5 ms·

Investor Mark Suster says a “handful” of bad actors in VC destroyed SVB

56 points by toss1 4y ago

xiphias2 4y ago
It's so boring to see people get blamed for taking their own money somewhere else in time.
- whatever1 4y ago
  And also rallying their dependents to do the same. How noble of them.
- Lazare 4y ago
  The article is blaming people for creating and spreading panic, not (just) for moving money out. (And in the context of a bank run, there's a pretty good argument that the author is correct too.)
  - stametseater 4y ago
    [dead]
- astrange 4y ago
  That's what a bank run is. If you don't take it out, there is no run and no problem. And as we can see, there was nothing to be in time for, because nobody's lost any deposits. If the bank was in that much trouble it could've been wound down in a more orderly fashion than this though.
  - andy_ppp 4y ago
    If people stop trusting banks because of good reasons they have a right to withdraw funds.
    - astrange 4y ago
      They don't have a good reason, they have a bank run. Which they have the right to do, but now there isn't a usable startup bank anymore.
    - 7speter 4y ago
      You can manufacture seemingly good reasons
      - andy_ppp 4y ago
        Like, for example, having a vast majority of deposits from an industry that is quite unstable and rumours travel extremely fast?
  - mytailorisrich 4y ago
    This is an unrealistic rationalisation after the fact. If you have lost confidence in your bank you will not sit tight and see what happens, you will withdraw your money to protect yourself. The article also contains quite a gem: "Every VC I know was telling people, ‘We think your deposits are safe with SVB. It would be prudent to take some money because you could have a liquidity crisis for a week, but we don’t think a run on the bank makes sense.’" That's a very strange thing to say. If it is prudent to take some money out then deposits are not safe and you should get everything out ASAP. Those who saw it coming did exactly that.
    - astrange 4y ago
      It doesn't matter if you have confidence in your bank. You just need confidence in the FDIC. They have a history of recovering everything including uninsured assets. > This is an unrealistic rationalisation after the fact. It's clearly correct that they were worried about nothing because 1. nothing bad happened to anyone who didn't withdraw funds 2. by withdrawing funds they now don't have a bank anymore. Which is a problem if it was the only one willing to handle startups.
      - mytailorisrich 4y ago
        >You just need confidence in the FDIC. The FDIC insures up to $250k only. You are not asking for confidence but for faith that somehow they'd be willing to guarantee 100% out of their good hearts. That's an irrational thing to do when your money is at risk. Regarding your second paragraph: hindsight is such a wonderful thing! Also strange to claim that they don't have a bank anymore...
        astrange 4y ago
        > The FDIC insures up to $250k only. No, they directly insure $250k and repeatedly and consistently demonstrate their ability to recover everything else by repossessing failing banks and selling them to other parties. They don't promise it's all immediately available past $250k, so it may take some time, but for you to expect a haircut you would need an example of someone getting one. I would prefer this be more explicit policy though. > That's an irrational thing to do when your money is at risk. If you know what a bank run is you know this is causing it, so this is bad game theory (as we see since it caused the bank to fail). You should actually pursue a strategy of stopping everyone else from withdrawing. Screaming at all your founders and panicking in group chats is not that. > Also strange to claim that they don't have a bank anymore... They ain't got one. SVB no longer exists. If you want a new checking account for a new business you cannot get one from DINB of Santa Clara.
  - trompetenaccoun 4y ago
    >If you don't take it out, there is no run and no problem. I have heard this "argument" before from people like Alex Mashinsky, who's accused of having run a ponzi scheme. One would think all customers being able to withdraw their funds should be the base minimum requirement any legitimate bank must be able to fulfill.
    - xiphias2 4y ago
      What you are describing is called a narrow bank, and it exists in Norway. There were people trying to create narrow banks, but they were rejected by regulators, because ,,everybody would take their money out of current banks and put it there’’. Also there is one narrow bank in Norway, if you have at least $50M, maybe big companies should think about voting with their wallets.
