40 ms·
SVB collapse: Peter Thiel’s role scrutinized as spark of bank run
- marvel_boy 4y agoSome context: "According to @FastCompany, it was Republican billionaire Peter Thiel who started the #SVB withdrawal frenzy, with little basis. Then it snowballed." Meanwhile Sacks was crying for an "intervention". Pathetic.
- ElijahLynn 4y ago> That same day, Peter Thiel’s Founder Fund advised companies in its portfolio to pull money from the bank, and a host of other venture funds followed suit. https://www.fastcompany.com/90864027/why-svb-failed-silicon-valley-bank-collapse https://www.fastcompany.com/90864027/why-svb-failed-silicon-...
- nawgz 4y agoYes, the Fund which had had issues using the Bank recommended the Fund's Companies stop using the services of the struggling Bank. Seems to me like this is how business would be conducted, I'm not sure where I would look deeper to understand how this is nefarious?
- brightball 4y agoI read earlier today that Thiel and many other people actually took action after reading a reputable newsletter called The Diff.
- brightball 4y agoFound the reference. https://twitter.com/byrnehobart/status/1628779894183272452?s=46&t=alZCBpHQmrOiijvY9w8DwA https://twitter.com/byrnehobart/status/1628779894183272452?s...
- gooseus 4y ago[flagged]
- deleted 4y ago[deleted]
- heisenbit 4y agoThe washingtonexaminer is not known for its fair and balance reporting.
- UncleOxidant 4y agoThis is what's odd here. TWE is a conservative outlet that you'd think would align with Thiel. Possibly this reflects the fault lines that are developing on the right?
- deleted 4y ago[deleted]
- kurthr 4y agoHow about Reuters? https://www.reuters.com/article/us-usa-trump-dodd-frank/trump-signs-bill-easing-u-s-bank-rules-into-law-idUSKCN1IP2WX https://www.reuters.com/article/us-usa-trump-dodd-frank/trum...
- tdaltonc 4y agoWhich snowflake started the avalanche?
- deleted 4y ago[deleted]
- jacquesm 4y ago[flagged]
- wolverine876 4y ago'People of Earth, this is Starship Captain Elon Musk and as you can see in the video feed, I have set foot on Mars!' ... 'Hello?' 'Earth? Are you receiving this?'
- misssocrates 4y agoClassic scapegoating. The problem was the bank, not a fund that was acting responsibly. > On Thursday, as the bank was beginning to unravel, the firm started what’s known as a capital call. That’s a run-of-the-mill activity in the venture capital world, in which a VC firm asks its investors, or limited partners, to send it money in order to make investments in startups — the core function of most VC firms. It began by asking those backers to transfer the funds to accounts at SVB, as it has done for years, the person said. > But the firm learned that its limited partners were encountering issues using SVB services as they tried to transfer the funds — they weren’t immediately going through as expected, the person said. > Quickly, Founders Fund asked its investors to transfer the money to other banks instead. The fund acted to ensure that startup funding deals that were slated to close in the coming days were not delayed, the person said. https://www.bloomberg.com/news/articles/2023-03-11/thiel-s-founders-fund-withdrew-millions-from-silicon-valley-bank https://www.bloomberg.com/news/articles/2023-03-11/thiel-s-f...
- pcarolan 4y agoThe problem was the community (or lack of). This was *their* bank. These are the titans of Silicon Valley and they couldn't get together in a room and work it out. Instead everyone took to Twitter. To call it a prisoner's dilemma is a straw man because it implies they couldn't have picked up the phone and called each other. It was a failure to have a group of professionals with mutual interests work it out together. It was a failure that an adult didn't step up. There was a moment in which this could have been staved off, but the integrative fabric of the community wasn't strong enough to hold it together. I don't blame anyone individually, but I am taking the note from the postmortem to make sure I'm building closer ties to the people around me I depend on.
- hypothesis 4y ago> It was a failure to have a group of professionals with mutual interests work it out together. I saw plenty comments to the effect that maybe getting out first and leaving competition in the dust is also ok. For all we know someone could also have picked up a distressed bank, save feds stepping in forcefully.
- rafaelturk 4y agoBlame the messenger. Media is going crazy about this with no fundamentals at all. SVB was already doomed at least a year ago when they bought HTM assets.
- dhbanes 4y agoWhat do Peter Thiel's political party and contribution activity have to do with Silicon Valley Bank's solvency?
- coldtea 4y ago[flagged]
- hnrodey 4y agoWhat does it mean "he is on the wrong side of politics"?
