company, it sounds like it's time for them to hire a finance professional who has experience with cash management.

reducesuffering 4y ago

VC's and YC have burned a lot of credibility overnight with their tech employees during this mask-off moment. I wouldn't be surprised if this forum harbors long term resentment, lack of respect, and a more adversarial relationship going forward. I haven't ever seen such a large lack of respect for them as the past couple days. This industry has gone full Wall St. The next generation of individualist, regulation-disruption startup founders will be reconsidering the YC club a bit more...

ldjkfkdsjnv 4y ago
The post by Gary Tan on here yesterday was actually shocking for me.
- macintux 4y ago
  Link?
  - syjer 4y ago
    I think it's this one: https://news.ycombinator.com/item?id=35114009 https://news.ycombinator.com/item?id=35114009
- alismayilov 4y ago
  Would you mind to share the post?
- flappyeagle 4y ago
  Why?
adharmad 4y ago
Now that the bailout is done, I hope these guys stop tweeting for the sake of everyone’s sanity.
blackoil 4y ago
> VC's and YC have burned a lot of credibility overnight with their tech employees during this mask-off moment Why? It should be other way round. They worked hard to make sure that payrolls are met and jobs are secure, that is my most important expectation from my management and investors.

huhneverthot 4y ago

Who would've thought post-hand-wringing-over-poor-300k-salary-tech-workers realizing their disposability that we would have another event reminding HN just how different the rules are for capital owners than the rest of us. Why is that tech workers, many of whom easily have earned over a million dollars in salary over the past few years can't be told to "live within their means"? Why is it that the same VCs that rallied against student debt relief think their poorly run bank should be bailed out? I know why, this thread is chalk full of it. "We were smart, we were playing the game with the advantage we were told made us untouchable, we can't fathom gasp 'negative consequences' whatever those are". I'm sick of it and thankful to see people seeing through this a bit more than usual. Downvoting isnt going to change a damn thing, click your hearts out and enjoy the dissonance. See ya in the next too-big-to-fail-as-a-result-of-unchecked-corporate-greed thread. lmao

deleted 4y ago
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DennisP 4y ago
Yes, regular people get their bank accounts automatically protected, and the capital owners had to sweat for a few days. The bank is not bailed out, it's out of business, its shareholders get nothing, and its execs just lost their jobs. The bank's customers got bailed out.
- stametseater 4y ago
  [dead]
bart_spoon 4y ago
How many startup employees do you believe are making 300k? That’s FAANG, big-tech companies that were in no way affected by SVB going under. If anything, startups are known for paying below market rate because they have tighter margins and compensate with the tenuous promise that more money might be made in the form of stock options if the company makes it big, which usually doesn’t pan out.
birdymcbird 4y ago

seizethecheese 4y ago

Why the scare quote on “founders”? It makes your comment come across as motivated.

ComplexSystems 4y ago

> It's great at a personal level that "founders" and startup employees didn't have to do without. But it's important to remember that they no longer automatically deserve any credit for taking risks and doing something new. Mm hmm. Yes, after all is said and done, the main take away from this is that startup employees and founders no longer deserve credit for taking risks and doing something new. Glad our priorities are straight here on hackernews.

KRAKRISMOTT 4y ago
The founders and employees deserve credit, the VCs not so much. They were the ones primarily driving the fearmongering.
- threeseed 4y ago
  The founders do need to wake up though. If you don't understand the basics of the US banking system then not sure you should be running a business.
  - KRAKRISMOTT 4y ago
    They don't have much agency in this. Go with a typical "small business account" meant for mom and pop shops at a bigger bank and you miss out on all the advantages of a more dynamic bank like SVB. Your investors would be asking questions. Collectively agree not to create a bank run, your investors would still ask questions. Unless you are fully bootstrapped with no major cashflow issues, there are no right answers to this.
    - wpietri 4y ago
      Oh, so they, wanting an advantage, made a choice that turned out to have some downsides as well? That sounds like a situation where they have plenty of agency to me. Especially when there are alternatives like putting their eggs in two baskets.
      - 4y ago

dpweb 4y ago

VC insider types won this one in some sense but at the cost of some credibility (those most hysterically yelling om twitter at least)

theLiminator 4y ago

Glorifying founders has always been stupid, they're all trying to get rich, not exactly a noble cause. It's not something to demonize them for either, but founder worship is kinda gross.

AYBABTME 4y ago

They might as well be FAANG employees if they're so risk averse that they can't deal with such casual occurrences as their dang banks failing.

bart_spoon 4y ago

Why should they not get credit for taking risks or doing something new? How is that related at all? The risks they take are based on the viability of their product. It was never (supposed to be) based on the risk of if their banking institution could provide them with their cash as needed. None of that has changed.