      - trompetenaccoun 4y ago
        Very interesting, thanks for the info! I wasn't aware a narrow bank already existed. And apparently the Norwegian financial system has not collapsed :)
    - astrange 4y ago
      Why would a bank need to support withdrawing 100% of its funds at once with no warning? Nobody wants to do that. (It's actually impossible to create a bank that allows doing that; regulators won't allow it.)
      - trompetenaccoun 4y ago
        Most are under the illusion that when they give money to a bank, the bank keeps it safe for them. The FED not allowing safe banks but actually forcing them to take unnecessary risks is part of the problem¹. It's completely false that nobody wants safe banking, many asset managers do for obvious reasons because this is a huge risk for anyone dealing with accounts in excess of the insured amount. Also if you think banks that support full withdrawals (and thus making bank runs impossible) should not exist, what percentage do you think they should support? 50%, 30%? Should they have enough money to at least handle 10% of customers withdrawing? The real legal requirement might worry you if you know the figure. I encourage you to look it up. ¹ https://www.chicagobooth.edu/review/safest-bank-fed-wont-sanction https://www.chicagobooth.edu/review/safest-bank-fed-wont-san...
- polygamous_bat 4y ago
  You can exit a theater (i.e. take your own self out of it) any time. Only if you shout "fire" and create a stampede does it become a problem. The situation in this analogy is complicated by the fact that there _was_ a fire at the theater. However, even in that situation panic can be detrimental to the system as a whole.
  - checkcircuits 4y ago
    Not a great analogy IMO. This is akin to seeing a terrible movie, announcing to the markets you're selling every share you own of the company, and then everyone doing the same. Victim blaming isn't useful here. Bank depositors are de facto investors in the bank. Pulling your money and saying "this company is terrible leave" is not illegal and not a problem. Don't have a bad business with bad business practices controlling tens of billions of people's money. If a bank can't produce the money I gave them that's their problem. They deserve to collapse and I deserve to be made whole. This whole "forgive the banks they have to make money too" non-sense ignores the fact the fed told these same banks they don't need any reserves in march of 2020. It's borderline criminal just like the idea of fractional reserve banking itself.
- spaceman_2020 4y ago
  You can’t wear a fireman’s uniform, walk into a theater, yell “fire” into a loudspeaker, and walk away. These were not ordinary people just moving money around. They had public trust, authority, and an outsized voice.
doesnt_know 4y ago
If a "handful" of external bad actors can completely destroy your financial institute then maybe it's time to consider how these systems are built.
- corbulo 4y ago
  >Enter CBDCs Your sentiment is common, particularly among central bankers. It feels kind of by design with the current international economic trends, but at the same time this seems like a pretty natural course of events when you have strong central banks. No matter what they do, it's always their fault because they have so much power. Solution? They actually don't have enough; now introducing CBDCs. I don't think there's an obvious stable alternative either. Tether is just waiting for the rug to get pulled on it.
- dariusj18 4y ago
  A handful of people can do immense damage to many things.
- kennywinker 4y ago
  I think there are probably thousands, maybe even tens of thousands of financial institutions around the world that could be destroyed if a handful plucked from some of the richest people in the world decides you're their enemy. To list of the financial institutions that could handle that would be the shorter list.
  - chitowneats 4y ago
    You're probably correct. That's a problem.
    - friendzis 4y ago
      Whether that is a problem is a rather semantic issue. This is *property* of our credit based capitalistic system. Remove this and you are back at medieval levels of inequality, one way or another.
kragen 4y ago
if i saw a prominent investor tweeting 'More in the VC community need to speak out publicly to quell the panic about [my bank]' i would close my account there asap, because in a sense a tweet like that is stronger evidence of a bank run than a tweet in all capitals saying 'get your money out now' so i would say mark suster is one of the people who destroyed svb but mostly i think it's that they'd been insolvent since september and weren't going to become solvent again unless the fed dropped the prime rate again