- throitallaway 4y agoI took GP's comment as sarcasm.
- vanjajaja1 4y agoThiel is a libertarian and he has recently earned the label of "someone who talks to someone who is connected to someone who has the label Nazi". That makes him colloquially "on the wrong side of politics" https://www.splcenter.org/hatewatch/2021/03/18/white-nationalist-who-met-peter-thiel-admired-terroristic-literature https://www.splcenter.org/hatewatch/2021/03/18/white-nationa... https://www.nytimes.com/2021/09/21/books/review/the-contrarian-peter-thiel-max-chafkin.html https://www.nytimes.com/2021/09/21/books/review/the-contrari...
- deleted 4y ago[deleted]
- phlakaton 4y ago...You're missing a /s, right?
- coldtea 4y agoyes
- 4y ago
- kmac_ 4y agoBlaming somebody for saving his money?
- SaintGhurka 4y agoThis ignores the voices crying in the wilderness for months about dangers at the bank. "The risk for $SIVB is that deposit outflows accelerate at such a pace that it is forced to either raise equity capital and/or sell down its HTM securities portfolio, thus realizing substantial losses. You can bet that $SIVB is praying for a Fed pivot!" https://twitter.com/RagingVentures/status/1615826088038473733 https://twitter.com/RagingVentures/status/161582608803847373...
- Etheryte 4y agoYou can pick any topic, any industry or any company and you'll find someone on the internet calling the doomsday clock on it. Identifying who was right after the fact is not useful, just like how saying the lottery numbers after they've already been broadcast is not useful.
- sonotathrowaway 4y agoThis makes no sense at all. You’re saying that we should ignore detailed analysis that correctly diagnoses issues - for no reason at all?
- adventured 4y agoThey're claiming quite broadly that reality is unknowable, ultimately. That's where you end up if you follow their premise. Nobody can know anything with certainty, in other words.
- jeromegv 4y ago> Identifying who was right after the fact is not useful Why not? It shows who was actually looking at the numbers and who was not buying on the popular narrative. This is a public company, now looking back, there are a lot of warning signs. Turns out that even a lot of professionals DID know and told us about those warning signs. Nothing to do with being lucky and no comparison whatsoever with the lottery numbers, they based their assessment on public information available to all of us, not randomly guessing that one day SVB might fail.
- jsnk 4y agoThere are probably thousands of VCs and even more startups who had accounts with SVB. You are telling me, Peter Thiel saw this before anyone else did? This indictment only shows how good Peter Thiel is at his job.
- ratsmack 4y agoEveryone saw the same quarterly report saying that they (SVB) took a $1.8b hit and needed to raise capital via a stock offering. Peter Thiel decided to move his funds elsewhere. Does that make him the bad guy?
- eli 4y agoPassive voice in a headline is always a red flag. His role "was scrutinized" by..."journalists and critics." That's true, but it's not news.
- s1gnp0st 4y agoYelling fire when there is in fact a fire is not a crime. What is this?
- gnicholas 4y agoWhat about forcefully yelling fire inches away from a minuscule fire, thus literally fanning the flames and putting it on the path to becoming a bonfire?
- JamesBarney 4y agoBank runs are self-fulfilling prophecies. So it's not a crime, but it very possibly could be the cause.
- bequanna 4y agoSVB was screwed. They bought at the tippy-top of the bond market and didn’t bother to hedge interest rate risk. The unreported losses were huge. It was just a matter of time before they bled deposits, were forced to sell and mark to market. Eventually people would notice and a panic bank run would happen. This actually could have occurred as early as Jan when others started to discuss the problems and predicted the bank failure.
- onlyrealcuzzo 4y agoThis seems more like blowing on a tiny ember and yelling fire at the same time.
- throitallaway 4y agoJust like Zhao blew on a tiny ember at FTX.
- onlyrealcuzzo 4y agoNo. Nice try. Cute. But not at all. 1) FTX held assets, not deposits that are understood to be fractional reserve. 2) FTX used the majority of those assets to buy bullshit. 3) The bullshit dropped in value by 80% (before Zhao yelled fire). 4) Everyone who gave FTX any money lost almost everything, on top of the equity investors getting wiped out completely. 5) SVB had something like 20% of assets held in long-term treasuries that "only" lost 25% of value - in a world where it's understood this is how things work and there's regulations in place and, even still, no depositor is losing money...
- analog31 4y agoAsk HN: Is there an easy way to know a bank's level of insured vs un-insured deposits?
