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Why are we complaining about the VCs when this isn’t their fault? If you want people to blame, it’s Newt Gingrich and Bill Clinton for repealing the Glass Steag

Why are we complaining about the VCs when this isn’t their fault? If you want people to blame, it’s Newt Gingrich and Bill Clinton for repealing the Glass Steagall Act. The exuberance and recklessness of the 90s is now haunting us, just like with Reagan’s deficit spending. This not being mentioned in over a dozen articles points to the failure of the mainstream media yet again, and they wonder why no one trusts them anymore. Dodd Frank obviously is not good enough. If I were to guess, it was drastically weakened by lobbyists.

johnny22 4y ago
people are just pointing out what they see as hypocrisy, that's it. I don't follow these people on twitter so I have no idea if that's the case or not.
- chaostheory 4y ago
  Hypocrisy? Banks have already proven their recklessness time and time again. Glass Steagall was enacted to prevent yet another Great Depression. Unless all the VCs are fintech bros, I don’t see anything hypocritical. The focus should be why Dodd Frank was watered down and neutered including placing the blame where it belongs. Most of the VCs in this case were just customers.
dia80 4y ago
As I understand it SVB is insolvent primarily due to incompetence, the actual actions they have taken: take deposits and buying US treasury bonds are every day activities for a bank. There are no exotic derivatives or off balance sheet special purpose vehicles. It's hard to regulate that away.
- chaostheory 4y ago
  You can regulate the minimum reserves banks have.
  - twblalock 4y ago
    That's not enough. SVB had reserves. SVB had two other problems that would not be identified simply by looking at minimum amounts: duration risk and lack of liquidity.
    - chaostheory 4y ago
      From what I understood, they had the minimum reserves because SVB and other banks lobbied to have it lower.
- markdown 4y ago
  > SVB is insolvent primarily due to incompetence And yet nobody knows who the fools running the bank were. We don't have their names all over the news. It's as if SVB was run automatically, with no humans at the helm. The rich really get to destroy lives without consequence.
  - twblalock 4y ago
    The only people getting "destroyed" by this are shareholders in SVB.
  - kristjansson 4y ago
    You can go lookup up the officers of the company, if you want to burn them in effigy or something. What are you really excoriating them for though? Destroying some capital? No one’s lives have been destroyed behind this mess
  - thephyber 4y ago
    “Nobody knows” Oh really? How sure are you that the CEO’s name, stock trades, and employment history aren’t being repeated by every major news outlet? He’s already being painted as bogeyman, even before anyone has proven that he has done anything wrong.
- phamilton 4y ago
  The most compelling piece of the puzzle to me (an engineer) is the notion of stress testing as part of regulation. SVBs problems didn't appear overnight. With each rate hike they were a bit worse, but had they been forced to act earlier rather than later it would have helped a lot. Regular stress tests would have performed that function.
  - gingerrr 4y ago
    Too bad SVB's CEO lobbied so hard for those stress tests to no longer apply to them when Trump relaxed Dodd-Frank.
kasey_junk 4y ago
You don’t have to guess that Dodd Frank was weakened by lobbyists it was a mainstream media story all weekend. https://www.bloomberg.com/news/articles/2023-03-13/svb-failure-sparks-blame-game-over-trump-era-regulatory-rollback#xj4y7vzkg https://www.bloomberg.com/news/articles/2023-03-13/svb-failu... https://fortune.com/2023/03/11/silicon-valley-bank-svb-ceo-greg-becker-dodd-frank-trump-rollback-systemically-important-fdic/amp/ https://fortune.com/2023/03/11/silicon-valley-bank-svb-ceo-g... https://www.foxbusiness.com/politics/liberals-blame-trump-silicon-valley-bank-collapse-citing-2018-bipartisan-bill.amp https://www.foxbusiness.com/politics/liberals-blame-trump-si... And why are VC being blamed? Because apparently the lot of them can push their portfolio companies all into a single bank without doing basic business risk management like requiring fdic sweeps or audits of the svb balance sheets. They came off as clowns this weekend.
- Woodi 4y ago
  > You don’t have to guess that Dodd Frank was weakened by lobbyists I keep reading: "by lobbyists", "by Trump"... But googling less then 5 seconds shows "Congress cut burdens for smaller and mid-sized banks in 2018". So blame Google ? Or congresspeoples being more stupid then suicidal lobbyists ? I thinked elected officials should be kind of smart filter not a bucket for throwing money...
  - kasey_junk 4y ago
    https://www.senate.gov/legislative/LIS/roll_call_votes/vote1152/vote_115_2_00054.htm https://www.senate.gov/legislative/LIS/roll_call_votes/vote1... Mike Crapo Republican of ID was the sponsor in the senate. House roll call: https://clerk.house.gov/Votes/2018216 https://clerk.house.gov/Votes/2018216 Here is Trumps tweet on the subject. https://twitter.com/realDonaldTrump/status/999258232110579714 https://twitter.com/realDonaldTrump/status/99925823211057971... For context, this rollback is actually a compromise. Jeb Hensarling of Texas lead a contingent that wanted to roll back Dodd-Frank entirely but it didn’t have the votes in the Senate because it was split more evenly between parties. Dodd-Frank has been unpopular with conservatives since it passed. So what the lobbyists did was convince small town democrats to cross parties and vote for the bill saying it would strengthen small banks. And maybe it did! We haven’t seen a small bank failure since it passed and a few typically fail every year. But it also let bigger regional banks off the hook.
deleted 4y ago
[deleted]
leonidasv 4y ago
VCs fuelled the bank run in first place. Many founders received messages from VCs telling/ordering them to withdraw everything from SVB ASAP.
onlyrealcuzzo 4y ago
> If you want people to blame, it’s Newt Gingrich and Bill Clinton for repealing the Glass Steagall Act. Sure, and we should blame Hammurabi while we're at it. SVB was the case of a bank being stupid and not hedging against its risks. And why should they? Even if you massively mess up, there's a high probability the Fed does something to manipulate the market so you end up being just fine. As long as you aren't the worst 1-3 positioned banks - you'll be fine. The problem is the Fed and the incentives it creates by allowing banks to enjoy profits in good times but almost never suffer losses in times of incompetence.
- chaostheory 4y ago
  > Sure, and we should blame Hammurabi while we're at it. You're right about the Fed Reserve, but Clinton and Gingrich were in power just a little over 2 decades ago. We can now add Trump to the roster since he had a direct hand in weakening Dodd Frank
thephyber 4y ago
> Why are we complaining about the VCs when this isn’t their fault? I wouldn’t be so sure. VCs didn’t tell the bank how to invest their deposits, but they caused some of the conditions for the illiquidity and they instigated the bank run. Why were so many startups concentrated at SVB? VCs recc’d it to their investment companies. Why did SVB’s liquidity dry up last year? VC funding dried up last year when interest rates rose. How did the run on the bank accelerate so fast? VCs directed their investment companies to divest at the same time. Why was SVB the first bank to be affected by the interest rate rises? Only about 7% of SVB’s deposit dollars were FDIC insured, compared to 40%+ of other banks of comparable size. And previous answers.
yucky 4y ago
> If you want people to blame, it’s Newt Gingrich and Bill Clinton for repealing the Glass Steagall Act. You want to blame people that haven't been relevant in a quarter of a century? We've had a lot of people in Congress and several Presidents since then who deserve the blame for not updating legislation if that's the issue.