- yuliyp 4y ago
  What's the basis for that insolvent since September claim? Looking at the end of 2022 financial data shows a bank that's been hurt by interest rates rising, but definitely not insolvent. Is the an alternative definition of insolvent you're using for that statement (beyond liabilities > assets)?
  - kragen 4y ago
    as i understand it, they hadn't marked-to-market their hold-to-maturity securities (because that's why you classify securities as htm, so you don't have to mark them to market) but their market value had fallen sharply (because of interest rates rising), so that their liabilities did exceed the actual market value of their assets in that sense their solvency after about september was just an accounting fiction i'm not even an accountant though, so please take this with a grain of salt, and let me know if i'm wrong
    - lordnacho 4y ago
      I feel this is the crucial missing bit of information. The rules allow Wiley E Coyote to run over the cliff without looking down. When I was running a fund we'd always think about the current mark to market. People would get in trouble for marking their books away from the market. How is it that is allowable to pretend things are worth more than they are?
      - whatshisface 4y ago
wolverine876 4y ago
I don't see many discussing that at least some of the VCs who pushed people to withdraw from SVB, such as Thiel, seem oriented toward disrupting SV, society, and the banking system (the latter in favor of cryptocurrencies). Do those people care about burning down this bank, and starting a conflagration in their own town?
- sdenton4 4y ago
  It's a small leap from literal vampirism (blood transfusions for eternal youth) to figurative vampirism (burning down a bank to breathe some life back into your bad crypto investments). https://www.vanityfair.com/news/2016/08/peter-thiel-wants-to-inject-himself-with-young-peoples-blood https://www.vanityfair.com/news/2016/08/peter-thiel-wants-to...
  - duud 4y ago
    Pretty sure he has done OK with crypto https://fortune.com/crypto/2023/01/18/peter-thiels-founders-fund-sold-crypto-just-before-markets-soured/ https://fortune.com/crypto/2023/01/18/peter-thiels-founders-...
- paxys 4y ago
  Several prominent VCs retweeted debunked claims about feds taking over First Republic Bank last evening, all in sync with each other. Their collective role in this panic (including possible backchannel collusion before and after everything went down) definitely needs to be investigated.
- tomhoward 4y ago
  I'm no great fan of Thiel, but it would not make financial sense for him to tank SVB (limited upside vs. the upside potential of his portfolio companies) and would likely in breach of several laws, most notably fiduciary duties as a director. It's a fun theory but doesn't hold up to more than a few seconds' thought.
  - wolverine876 4y ago
swatcoder 4y ago
SVB was clearly vulnerable. It had a concentrated portfolio of venture industry customers many of whom were required to deposit exclusively with itself and were therefore well over the FDIC insurance limit, and its curiously structured asset portfolio had taken a major hit with the change in interest rates. They were not healthy. With a condition so marginal, of course there will be people insisting that they could have made it through if nobody flinched and people insisting that their collapse was just waiting for a strong gust of wind. The difference of opinion is why people were still both buying and selling their stock until it was delisted. That’s how markets work. But at this point, it already happened. The only reason to make a case like this (and those with opposing perspectives) is for influential people to jockey against each other, trying to smear people who they compete with for deals. We don’t need to participate in their soap opera. There’s plenty more practical to talk about now.
neom 4y ago
The run started earlier in the week, msg's to moving money out were going on long before Thursday. Who originally triggered it, no clue... but in a bank run, those who run first make it out the door. You're not exactly taking your fiduciary responsibility seriously by thinking "oh it's probably fine! I'm sure everyone else will stay level headed and keep their money in this bank that seems to be falling over" - The FDIC in theory should to step in prior to the run, take over the bank and prevent it, they did a good job of that in many instances in 2008, not sure what happened here. It's been mentioned quite a few times in these threads, but this 60 minutes clip about 2008 is really good: https://www.youtube.com/watch?v=TAE8i40A5uI https://www.youtube.com/watch?v=TAE8i40A5uI