ChatGTP 4y ago
We’ll because taking risks by definition means you could end up in a negative situation and so it should be more of a personal decision? It seems like SVB took a risk and lost. If the majority of Americans voted for SVB taking higher risks it would be understandable but now who comes up with the missing money ? The government, which is tax payers who are already probably getting the raw end of the stick financially compare to silicon valleys. I think this bailout will see a lot of political backlash.

lopkeny12ko 4y ago

What did VCs do wrong here? They warned of impending solvency problems at SVB and told founders to withdraw their money ASAP. And indeed, the bank failed the next day. The companies in trouble are those who didn't listen to the VCs.

hello_moto 4y ago
VCs Group-A (who knew something) rushed the bank. VCs Group-B to Z were too late so they asked Govt to help them. It's not just founders who put their money there, VC funds are there as well and they are probably close to 100% uninsured (cause it's the Fund Series I - XXX). If you get your hands on the list of depositors, you'll see the list of Funds Series from VCs.
- mattzito 4y ago
  Most VCs don’t keep a substantive amount of their dry powder on hand, just a percentage. When they need money they make a capital call to their LPs. (At least, that’s as I understand it from the VCs that I know it)
maxilevi 4y ago
Basically lobbying the government for a bailout so that their startup investments don't go to zero.
deleted 4y ago
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femiagbabiaka 4y ago
Part of the issue is a common one: assigning blame for actions taken by individuals to the collective. It’s a nasty internet trope. But these things are true: - the crisis was at the most caused and at the least exacerbated to the point of no return by the advice that some firms gave - the general zeitgeist amongst certain firms and from particular individuals in firms leaned towards libertarian ideology, which seemed to go out the window when ish hit the fan. I can really only find one prominent example of this, so I don’t know if it’s fair to paint all of VC-land with the same brush - it is probably the case that there are members of firms in both group one and group two, which looks bad, because panicking at the last second looks bad, especially when your panic screws (for your own benefit) a business partner of decades who was essentially only in a risk zone because they chose to do business with you. That’s an oversimplification of course, but it all is

hello_moto 4y ago

> For some sily reason I had some respect for the startup industry before this, now I see it as a joke. 1. silly reason 2. It's a joke It looks like you just found your silly reason. The greed of startups have evolved to become bigger and bigger as years pass by. The romanticizing of startups came from propaganda. It's just that some of us were too young and naive to understand the puppetmaster while others had seen the puppeteer before...

lazzlazzlazz 4y ago

An equally silly error would be concluding that all VCs are like this. Although we heard absolutely unhinged and insane panic from a few (like Jason Calacanis), and some milquetoast statements from others (Redpoint), we heard no panic from the largest players. I won't reshare anecdotes here, but I heard stories over the weekend about intense and direct conversations between the largest VCs and the Fed.

hypothesis 4y ago
By any chance were those largest players part of bank run on SVB? [0] https://twitter.com/tomharari/status/1634577650856632321 https://twitter.com/tomharari/status/1634577650856632321
- lazzlazzlazz 4y ago
  You can probably infer who I'm talking about simply by noticing which major VCs were not part of the histrionic crowd.

jongjong 4y ago

It's impossible to move on. There were insufficient funds to pay depositors; meaning, the money was gone - Since the money didn't vanish into thin air; somebody got that money through some scheme. Now taxpayers are going to be footing the bill... It's a government-ordained transfer of wealth from good, honest taxpayers to whatever (possibly malicious) entities got that money. It's theft. It's straight theft. Not even complicated. Theft is now legal depending on who you are.

bradleyjg 4y ago
It’s not strictly speaking taxpayers, it’s anyone with a bank account at a U.S. bank. But same effect.
jurassic 4y ago
> It's impossible to move on. There was insufficient funds to pay depositors; meaning, the money was gone - Since the money didn't vanish into thin air; somebody got that money through some scheme. There was no theft. The bank bought bonds that decreased in value rapidly due to rising interest rates. Pure mismanagement, but not theft.
- ok_computer 4y ago
  The bonds are good to yield on the stated timeframe. You need to hold them to maturity. They bought long term bonds and tried to sell them after newer higher yielding bonds came out. Bad decision. Also lobbying to avoid stress testing below 250B instead of 50B. They could have kept deposits as cash and watched the value erode like a dumb retail consumer has an option to do. But that’d look bad for bank investors. So now the Fed and Treasury are responsible for negative yield on bad bets if that account crosses 100B. Cool. I only have about 100B to go before the US government cares about my negative position. 401K takes an L because interest rate rises and the SP500 being a stock buyback circus. That’s on me I guess. Anyone saying well it’s not using taxpayer dollars. Whatever, it is using our feds time. This whole thing is now J Powell and Yellen focusing on a cottage industry serving billionaire interests instead of using their time and agency to work for that dumb aforementioned retail consumer undergoing inflation and a pending recession. In an agency where any intervention sets a precedent this is now telling regional banks to go ahead and yolo your balance sheet. We got you. I want the startups to get their money through liquidation of the bank at whatever discount that comes to. 80c on the dollar, whatever it isn’t your money anyway it’s VC money. All savings accounts come with 250k FDIC insured. So play by those rules.

