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SVB was never "unsound." They had plenty of assets to cover all their deposits and plenty of cash to cover normal withdrawals. If not for people like Peter call

SVB was never "unsound." They had plenty of assets to cover all their deposits and plenty of cash to cover normal withdrawals. If not for people like Peter calling for a bank run, SVB would still be in business today.

twblalock 4y ago
Nope, someone else would have started a run.
- cjtrowbridge 4y ago
  By that logic, all banks are unsound. It's not turtles all the way down, and pretending the guilty party is blameless because "someone else would have done it" is nonsense.
kelnos 4y ago
> They had plenty of assets to cover all their deposits No, they did not. If they did, then they could have immediately sold all their assets during this bank run, and there would have been no need for the FDIC to step in. If they could not do that, then, by definition, they did not have enough assets to cover all deposits.
- caddemon 4y ago
  I mostly agree, but there are cases where someone can have enough assets but it's such a large amount of something that word gets out they have to offload it, and then good luck selling it all at anything but a big discount, then not too long after price does rebound. That is obviously not a situation that one gets into without making some mistakes, but I think this is distinctly worse, though some are trying to act like it's the same. The actual fair market value of what they held, even removing SVB from the situation entirely, was down a lot. And it was down for very logical and predictable reasons, and will almost certainly never rebound.
- c23gooey 4y ago
  They had the assets. Just that a good portion of them aren't available to be sold immediately
  - searealist 4y ago
    People need to stop repeating this, they had assets to cover most but not all deposits. They used accounting tricks to pretend they had more than they did.
  - MrMan 4y ago
    This is False. They had the assets, but they declined in value until they were worth less than liabilities. Insolvency.
- rmccue 4y ago
  This is conflating liquidity with solvency, the parent appears to be arguing that SVB was solvent (which seems to be true) albeit not liquid. If I owe you $10, and all I own is a house, and you ask for your $10 back, I may not be able to pay you even though the value of my assets way outweighs the debt owed. Selling a house isn’t instant.
  - za3faran 4y ago
    Arguably the only purpose of a bank is that you have access to your money at any time you wish, if they can't honor that, they're not doing a good job to say the least.
    - slg 4y ago
      That shows a lack of understanding of the true nature of banks because most banks can't withstand a barrage of everyone asking for their money at once. The underlying criticism of Thiel here is that he saw a liquidity problem and made it a solvency problem by encouraging everyone to pull their money immediately. If he didn't do that, there were potentially solutions that could have fixed the bank's liquidity problem without jeopardizing their solvency.
      - searealist 4y ago
        They were already insolvent, the bank run did not cause that. They used accounting tricks to pretend they had more assets than they really did.
        panarky 4y ago
        I believe the point is the utter craven hypocrisy of ultrarich who savagely denounce government programs that help poor people and ordinary workers, who destroy and tear shit down for their own private profit, and then have the fucking audacity to scream and cry for other people to pay for their own investing mistakes. David O. Sacks I'm looking at you.
- cjtrowbridge 4y ago
  That's literally what they did that triggered the FDIC to take over. Assets are not always liquid though. It takes time to prematurely sell 46 billion of bonds, and it comes with a huge cost.
- mtrpcic 4y ago
  The value of their assets was enough to cover deposits. The liquidity of those assets was not.
  - MrMan 4y ago
    False
caddemon 4y ago
Today maybe, but a year or two from now? They had 40% of deposits locked in for years at a low interest rate. They wouldn't have been able to offer depositors a competitive interest rate over the next couple years without bleeding money. So they'd have to hope that few would withdraw in spite of an objectively inferior service (which in itself would start raising alarm bells at some point). Maybe a more gradual stream of withdrawals would've allowed them to make up money elsewhere to stay alive, but they demonstrated such horrible incompetence with this entire situation that I don't see that ending well.
- twblalock 4y ago
  Plus this kind of approach requires everyone to coordinate and not freak out, which is not gonna happen.
dnw 4y ago
This tweet thread from January https://twitter.com/ragingventures/status/1615826088038473733 https://twitter.com/ragingventures/status/161582608803847373... has some details.
paulddraper 4y ago
Then why didn't they borrow it? People keep screaming "illiquidity not insolvency" as if bankers of all people didn't know what a loan is. The answer, of course, is that no one was willing to loan them money due to solvency issues
- cjtrowbridge 4y ago
  Because that's not how banking works. They aren't allowed to get a loan to cover liquidity obligations. They have to sell assets which takes time. If Peter Thiel starts screaming for everyone to withdraw their money, the bank can't keep up, and the FDIC steps in.
smsm42 4y ago
Thiel did not call for a bank run. If he yelled fire, that's because there was fire. For some people, that could be seen as a public service. But of course, since Thiel is hated by the Blue Tribe, he must be painted as evil mastermind killing banks for fun.
- cjtrowbridge 4y ago
  That's the same thing.