- paxys 4y ago
  This was the second largest bank failure in US history. The feds stepped in mid day on Friday and sorted out the entire situation by Sunday evening. And your takeaway is that the government was too slow to react and are to blame for this?
  - neom 4y ago
    I wasn't trying to be critical of the FDIC, they're obviously really excellent at their job and it's a testament to just how down pat they have their play book given they did managed to get so much sorted out by Sunday. My only point was they managed to prevent bank runs of failing banks in the past, they have deep insight into the banking system. I'm curious what happened this time. Maybe as you said, it's related to the size of the bank, I don't know.
  - kragen 4y ago
    at this point they've promised to make svb's depositors whole, by levying a special assessment on all other banks if need be if they had done that 60 hours earlier svb would be fine
    - sokoloff 4y ago
      Would be fine (an excellent outcome) and under the original ownership and leadership (arguably an undesirable outcome). I say undesirable because if you believe they had financial troubles that cast genuine doubt on their ability to meet all withdrawals if they were spaced out over a reasonable period (say 24 months), then their management’s ability to run a bank is in question (and the owners who put that management in place should have that ownership at risk). I don’t know with certainty that the “could meet all withdrawals” test was failed, but it seems that many people who know more finance than I do do believe that.
fuoqi 4y ago
I think it's likely that certain actors were pulling the strings behind the scenes to trigger the run and make a hefty profit in the process. But they are nothing more than capitalistic hyenas, the root issue lies in irresponsible SVB management and reckless tightening by FED.
- paxys 4y ago
  No one was making a "hefty profit" off the bank run. It was a case of a panic selloff, nothing more.
  - fuoqi 4y ago
    And of course no one has shorted the stocks. /s
    - paxys 4y ago
      I assume you know the answer? Or are just pulling facts out of nowhere?
      - fuoqi 4y ago
        This is why I wrote "likely", but as for facts, I know that SVB's CEO has sold his stocks on March 1 for $3M (in addition to a number of earlier sells). And according to Bloomberg short sellers made at least $500M in profits: https://www.bloomberg.com/news/articles/2023-03-10/shorts-make-500-million-on-svb-demise-collecting-won-t-be-easy https://www.bloomberg.com/news/articles/2023-03-10/shorts-ma... I absolutely will not be surprised if in the future we will learn that some enterprising individuals connected to the VC crowd have helped to trigger the run in the right time for them.
        7speter 4y ago
        Or the banks leadership saw the inevitable writing on the wall and knew someone was going to start a run.
sschueller 4y ago
Probably the same VCs that had interest in SVP taking higher risk before hand...
ars 4y ago
This is complete and utter nonsense. If SVB had enough assets to cover liabilities they could have borrowed as much money as they needed to cover and possible bank run. On top of that, by simply saying "we have enough assets, anyone who wants their deposits will get them", they would halt the bank run on the spot.
simonebrunozzi 4y ago
I keep hear about bad actors among VCs, but I don't hear about the colossal mistakes being made by SVB's executives and board of directors.
_8j50 4y ago
The conspiracy theorist in me thinks: given the bullshit layoffs and other fabricated trends such as consistent news stories about a tech crash and a big recession around the corner and given the history,ideology and portfolio of Mr. Thiel and other "bad actors" that precipitsted SVB's collapse, this all maybe part of an attempt to crash the tech sector of the US and blame it for a recession which will allow a re-alignment of power and influence both politically and financially (including things like tech salaries but also at a much bigger scale). In other words, this looks too much like a controlled explosion by a few powerful people in reaction to covid-bailouts and 2020/2022 elections in the US. Ask yourself who stands to benefit? Mr. Thiel and pals would surely benefit by giving their politicians ammo before elections next year and if they hedge their investments right their wealth will be minimally affected in a tech/US centric recession