johnny22 4y ago

people are just pointing out what they see as hypocrisy, that's it. I don't follow these people on twitter so I have no idea if that's the case or not.

chaostheory 4y ago
Hypocrisy? Banks have already proven their recklessness time and time again. Glass Steagall was enacted to prevent yet another Great Depression. Unless all the VCs are fintech bros, I don’t see anything hypocritical. The focus should be why Dodd Frank was watered down and neutered including placing the blame where it belongs. Most of the VCs in this case were just customers.

dia80 4y ago

As I understand it SVB is insolvent primarily due to incompetence, the actual actions they have taken: take deposits and buying US treasury bonds are every day activities for a bank. There are no exotic derivatives or off balance sheet special purpose vehicles. It's hard to regulate that away.

chaostheory 4y ago
You can regulate the minimum reserves banks have.
- twblalock 4y ago
  That's not enough. SVB had reserves. SVB had two other problems that would not be identified simply by looking at minimum amounts: duration risk and lack of liquidity.
  - chaostheory 4y ago
    From what I understood, they had the minimum reserves because SVB and other banks lobbied to have it lower.
markdown 4y ago
> SVB is insolvent primarily due to incompetence And yet nobody knows who the fools running the bank were. We don't have their names all over the news. It's as if SVB was run automatically, with no humans at the helm. The rich really get to destroy lives without consequence.
- twblalock 4y ago
  The only people getting "destroyed" by this are shareholders in SVB.
- kristjansson 4y ago
  You can go lookup up the officers of the company, if you want to burn them in effigy or something. What are you really excoriating them for though? Destroying some capital? No one’s lives have been destroyed behind this mess
- thephyber 4y ago
  “Nobody knows” Oh really? How sure are you that the CEO’s name, stock trades, and employment history aren’t being repeated by every major news outlet? He’s already being painted as bogeyman, even before anyone has proven that he has done anything wrong.
phamilton 4y ago
The most compelling piece of the puzzle to me (an engineer) is the notion of stress testing as part of regulation. SVBs problems didn't appear overnight. With each rate hike they were a bit worse, but had they been forced to act earlier rather than later it would have helped a lot. Regular stress tests would have performed that function.
- gingerrr 4y ago
  Too bad SVB's CEO lobbied so hard for those stress tests to no longer apply to them when Trump relaxed Dodd-Frank.