bloodyplonker22 4y ago

You're going too far by calling VCs "rent seekers". They do provide value with other peoples' money to build companies. No matter how much people love to hate them, they are a necessary part of the startup ecosystem. Most of them fail and end up in tears in the long run -- it's just the nature of VC. There's no need to punch them when they're down.

kazen44 4y ago
in my personal opinion most if not all modern startups are seeking to create a system in which rent seeking behaviour is the end goal. The stereotypical SV playbook is to enter a market, don't give a crap about the local regulation or laws, try to get big by using your cheap money to outstrip to competition and do rent-seeking when you are the largest. Also, a lot of startups are solving non fundemental problems. We should be spending all that engineering effort fixing things like climate change, food security for the global south and a way to deal with the aging population in the western world instead of thinking about algorithms to get more clicks on ads.
- molsongolden 4y ago
  A few companies have done this but calling it the stereotypical playbook is a bit over the top. Also, there are many startups building stupid junk to capture a piece of the pie but also many startups working on real problems. This whole comment is a reductive cliche at this point. Please start a company to work on fixing climate change, food security, aging, etc.

florakel 4y ago

There is nothing but economic interest. If you want to predict how any company, startup or not, will behave just look at how they make money. In 99% of the cases companies act according to their business model. It is that simple, there is nothing else. All the "we will make the world a better place" rhetoric and mission statements are just recruiting and PR BS.

Fede_V 4y ago

Joe Weisenthal (who is always worth listening too in matters of finance) put it well here: https://twitter.com/thestalwart/status/1634985524007157760?s=46&t=P7y2mV1WVqYHHZAviaV-dg https://twitter.com/thestalwart/status/1634985524007157760?s... Some VCs were definitely better than others: the very worse was probably the All In Crew who were trying to spread a bank run to tie the government's hand. Truly despicable.

birdymcbird 4y ago
saw their all in episode. definitely did not get signal you described.
MaxHoppersGhost 4y ago
The All In Crew are the kings of rent seekers. Chamath himself made billions off the SPAC boom which should tell you all you need to know about them. Mr Libertarian himself David Sacks crying for govt intervention was hilarious. What a clown.
- WanderPanda 4y ago
  Yes, this and his Solana pump (and dump?) really showed his true face to a point where I have to start questioning his qualities as a capital allocator
WanderPanda 4y ago
Agreed, I‘m a big fan of the all in podcast but this really showed them (especially Sacks) from their worst side. They clearly pressured the regulators by saying that everyone who has more than the amount insured by the FDIC in their account at a regional bank is stupid and reckless if they don‘t transfer it to one of the top four banks on Monday. The situation at SVB seemed very manageable but even a small chance of this „mind virus“ spreading would be so devastating that they decided to backstop the situation.

skwirl 4y ago

The people I lost respect for was a large portion of HN commenters calling on bank depositors - largely small businesses - to be snuffed out because there was a run on their bank. The comments have largely been factually wrong, misleading, and downright psychopathic. I am glad our government is not controlled by such people, but I question the value of this forum going forward given the large portion of it that is so incredibly toxic and so poorly informed.

AlchemistCamp 4y ago
[flagged]
- greenyoda 4y ago
  I'm pretty sure that calling your fellow commenters "trolls" and accusing them of having "psychological issues" also violates HN Guidelines, which say: > Be kind. Don't be snarky. Converse curiously; don't cross-examine. Edit out swipes. > Please don't fulminate. Please don't sneer, including at the rest of the community. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
  - AlchemistCamp 4y ago
    I suppose that might run afoul of the guidelines, though I did not call out any specific commenters and I think we can all agree there were some trolls on that thread. You can look for yourself and see some newly created and quickly banned green accounts on it. The comment you're replying to was my honest assessment of the situation, given the many dozens of comments hoping for people to lose their bank deposits and for their businesses (or those that employ them) to fail.
tomato_123 4y ago
All of these companies could have sold their uninsured deposits at a discount, made payroll, and let their equity holders take the loss. This is what equity holders are supposed to do. Instead they went on an embarrassing twitter begging campaign and unfortunately succeeded. The whole "workers missing mortgage payments" or "destroying a generation of innovation" is an insane, buck-passing take.

wilde 4y ago

Just think of this moment as a great interview question during the next upcycle

antibasilisk 4y ago

i don't think there's going to be very much 'moving on', in fact i think alot of 'moving backwards' is about to happen

dccoolgai 4y ago

Now they are going to see the light and give the employees the same "bailout" they got when times got tough in the form of "not getting laid off" right? .... Right? Because everyone deserves a break, right?