56 points by toss1 4y ago

xiphias2 4y ago

It's so boring to see people get blamed for taking their own money somewhere else in time.

whatever1 4y ago
And also rallying their dependents to do the same. How noble of them.
Lazare 4y ago
The article is blaming people for creating and spreading panic, not (just) for moving money out. (And in the context of a bank run, there's a pretty good argument that the author is correct too.)
- stametseater 4y ago
  [dead]
astrange 4y ago
That's what a bank run is. If you don't take it out, there is no run and no problem. And as we can see, there was nothing to be in time for, because nobody's lost any deposits. If the bank was in that much trouble it could've been wound down in a more orderly fashion than this though.
- andy_ppp 4y ago
  If people stop trusting banks because of good reasons they have a right to withdraw funds.
  - astrange 4y ago
    They don't have a good reason, they have a bank run. Which they have the right to do, but now there isn't a usable startup bank anymore.
  - 7speter 4y ago
    You can manufacture seemingly good reasons
    - andy_ppp 4y ago
      Like, for example, having a vast majority of deposits from an industry that is quite unstable and rumours travel extremely fast?
- mytailorisrich 4y ago
  This is an unrealistic rationalisation after the fact. If you have lost confidence in your bank you will not sit tight and see what happens, you will withdraw your money to protect yourself. The article also contains quite a gem: "Every VC I know was telling people, ‘We think your deposits are safe with SVB. It would be prudent to take some money because you could have a liquidity crisis for a week, but we don’t think a run on the bank makes sense.’" That's a very strange thing to say. If it is prudent to take some money out then deposits are not safe and you should get everything out ASAP. Those who saw it coming did exactly that.
  - astrange 4y ago
    It doesn't matter if you have confidence in your bank. You just need confidence in the FDIC. They have a history of recovering everything including uninsured assets. > This is an unrealistic rationalisation after the fact. It's clearly correct that they were worried about nothing because 1. nothing bad happened to anyone who didn't withdraw funds 2. by withdrawing funds they now don't have a bank anymore. Which is a problem if it was the only one willing to handle startups.
    - mytailorisrich 4y ago
      >You just need confidence in the FDIC. The FDIC insures up to $250k only. You are not asking for confidence but for faith that somehow they'd be willing to guarantee 100% out of their good hearts. That's an irrational thing to do when your money is at risk. Regarding your second paragraph: hindsight is such a wonderful thing! Also strange to claim that they don't have a bank anymore...
      - astrange 4y ago
        > The FDIC insures up to $250k only. No, they directly insure $250k and repeatedly and consistently demonstrate their ability to recover everything else by repossessing failing banks and selling them to other parties. They don't promise it's all immediately available past $250k, so it may take some time, but for you to expect a haircut you would need an example of someone getting one. I would prefer this be more explicit policy though. > That's an irrational thing to do when your money is at risk. If you know what a bank run is you know this is causing it, so this is bad game theory (as we see since it caused the bank to fail). You should actually pursue a strategy of stopping everyone else from withdrawing. Screaming at all your founders and panicking in group chats is not that. > Also strange to claim that they don't have a bank anymore... They ain't got one. SVB no longer exists. If you want a new checking account for a new business you cannot get one from DINB of Santa Clara.