- MilnerRoute 4y agoIt's in their bank filings, so reporters can and do dig it up. For SVB, it was 96% uninsured https://www.semafor.com/article/03/11/2023/hedge-funds-offer-to-buy-deposits-stuck-at-silicon-valley-bank https://www.semafor.com/article/03/11/2023/hedge-funds-offer...
- theklub 4y agoTo add to that, does it matter? The government is backing all deposits so does that mean bank runs are a thing of the past now?
- cjhanks 4y agoThe bank was nearly fully capitalized with low risk investments. Everyone would have gotten their money back anyways, it would have just taken 5-10 years. Imagine what would happen if startups could not access their capital? By the time funds were available for withdrawal, the businesses would be dead. The regulators then have to track every funder to every dollar to return money. It would take a decade for this to happen.
- lxgr 4y agoGetting your money back in 5 years at current rates means getting back 80 cents on the dollar.
- rmilk 4y agoAt the same time, these startups all had a CFO whose job was to manage that financial risk. What if they had a late payment from customers or a supply chain delay, or were simply locked out of their accounts due to a cyber event or unavailability of a key employee? Did they have any contingencies like line of credit or instruments outside SVB? They took other risk reductions like insuring their office space, etc. In addition every offering and statement from SVB shows >$250k is not insured but they treated it like nothing bad could ever happen there. Even your average retiree knows their life savings in a bank is only covered to FDIC limits. This risk for businesses with cash is not new. Financial services like sweep accounts, negotiable instruments, etc. existed for decades. Is it just that SV entrepreneurs are too smart or not smart enough to manage these risks? Or was it the VC firms that forced their hand by requiring them to bank at SVB (noted as a VC funding requirement by others on HN). The companies can sell their invoices or ownership of their deposits on the market, or use it as collateral for recovery. The CFOs job was to manage financial risk. They failed at this and their companies are at risk because of it. The FDIC takeover means they have unfettered access to at least $250K as of today, so it’s not quite as bad. And the FDIC will unwind SVB’s current assets through their insurance trust or by finding a buyer. The SVB stock and bond holders will lose, the depositors will lose much less. But it makes you wonder how long the C-suite knew this liquidity issue given they had no risk manager for most of last year (also noted in other HN articles).
- chungleong 4y agoBlaming one man for the rottened culture of an entire industry. The people who made the decision to withdraw money from SVB are supposed to be sophisticated. They're certainly well compensated. Yet they acted like bunch of illiterate peasants. The whole episode really demonstrated the disappearance of critical thinking from the American tech industry. This primitive monkey-see monkey-do mindset has come to dominate just about every aspect of it.
- bink 4y agoIsn't that kinda like blaming the crowd when someone yells "fire!" in a crowded theater? I don't know how much influence Thiel had in this particular failure, but I don't think it's appropriate to completely absolve those that triggered the start of the bank run from blame.
- sebzim4500 4y agoEspecially since in the case the theatre was on fire, at least a little bit.
- ahtihn 4y ago> Yet they acted like bunch of illiterate peasants. Anyone who withdrew their money was acting rationally. There is 0 upside to leaving your money in a bank that is at risk of experiencing a bank run.
- xvector 4y agoAren't most banks at risk of experiencing a bank run?
- slt2021 4y agoif it was your money at SVB on the line - with two or three commas - you would think differently. Or to put it differently - if you were the person to manage money with couple commas, you would have done the same. It is classic prisoner's dilemma. The more there are participants - the less likelihood that everyone will act in a coordinated manner for common benefit. Two persons maybe can call each other and agree, but hundreds/thousands? unlikely
- AYBABTME 4y agoOne of the first quotes of this article points to Dave Troy's "research" which as far as I can tell is lizard-theory without the lizards. A catchy tweet concludes it in https://twitter.com/davetroy/status/1634871362744651776?s=20 https://twitter.com/davetroy/status/1634871362744651776?s=20 but the thread is some sort of "don't read what they say, their actual secret motive is XYZ and to overthrow the government!".
- dools 4y agoDave Troy is very well researched, and is totally on the money in almost everything he says. Lumping him in with right wing conspiracy theorists is a mistake.
- afarrell 4y agoIt is possible for a normally-reasonable person to have a moment of panic and say something foolish.
- dools 4y agoEven if that were what was happening here, would you describe "saying something foolish but being otherwise reasonable" as "lizard theory without the lizards"? If you thought someone was generally well researched, but was incorrect in one instance, would you call their research "research"?