ah765 4y ago

Absolutely. People like Garry Tan, Sam Altman, Michael Seibel, Paul Graham, Mark Cuban, all pushed hard to keep their money, not caring if it's at taxpayer expense. Rich people tend to only care about helping others when it aligns with helping their own pockets. This may have been the most prudent decision by the government, though it'll be hard to say what would've happened otherwise. But in the end, it sounds like the average person will still be negatively affected, by having small accounts under the $250k limit subsidize insurance for larger accounts.

garry 4y ago
[flagged]
- actuator 4y ago
  Oh please, these are just excuses. If you want to reap the benefits of capitalism, you should also get punishment for not doing the job well. Getting a haircut above the insured amount was the sensible thing here.
  - throwawaysleep 4y ago
    The problem is that everyone now thinks of the haircut and flees any bank that its a fortress to make sure they don't face a haircut. I.e. you have a bank run on every bank under the largest 10.
    - actuator 4y ago
      If we are so fearful of this, and banks are so core to the economy, why not just have government owned banks then, since it seems like government has to subsidize mismanagement.
  - adharmad 4y ago
    Capitalism without bankruptcy is a bit like Christianity without hell.

tempsy 4y ago

the long term fallout was never going to come from only getting 90 cents on the dollar vs 100% it’s the fact that the lender most willing to work with non traditional borrowers eg tech startups is now gone, and there’s no bank or lender that will replace them. if anything this will mean lending standards will tighten, and it will be very difficult for any customer with a SVB credit line to find another bank willing to lend to them on the same terms. this is also coming at a time when more startups relied on debt to fund their companies because the equity raising environment is so tough, so now many founders might be forced to attempt to raise equity in a tech bear market on very bad terms if they can at all

paulddraper 4y ago

I learned that VCs are protective of their investments. Which, as an investee, is exactly what I want.

lanza 4y ago

> I just hope nobody forgets how prominent VCs behaved during the brief period of uncertainty. The idea of some noble class of investors championing disruption is dead. They're just a bunch of rent seekers like everybody else. For some silly reason I had some respect for the startup industry before this, now I see it as a joke. You have some serious disillusion.

jraines 4y ago

> they no longer deserve credit for taking risks and doing something new What on earth. Putting money in the bank was never a risk founders were lauded for, nor should it be on the titanic list of things they have to worry about. We can brawl in the peanut gallery over FDIC limits and precedents and moral hazard (which lies with the banks, btw) but at the end of the day there can only be one “best country to start a startup” and whatever that is, it’s definitionally one where you don’t have to worry about getting rugged by the bank because someone you wouldn’t know from Adam made a bad bond trade.

FooBarBizBazz 4y ago

What are you on about? The final decision was eminently reasonable. The bank's shareholders are getting wiped out. The depositors are protected. Banks -- who depend on the continued faith of the public -- chip in a little more in insurance. The taxpayer pays nothing. A bunch of software companies get to succeed or fail now on the basis of whether their business models and execution make any sense, as opposed to whether their bank bought enough interest-rate swaps. Small regional banks can continue to exist. This will not necessitate even more consolidation in American capitalism. And there will be no follow-on bank runs to jeopardize grandma's CDs. Seriously, what is there to complain about? The government did its job here. It governed. Fairly and competently.

dns_snek 4y ago
> The taxpayer pays nothing. Money to cover deposits that didn't previously didn't exist, suddenly exists, and there are people like you trying to tell everyone else that everything is rosy and that it's not going to cost the taxpayers anything. It sounds like a revolutionary system that you're working with and if it truly costs "nothing", may I ask where I can sign up to have my bad financial investments refunded for free?
- FooBarBizBazz 4y ago
  FDIC insurance is paid for by FDIC members (i.e., by banks), via an insurance premium. In this case, the FDIC is providing extra coverage, and charging member banks an extra assessment to pay for it. So the money comes from all the other banks. "The taxpayer will pay for it" only in the sense that maybe member banks will try to pass this on in the form of fees. "Bad financial investments" are almost 100% not being "refunded" to the bank shareholders. Their shares are, I assume, going to zero. The only way in which they are being protected -- the "almost" -- is in the fact that their shares go only to zero, and do not become liabilities. Let us also consider what the investments were that went bad: Government bonds. So you could say that value flowed from the bank to "the taxpayer" (or to "the government") the minute those bonds lost value, i.e., the minute the Fed devalued them by hiking rates on newly-issued bonds. In that sense, the bank was already the bagholder for the Fed ("the taxpayer").

fullshark 4y ago

I will never forget, they revealed their true faces. All these CEOs also. It's a big game, words are just tools to manipulate others into doing what you want them to do, nothing more.

anonu 4y ago

why conflate "startups" with "VC"?