kasey_junk 4y ago

You don’t have to guess that Dodd Frank was weakened by lobbyists it was a mainstream media story all weekend. https://www.bloomberg.com/news/articles/2023-03-13/svb-failure-sparks-blame-game-over-trump-era-regulatory-rollback#xj4y7vzkg https://www.bloomberg.com/news/articles/2023-03-13/svb-failu... https://fortune.com/2023/03/11/silicon-valley-bank-svb-ceo-greg-becker-dodd-frank-trump-rollback-systemically-important-fdic/amp/ https://fortune.com/2023/03/11/silicon-valley-bank-svb-ceo-g... https://www.foxbusiness.com/politics/liberals-blame-trump-silicon-valley-bank-collapse-citing-2018-bipartisan-bill.amp https://www.foxbusiness.com/politics/liberals-blame-trump-si... And why are VC being blamed? Because apparently the lot of them can push their portfolio companies all into a single bank without doing basic business risk management like requiring fdic sweeps or audits of the svb balance sheets. They came off as clowns this weekend.

Woodi 4y ago
> You don’t have to guess that Dodd Frank was weakened by lobbyists I keep reading: "by lobbyists", "by Trump"... But googling less then 5 seconds shows "Congress cut burdens for smaller and mid-sized banks in 2018". So blame Google ? Or congresspeoples being more stupid then suicidal lobbyists ? I thinked elected officials should be kind of smart filter not a bucket for throwing money...
- kasey_junk 4y ago
  https://www.senate.gov/legislative/LIS/roll_call_votes/vote1152/vote_115_2_00054.htm https://www.senate.gov/legislative/LIS/roll_call_votes/vote1... Mike Crapo Republican of ID was the sponsor in the senate. House roll call: https://clerk.house.gov/Votes/2018216 https://clerk.house.gov/Votes/2018216 Here is Trumps tweet on the subject. https://twitter.com/realDonaldTrump/status/999258232110579714 https://twitter.com/realDonaldTrump/status/99925823211057971... For context, this rollback is actually a compromise. Jeb Hensarling of Texas lead a contingent that wanted to roll back Dodd-Frank entirely but it didn’t have the votes in the Senate because it was split more evenly between parties. Dodd-Frank has been unpopular with conservatives since it passed. So what the lobbyists did was convince small town democrats to cross parties and vote for the bill saying it would strengthen small banks. And maybe it did! We haven’t seen a small bank failure since it passed and a few typically fail every year. But it also let bigger regional banks off the hook.

deleted 4y ago

[deleted]

leonidasv 4y ago

VCs fuelled the bank run in first place. Many founders received messages from VCs telling/ordering them to withdraw everything from SVB ASAP.

onlyrealcuzzo 4y ago

> If you want people to blame, it’s Newt Gingrich and Bill Clinton for repealing the Glass Steagall Act. Sure, and we should blame Hammurabi while we're at it. SVB was the case of a bank being stupid and not hedging against its risks. And why should they? Even if you massively mess up, there's a high probability the Fed does something to manipulate the market so you end up being just fine. As long as you aren't the worst 1-3 positioned banks - you'll be fine. The problem is the Fed and the incentives it creates by allowing banks to enjoy profits in good times but almost never suffer losses in times of incompetence.

chaostheory 4y ago
> Sure, and we should blame Hammurabi while we're at it. You're right about the Fed Reserve, but Clinton and Gingrich were in power just a little over 2 decades ago. We can now add Trump to the roster since he had a direct hand in weakening Dodd Frank

thephyber 4y ago

> Why are we complaining about the VCs when this isn’t their fault? I wouldn’t be so sure. VCs didn’t tell the bank how to invest their deposits, but they caused some of the conditions for the illiquidity and they instigated the bank run. Why were so many startups concentrated at SVB? VCs recc’d it to their investment companies. Why did SVB’s liquidity dry up last year? VC funding dried up last year when interest rates rose. How did the run on the bank accelerate so fast? VCs directed their investment companies to divest at the same time. Why was SVB the first bank to be affected by the interest rate rises? Only about 7% of SVB’s deposit dollars were FDIC insured, compared to 40%+ of other banks of comparable size. And previous answers.

yucky 4y ago

> If you want people to blame, it’s Newt Gingrich and Bill Clinton for repealing the Glass Steagall Act. You want to blame people that haven't been relevant in a quarter of a century? We've had a lot of people in Congress and several Presidents since then who deserve the blame for not updating legislation if that's the issue.