- trompetenaccoun 4y ago
  >If you don't take it out, there is no run and no problem. I have heard this "argument" before from people like Alex Mashinsky, who's accused of having run a ponzi scheme. One would think all customers being able to withdraw their funds should be the base minimum requirement any legitimate bank must be able to fulfill.
  - xiphias2 4y ago
    What you are describing is called a narrow bank, and it exists in Norway. There were people trying to create narrow banks, but they were rejected by regulators, because ,,everybody would take their money out of current banks and put it there’’. Also there is one narrow bank in Norway, if you have at least $50M, maybe big companies should think about voting with their wallets.
    - trompetenaccoun 4y ago
      Very interesting, thanks for the info! I wasn't aware a narrow bank already existed. And apparently the Norwegian financial system has not collapsed :)
  - astrange 4y ago
    Why would a bank need to support withdrawing 100% of its funds at once with no warning? Nobody wants to do that. (It's actually impossible to create a bank that allows doing that; regulators won't allow it.)
    - trompetenaccoun 4y ago
      Most are under the illusion that when they give money to a bank, the bank keeps it safe for them. The FED not allowing safe banks but actually forcing them to take unnecessary risks is part of the problem¹. It's completely false that nobody wants safe banking, many asset managers do for obvious reasons because this is a huge risk for anyone dealing with accounts in excess of the insured amount. Also if you think banks that support full withdrawals (and thus making bank runs impossible) should not exist, what percentage do you think they should support? 50%, 30%? Should they have enough money to at least handle 10% of customers withdrawing? The real legal requirement might worry you if you know the figure. I encourage you to look it up. ¹ https://www.chicagobooth.edu/review/safest-bank-fed-wont-sanction https://www.chicagobooth.edu/review/safest-bank-fed-wont-san...
polygamous_bat 4y ago
You can exit a theater (i.e. take your own self out of it) any time. Only if you shout "fire" and create a stampede does it become a problem. The situation in this analogy is complicated by the fact that there _was_ a fire at the theater. However, even in that situation panic can be detrimental to the system as a whole.
- checkcircuits 4y ago
  Not a great analogy IMO. This is akin to seeing a terrible movie, announcing to the markets you're selling every share you own of the company, and then everyone doing the same. Victim blaming isn't useful here. Bank depositors are de facto investors in the bank. Pulling your money and saying "this company is terrible leave" is not illegal and not a problem. Don't have a bad business with bad business practices controlling tens of billions of people's money. If a bank can't produce the money I gave them that's their problem. They deserve to collapse and I deserve to be made whole. This whole "forgive the banks they have to make money too" non-sense ignores the fact the fed told these same banks they don't need any reserves in march of 2020. It's borderline criminal just like the idea of fractional reserve banking itself.
spaceman_2020 4y ago
You can’t wear a fireman’s uniform, walk into a theater, yell “fire” into a loudspeaker, and walk away. These were not ordinary people just moving money around. They had public trust, authority, and an outsized voice.