twblalock 4y ago

Nope, someone else would have started a run.

cjtrowbridge 4y ago
By that logic, all banks are unsound. It's not turtles all the way down, and pretending the guilty party is blameless because "someone else would have done it" is nonsense.

kelnos 4y ago

> They had plenty of assets to cover all their deposits No, they did not. If they did, then they could have immediately sold all their assets during this bank run, and there would have been no need for the FDIC to step in. If they could not do that, then, by definition, they did not have enough assets to cover all deposits.

caddemon 4y ago
I mostly agree, but there are cases where someone can have enough assets but it's such a large amount of something that word gets out they have to offload it, and then good luck selling it all at anything but a big discount, then not too long after price does rebound. That is obviously not a situation that one gets into without making some mistakes, but I think this is distinctly worse, though some are trying to act like it's the same. The actual fair market value of what they held, even removing SVB from the situation entirely, was down a lot. And it was down for very logical and predictable reasons, and will almost certainly never rebound.
c23gooey 4y ago
They had the assets. Just that a good portion of them aren't available to be sold immediately
- searealist 4y ago
  People need to stop repeating this, they had assets to cover most but not all deposits. They used accounting tricks to pretend they had more than they did.
- MrMan 4y ago
  This is False. They had the assets, but they declined in value until they were worth less than liabilities. Insolvency.
rmccue 4y ago
This is conflating liquidity with solvency, the parent appears to be arguing that SVB was solvent (which seems to be true) albeit not liquid. If I owe you $10, and all I own is a house, and you ask for your $10 back, I may not be able to pay you even though the value of my assets way outweighs the debt owed. Selling a house isn’t instant.
- za3faran 4y ago
  Arguably the only purpose of a bank is that you have access to your money at any time you wish, if they can't honor that, they're not doing a good job to say the least.
  - slg 4y ago
    That shows a lack of understanding of the true nature of banks because most banks can't withstand a barrage of everyone asking for their money at once. The underlying criticism of Thiel here is that he saw a liquidity problem and made it a solvency problem by encouraging everyone to pull their money immediately. If he didn't do that, there were potentially solutions that could have fixed the bank's liquidity problem without jeopardizing their solvency.
    - searealist 4y ago
      They were already insolvent, the bank run did not cause that. They used accounting tricks to pretend they had more assets than they really did.
      - panarky 4y ago
        I believe the point is the utter craven hypocrisy of ultrarich who savagely denounce government programs that help poor people and ordinary workers, who destroy and tear shit down for their own private profit, and then have the fucking audacity to scream and cry for other people to pay for their own investing mistakes. David O. Sacks I'm looking at you.
cjtrowbridge 4y ago
That's literally what they did that triggered the FDIC to take over. Assets are not always liquid though. It takes time to prematurely sell 46 billion of bonds, and it comes with a huge cost.
mtrpcic 4y ago
The value of their assets was enough to cover deposits. The liquidity of those assets was not.
- MrMan 4y ago
  False

caddemon 4y ago

Today maybe, but a year or two from now? They had 40% of deposits locked in for years at a low interest rate. They wouldn't have been able to offer depositors a competitive interest rate over the next couple years without bleeding money. So they'd have to hope that few would withdraw in spite of an objectively inferior service (which in itself would start raising alarm bells at some point). Maybe a more gradual stream of withdrawals would've allowed them to make up money elsewhere to stay alive, but they demonstrated such horrible incompetence with this entire situation that I don't see that ending well.

twblalock 4y ago
Plus this kind of approach requires everyone to coordinate and not freak out, which is not gonna happen.

dnw 4y ago

This tweet thread from January https://twitter.com/ragingventures/status/1615826088038473733 https://twitter.com/ragingventures/status/161582608803847373... has some details.

paulddraper 4y ago

Then why didn't they borrow it? People keep screaming "illiquidity not insolvency" as if bankers of all people didn't know what a loan is. The answer, of course, is that no one was willing to loan them money due to solvency issues

cjtrowbridge 4y ago
Because that's not how banking works. They aren't allowed to get a loan to cover liquidity obligations. They have to sell assets which takes time. If Peter Thiel starts screaming for everyone to withdraw their money, the bank can't keep up, and the FDIC steps in.

smsm42 4y ago

Thiel did not call for a bank run. If he yelled fire, that's because there was fire. For some people, that could be seen as a public service. But of course, since Thiel is hated by the Blue Tribe, he must be painted as evil mastermind killing banks for fun.

cjtrowbridge 4y ago
That's the same thing.