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The bank was not bailed out. The depositors were. Investors may lose almost everything. The management is sacked. The bank is dead, not bailed out.

by MBCook 4y ago

metadat 4y ago
SVB management cashed out millions in stock sales in the preceding months and days before the implosion, which is the closest thing you can get to a soft landing in this circumstance. It's difficult to believe they top executives didn't know something was severely wrong in 2022 when they setup the sales.
- MBCook 4y ago
  I’m very curious to see what happens to them. Two agencies announced investigations into the collapse today (initial fact finding). If they knew this was coming, and that seems very likely, I wonder if there’s a law that could be used to claw that back/punish them.
- brogrammernot 4y ago
  It’s actually not difficult to believe at all in my opinion. They had 105b plans prepared, filed and approved by outside entities. You can see in the SEC documents and company filings all of the sales were pursuant to those plans, which are also commonly done to cover tax obligations throughout the year due to the vesting of stock. KPMG passed SVB’s audit and several top financial firms had SVB’s default risk at around 2.5%. The executives didn’t expect a “run on the bank” and those longer-term assets had been underwater for awhile & the financial market knew but expected they would be fine when they came to maturity. They booked a loss to shift funds into shorter-term securities with higher yields to hedge and hindsight is 20/20 but they should’ve hedged sooner. Overall, I don’t believe there was anything nefarious here & if we dislike the 105b rules, as many do, that should be the outcome of this review - that they need to change.
whydoyoucare 4y ago
Any rescue beyond the $250K insured limit is basically tempting other banks to take similar risks in the future. It is a bad omen for the American financial machinery. And I sincerely hope I am wrong on this count, and this is just an outlier...
- MBCook 4y ago
  Hopefully sacking everyone is a good deterrent. That said, the vast majority of people don’t need to worry about the $250k limit. But companies do. Should there be a separate limit for business accounts? Or is every business just supposed to juggle dozens+ of accounts if they’re big enough to stay safe? Roku had $500 million in SVB. That would need 2000 accounts. But even small local business may have to deal with $1-2 million just in savings and payroll and such right?
  - deleted 4y ago
    [deleted]
  - krupan 4y ago
    Even just two or three accounts at different banks would be more prudent and would have prevented the run on SVB that ultimately killed it.
    - MBCook 4y ago
      I think a lot of companies did (Roku for example did). But when basically the entire sector you focus on decides to run, you’re in deep trouble. They just weren’t diversified enough.
    - gretch 4y ago
      But why is this a desired end state of the world? Does anyone think to themselves, gee, I'm glad Roku, the company that made my TV, is financially prudent enough to open 3 separate bank accounts. TV companies should compete on making the best TV. Not playing some sort of weird financial hedging game on the risk of a bank run.
gnulinux 4y ago
Bailing out depositors is still bail out. FDIC insures $250k per depositor. Any amount given to depositors above that is a bail out.

The bank was not bailed out. The depositors were. Investors may lose almost everything. The management is sacked. The bank is dead, not bailed out.

by MBCook 4y ago

The bank was not bailed out. The depositors were. Investors may lose almost everything. The management is sacked. The bank is dead, not bailed out.

metadat 4y ago

SVB management cashed out millions in stock sales in the preceding months and days before the implosion, which is the closest thing you can get to a soft landing in this circumstance. It's difficult to believe they top executives didn't know something was severely wrong in 2022 when they setup the sales.

MBCook 4y ago
I’m very curious to see what happens to them. Two agencies announced investigations into the collapse today (initial fact finding). If they knew this was coming, and that seems very likely, I wonder if there’s a law that could be used to claw that back/punish them.
brogrammernot 4y ago
It’s actually not difficult to believe at all in my opinion. They had 105b plans prepared, filed and approved by outside entities. You can see in the SEC documents and company filings all of the sales were pursuant to those plans, which are also commonly done to cover tax obligations throughout the year due to the vesting of stock. KPMG passed SVB’s audit and several top financial firms had SVB’s default risk at around 2.5%. The executives didn’t expect a “run on the bank” and those longer-term assets had been underwater for awhile & the financial market knew but expected they would be fine when they came to maturity. They booked a loss to shift funds into shorter-term securities with higher yields to hedge and hindsight is 20/20 but they should’ve hedged sooner. Overall, I don’t believe there was anything nefarious here & if we dislike the 105b rules, as many do, that should be the outcome of this review - that they need to change.

whydoyoucare 4y ago

Any rescue beyond the $250K insured limit is basically tempting other banks to take similar risks in the future. It is a bad omen for the American financial machinery. And I sincerely hope I am wrong on this count, and this is just an outlier...

MBCook 4y ago
Hopefully sacking everyone is a good deterrent. That said, the vast majority of people don’t need to worry about the $250k limit. But companies do. Should there be a separate limit for business accounts? Or is every business just supposed to juggle dozens+ of accounts if they’re big enough to stay safe? Roku had $500 million in SVB. That would need 2000 accounts. But even small local business may have to deal with $1-2 million just in savings and payroll and such right?
- deleted 4y ago
  [deleted]
- krupan 4y ago
  Even just two or three accounts at different banks would be more prudent and would have prevented the run on SVB that ultimately killed it.
  - MBCook 4y ago
    I think a lot of companies did (Roku for example did). But when basically the entire sector you focus on decides to run, you’re in deep trouble. They just weren’t diversified enough.
  - gretch 4y ago
    But why is this a desired end state of the world? Does anyone think to themselves, gee, I'm glad Roku, the company that made my TV, is financially prudent enough to open 3 separate bank accounts. TV companies should compete on making the best TV. Not playing some sort of weird financial hedging game on the risk of a bank run.

gnulinux 4y ago

Bailing out depositors is still bail out. FDIC insures $250k per depositor. Any amount given to depositors above that is a bail out.