doesnt_know 4y ago

If a "handful" of external bad actors can completely destroy your financial institute then maybe it's time to consider how these systems are built.

corbulo 4y ago
>Enter CBDCs Your sentiment is common, particularly among central bankers. It feels kind of by design with the current international economic trends, but at the same time this seems like a pretty natural course of events when you have strong central banks. No matter what they do, it's always their fault because they have so much power. Solution? They actually don't have enough; now introducing CBDCs. I don't think there's an obvious stable alternative either. Tether is just waiting for the rug to get pulled on it.
dariusj18 4y ago
A handful of people can do immense damage to many things.
kennywinker 4y ago
I think there are probably thousands, maybe even tens of thousands of financial institutions around the world that could be destroyed if a handful plucked from some of the richest people in the world decides you're their enemy. To list of the financial institutions that could handle that would be the shorter list.
- chitowneats 4y ago
  You're probably correct. That's a problem.
  - friendzis 4y ago
    Whether that is a problem is a rather semantic issue. This is *property* of our credit based capitalistic system. Remove this and you are back at medieval levels of inequality, one way or another.

kragen 4y ago

if i saw a prominent investor tweeting 'More in the VC community need to speak out publicly to quell the panic about [my bank]' i would close my account there asap, because in a sense a tweet like that is stronger evidence of a bank run than a tweet in all capitals saying 'get your money out now' so i would say mark suster is one of the people who destroyed svb but mostly i think it's that they'd been insolvent since september and weren't going to become solvent again unless the fed dropped the prime rate again

yuliyp 4y ago
What's the basis for that insolvent since September claim? Looking at the end of 2022 financial data shows a bank that's been hurt by interest rates rising, but definitely not insolvent. Is the an alternative definition of insolvent you're using for that statement (beyond liabilities > assets)?
- kragen 4y ago
  as i understand it, they hadn't marked-to-market their hold-to-maturity securities (because that's why you classify securities as htm, so you don't have to mark them to market) but their market value had fallen sharply (because of interest rates rising), so that their liabilities did exceed the actual market value of their assets in that sense their solvency after about september was just an accounting fiction i'm not even an accountant though, so please take this with a grain of salt, and let me know if i'm wrong
  - lordnacho 4y ago
    I feel this is the crucial missing bit of information. The rules allow Wiley E Coyote to run over the cliff without looking down. When I was running a fund we'd always think about the current mark to market. People would get in trouble for marking their books away from the market. How is it that is allowable to pretend things are worth more than they are?
    - whatshisface 4y ago

wolverine876 4y ago

I don't see many discussing that at least some of the VCs who pushed people to withdraw from SVB, such as Thiel, seem oriented toward disrupting SV, society, and the banking system (the latter in favor of cryptocurrencies). Do those people care about burning down this bank, and starting a conflagration in their own town?

sdenton4 4y ago
It's a small leap from literal vampirism (blood transfusions for eternal youth) to figurative vampirism (burning down a bank to breathe some life back into your bad crypto investments). https://www.vanityfair.com/news/2016/08/peter-thiel-wants-to-inject-himself-with-young-peoples-blood https://www.vanityfair.com/news/2016/08/peter-thiel-wants-to...
- duud 4y ago
  Pretty sure he has done OK with crypto https://fortune.com/crypto/2023/01/18/peter-thiels-founders-fund-sold-crypto-just-before-markets-soured/ https://fortune.com/crypto/2023/01/18/peter-thiels-founders-...
paxys 4y ago
Several prominent VCs retweeted debunked claims about feds taking over First Republic Bank last evening, all in sync with each other. Their collective role in this panic (including possible backchannel collusion before and after everything went down) definitely needs to be investigated.
tomhoward 4y ago
I'm no great fan of Thiel, but it would not make financial sense for him to tank SVB (limited upside vs. the upside potential of his portfolio companies) and would likely in breach of several laws, most notably fiduciary duties as a director. It's a fun theory but doesn't hold up to more than a few seconds' thought.
- wolverine876 4y ago

swatcoder 4y ago

SVB was clearly vulnerable. It had a concentrated portfolio of venture industry customers many of whom were required to deposit exclusively with itself and were therefore well over the FDIC insurance limit, and its curiously structured asset portfolio had taken a major hit with the change in interest rates. They were not healthy. With a condition so marginal, of course there will be people insisting that they could have made it through if nobody flinched and people insisting that their collapse was just waiting for a strong gust of wind. The difference of opinion is why people were still both buying and selling their stock until it was delisted. That’s how markets work. But at this point, it already happened. The only reason to make a case like this (and those with opposing perspectives) is for influential people to jockey against each other, trying to smear people who they compete with for deals. We don’t need to participate in their soap opera. There’s plenty more practical to talk about now.

neom 4y ago

The run started earlier in the week, msg's to moving money out were going on long before Thursday. Who originally triggered it, no clue... but in a bank run, those who run first make it out the door. You're not exactly taking your fiduciary responsibility seriously by thinking "oh it's probably fine! I'm sure everyone else will stay level headed and keep their money in this bank that seems to be falling over" - The FDIC in theory should to step in prior to the run, take over the bank and prevent it, they did a good job of that in many instances in 2008, not sure what happened here. It's been mentioned quite a few times in these threads, but this 60 minutes clip about 2008 is really good: https://www.youtube.com/watch?v=TAE8i40A5uI https://www.youtube.com/watch?v=TAE8i40A5uI