- throwaway81523 4y agoI leave it to others to judge the validity, but I found Brad DeLong's epithet for Thiel amusing (https://braddelong.substack.com/p/saturday-night-thoughts-on-the-need https://braddelong.substack.com/p/saturday-night-thoughts-on...): > Even so, SVB knew it had gotten itself into trouble—that it had put too large a share of its assets into long-term Treasuries that it intended to hold-to-maturity, and that while it was notionally hedged against interest-rate duration risk by this hold-to-maturity strategy, that strategy put those assets outside the circle of those available to meet unexpected withdrawals, and so caused liquidity problems. SVB was, I am told by sources who really should know, because they talked to people talking to people doing the deal, that SVB came within twenty minutes of getting enough additional cash to fix likely problems. > Then chaos monkey Peter Thiel showed up: advising companies to pull their money out of SVB.
- bigtex88 4y agoInsightful writing but that man needs an editor in a bad way.
- mhb 4y ago> notionally hedged against interest-rate duration risk WTF does that mean?
- grumple 4y agoIt means that your bonds having a low interest rate is only a problem if you plan on selling the bonds instead of holding them until maturity.
- jojobas 4y agoNo? If you hold a 1.5% bond to maturity when the cash rate is 4.5% and projected to rise further you lose money in a very literal sense. Also they had to sell some at loss to just keep going before any gossip of trouble.
- SoftTalker 4y ago
- a_c 4y agoI wonder if Peter had shorted SVB
- dxhdr 4y agoI wonder if the SVB CEO sold shares 2 weeks ago
- adventured 4y agoHopefully.
- boc 4y agoIt's objectively hilarious that the top VCs put on their "banking expert" hats and misdiagnosed SVB's public statements so badly that they created a run on their own bank. Let's be honest, very few of the VCs calling their founders telling them to pull their accounts had any clue about what "held-to-maturity" vs "available for sell" meant in the context of SVB's investment portfolio, or had any real knowledge about what the actual issue was within the bank. They were just hearing rumors/reading tweets that the bank was going to collapse and taking it at face value without any diligence. They made the calls, retweeted the tweets, and then read the explainers on substack the following day to figure out what was actually happening. It was pure herd panic behavior and should make a great case study some day.
- Aperocky 4y ago> misdiagnosed SVB's public statements What's misdiagnosed? That SVB is holding half its assets in 1.5% long term HTM bonds in a 4.5% interest rate environment?
- deleted 4y ago[deleted]
- claytonjy 4y agoThat should only be a concern for investors, not depositors. The HTM lockup is only a concern for depositors if they all start trying to withdraw at once...which is exactly what happened due to the VC-fueled panic.
- vkou 4y agoThe depositors were all trying to withdraw all at once, because the depositors were startups that are spending money, but aren't getting any new funding injections or revenue. That normal behavior triggered the insolvency.
- KaiserPro 4y ago> That normal behavior triggered the insolvency. Its not normal to have 42 billion withdraw in a day, net. That's 20% of total assets. If your hypothesis is correct, then all of the companies using SVB would have spend all their money in just over a business week.
- chernevik 4y agoIt was always going to be someone who noticed that SVB's idiotic investments had put a hole in its balance sheets, and that it was largely funded with hot money that would depart when that hole was noticed. Blaming Thiel for being that someone is just saying he was more alert than anyone else.
- _dain_ 4y agoso let's get this straight: VCs/startups are bad because they didn't scrutinize the bank's finances before putting money in it (how many businesses actually do this for their bank?). and they were somehow supposed to know that the bank was dodgy months or years before it actually became dodgy. and they're also bad because one VC looked into the bank's finances, noticed a real problem, told people about it, and those people did the rational thing and pulled their money out.
- rmilk 4y agoManaging that risk is what the customer CFOs were supposed to do. Your average retiree or semi wealthy person knows the FDIC limits and manages their portfolio around them. This is not a new risk for businesses in any industry and financial services exist to help manage that risk for companies with cash on hand. I would instead ask why the SVB customers didn’t manage this risk. Others on HN said that banking with SVB was a requirement placed by many VC companies, which does tie the customer’s hands.
- _dain_ 4y agoAre you really expected to spread out all your day-to-day business cash around tons of different accounts just to stay under the FDIC limit? How is that meant to work, logistically? Let's say you're a company with like 50 well-paid devs, they make 200 grand each on average, so monthly payroll for them is 50 x 200,000 / 12 = ~830,000, so you'd need accounts with four different banks to stay under the FDIC limit just to manage payroll for engineering. What about everything else?
- twblalock 4y agoWhat would you do if you were a board member of multiple companies and you found out their bank was financially unsound and couldn't do normal bank stuff? Would you say nothing and hope nobody else notices? Good luck with that. That just means your companies get screwed. What if you get away with being silent, nobody else noticed, and the bank gets bigger and fails even more spectacularly later in the year? Wouldn't that be worse? Wouldn't you then be criticized for not speaking up when you knew about the problem? Would you try to band together with other investors to save the bank? Worth a try, but that means you have to tell other people there is a problem and trust that not a single one of them would start a bank run. A lot of people have an axe to grind against Peter Thiel but in this case he did the only rational thing. If he had done anything else he would have been blamed too, because some people just don't like him. I haven't seen anyone demonstrate a reasonable alternative for how a rational person would act, knowing what he knew at the time.
- schmichael 4y ago> What would you do if you were a board member of multiple companies and you found out their bank was financially unsound and couldn't do normal bank stuff? Was there any evidence that they couldn't do "normal bank stuff"? AFAIK SVB still had ample avenues to raise liquidity before the bank run Thiel orchestrated. SVB's stock would have suffered immensely, but their operations and deposits would have been fine as far as I can tell.
- twblalock 4y ago> Was there any evidence that they couldn't do "normal bank stuff"? His fund had problems transferring money and that's why he noticed something was wrong. Someone else would have had similar problems, and would have noticed, even if Thiel didn't act.
- kelnos 4y agoDo you have more information on this? From what I understand, SVB had more than enough cash (yes, cash) on hand to handle any money transfer Thiel's fund could have thrown at it.
- frellus 4y agoWhen a building is on fire, no one is going to (nor should they) blame you for trying to get to the exit. Did Peter Thiel cause the bank to fail? No, their mis-management did. Did Peter Thiel try to safeguard his companies' bank positions? Yes, so they can make payroll and operate. Who are these people to throw blame, when the building's still smoldering ashes and the smoke hasn't cleared. Maybe he called the CEO and got bad messages. Maybe no one talked to him, so he said, "F it, pull out". No one yet knows all the factors which caused the failure, but let's start with the company itself, not its customers.
- twblalock 4y ago> Did Peter Thiel try to safeguard his companies' bank positions? Yes, so they can make payroll and operate. Seriously, if I was a CEO trying to make payroll right now and I found out a board member knew my bank was screwed and didn't try to help me, I'd be working on a lawsuit. Thiel did his duty as a board member and investor. He should not be blamed for acting rationally. The bank should be blamed for making a run the only rational choice.
- motohagiography 4y agoTheil will probably appreciate that his crime was that he was the first to stop clapping. This narrative was taking form over the weekend, and it's intended to edge him out of funding or participating in the '24 election. It doesn't need to be true, it just has to stick.
- jalapenos 4y agoI like to imagine it going down like Margin Call, with Thiel at the head of the table "this is, ur ur, this is, ur ur, it". Maybe with an "overdetermined" thrown in there. If anyone hasn't seen Margin Call, give it a watch. Fantastic movie.
- taftster 4y agoI really doubt that Mr. Thiel's role was intentional. He was probably just being a good steward of his portfolio's accounts and his spidy sense was going off. I don't think it was like, "Hey, I know what, I've seen A Wonderful Life. Let's see if we can do a modern day version of a bank run. Everyone, get your money out of there." His actions might have been the spark. But the tinder was there and it would have sparked by any other person (of similar influence) taking notice. The bank is at fault for this, not any depositor.
- jongjong 4y agoHow much can one blame Peter Thiel when he turned out to be right? The economy would be a lot more robust with this kind of repeated stress testing. I don't buy all the narratives about "SVB was solvent, just had a timing issue" what kind of argument is that? Timing is everything and time is money. That said, I agree that it makes sense to investigate everyone's involvement to uncover any ulterior motives or shady dealings.
- paulddraper 4y agoYelling fire in a crowded theater is in fact the right thing, if the theater is on fire.
- Dowwie 4y agoYes it's all his fault for the bank refusing to hedge interest rate risk. Damn that Peter Thiel.
- Melatonic 4y agoWarrens latest article about the 2018 rollbacks and how that allowed banks to prioritise short term profits is pretty good - it outlines how we tried to pass laws to avoid another 2008 crisis and then some of these were rolled back. We need to undo that rollback.
- deleted 4y ago[deleted]
- ksec 4y ago5 days too late to the thread. But it is refreshing to see Sanity still prevails on HN. No more politics and ideals over rational. As they were during the past 5 years. Top 4 upvoted comments were defending Peter Thiel.