paxys 4y ago
This was the second largest bank failure in US history. The feds stepped in mid day on Friday and sorted out the entire situation by Sunday evening. And your takeaway is that the government was too slow to react and are to blame for this?
- neom 4y ago
  I wasn't trying to be critical of the FDIC, they're obviously really excellent at their job and it's a testament to just how down pat they have their play book given they did managed to get so much sorted out by Sunday. My only point was they managed to prevent bank runs of failing banks in the past, they have deep insight into the banking system. I'm curious what happened this time. Maybe as you said, it's related to the size of the bank, I don't know.
- kragen 4y ago
  at this point they've promised to make svb's depositors whole, by levying a special assessment on all other banks if need be if they had done that 60 hours earlier svb would be fine
  - sokoloff 4y ago
    Would be fine (an excellent outcome) and under the original ownership and leadership (arguably an undesirable outcome). I say undesirable because if you believe they had financial troubles that cast genuine doubt on their ability to meet all withdrawals if they were spaced out over a reasonable period (say 24 months), then their management’s ability to run a bank is in question (and the owners who put that management in place should have that ownership at risk). I don’t know with certainty that the “could meet all withdrawals” test was failed, but it seems that many people who know more finance than I do do believe that.

fuoqi 4y ago

I think it's likely that certain actors were pulling the strings behind the scenes to trigger the run and make a hefty profit in the process. But they are nothing more than capitalistic hyenas, the root issue lies in irresponsible SVB management and reckless tightening by FED.

paxys 4y ago
No one was making a "hefty profit" off the bank run. It was a case of a panic selloff, nothing more.
- fuoqi 4y ago
  And of course no one has shorted the stocks. /s
  - paxys 4y ago
    I assume you know the answer? Or are just pulling facts out of nowhere?
    - fuoqi 4y ago
      This is why I wrote "likely", but as for facts, I know that SVB's CEO has sold his stocks on March 1 for $3M (in addition to a number of earlier sells). And according to Bloomberg short sellers made at least $500M in profits: https://www.bloomberg.com/news/articles/2023-03-10/shorts-make-500-million-on-svb-demise-collecting-won-t-be-easy https://www.bloomberg.com/news/articles/2023-03-10/shorts-ma... I absolutely will not be surprised if in the future we will learn that some enterprising individuals connected to the VC crowd have helped to trigger the run in the right time for them.
      - 7speter 4y ago
        Or the banks leadership saw the inevitable writing on the wall and knew someone was going to start a run.

sschueller 4y ago

Probably the same VCs that had interest in SVP taking higher risk before hand...

ars 4y ago

This is complete and utter nonsense. If SVB had enough assets to cover liabilities they could have borrowed as much money as they needed to cover and possible bank run. On top of that, by simply saying "we have enough assets, anyone who wants their deposits will get them", they would halt the bank run on the spot.

simonebrunozzi 4y ago

I keep hear about bad actors among VCs, but I don't hear about the colossal mistakes being made by SVB's executives and board of directors.

_8j50 4y ago

The conspiracy theorist in me thinks: given the bullshit layoffs and other fabricated trends such as consistent news stories about a tech crash and a big recession around the corner and given the history,ideology and portfolio of Mr. Thiel and other "bad actors" that precipitsted SVB's collapse, this all maybe part of an attempt to crash the tech sector of the US and blame it for a recession which will allow a re-alignment of power and influence both politically and financially (including things like tech salaries but also at a much bigger scale). In other words, this looks too much like a controlled explosion by a few powerful people in reaction to covid-bailouts and 2020/2022 elections in the US. Ask yourself who stands to benefit? Mr. Thiel and pals would surely benefit by giving their politicians ammo before elections next year and if they hedge their investments right their wealth will be minimally affected in a tech/US centric recession