5 ms·

I’ve had plenty of debates about SVB where a key argument is “the bank’s depositors should have known better!” This kid is now a billionaire(?). I think this i

I’ve had plenty of debates about SVB where a key argument is “the bank’s depositors should have known better!” This kid is now a billionaire(?). I think this is a good example of the financial acumen of a typical SVB customer. I don’t say this to promote or defend a bail out. To me it says that if we are regulating the system to protect deposits, we should come up with rules that actually work. For better or for worse, a bank is a bank is a bank is how most people see it.

quickthrower2 4y ago
Yes and how does one do due diligence on a bank anyway?
- ghiculescu 4y ago
  That is possible. Here’s an example: https://twitter.com/RagingVentures/status/1615826088038473733 https://twitter.com/RagingVentures/status/161582608803847373... But I think it’s beyond the ability of many.
  - vkou 4y ago
    It's possible, just like it's possible to do a detailed food safety inspection on every single thing you bring home from the grocery, but why would anyone want to live in a buyer-beware world where that is expected?
zamnos 4y ago
Yes, back in 2021. > Hashimoto, the original CEO, is a new billionaire, worth $1.2 billion based on the IPO price. https://www.forbes.com/sites/kenrickcai/2021/12/09/hashicorp-shares-rise-in-latest-open-source-ipo-minting-new-billionaire/ https://www.forbes.com/sites/kenrickcai/2021/12/09/hashicorp...
hn_throwaway_99 4y ago
> I think this is a good example of the financial acumen of a typical SVB customer. While I totally wouldn't expect startup founders to behave hardly any different than Hashimoto, I would expect VCs to have done a much better job helping their startups do cash management. I mean, isn't that a pitch so many VCs give, in that it's not just "we give you money", but we also help connect you with experts for different parts of the business? Even for pure self interest, if VCs are going to write a "kid" a check for $10 million, wouldn't they want to ensure it was properly safeguarded? Regardless of the above, I 100% agree with your "we should come up with rules that actually work" statement.
- ghiculescu 4y ago
  If your point is that despite what they'll pitch you, most VCs are just dumb money, you won't get any debate from me :)
- chernevik 4y ago
  This. VCs advise their portfolio companies on any number of mundane business arrangements and cash management should on that list. I strongly suspect that SVB's relations with the VCs interfered with this obvious item.
anonymousiam 4y ago
Historically, the FDIC was intended to protect consumer banking. $250k was enough coverage for most consumers, and consumers with more than that (back then) probably had an accountant savvy enough to know better than to keep all the eggs in one basket. The same goes for businesses (including startups). The SVB crash was a wake-up call for businesses that were careless with their finances, and they were lucky to get a (unprecedented) bail-out from an administration with an interest in their success.
- shapefrog 4y ago
  They were lucky it was a slow motion car crash, and the FDIC stepped in before the losses wiped out any customer funds.
vkou 4y ago
> I don’t say this to promote or defend a bail out. To me it says that if we are regulating the system to protect deposits, we should come up with rules that actually work. For the most part, they do. The government made it very clear last weekend that deposits are sacred, but the executives and the shareholders will be taken out back and shot if they are caught doing risky things. (Signature bank was seized, and it wasn't even insolvent.)
- ghiculescu 4y ago
  They had to change the rules to do so (from 250k, to infinite). That’s why so many people are understandably angry.
  - vkou 4y ago
    People are angry because bank executives and shareholders ate all the losses, and the depositors were rescued at no net cost to the taxpayer? What would make those people happy, exactly, and why should anyone care about their happiness? I rather like living in a world where from the perspective of the end user, my money doesn't disappear because some moron five steps removed from me decided to YOLO the bank on 10-year treasuries. I also, for similar reasons, like living in a world where I don't need to personally test all my produce for e.coli contamination, or my food coloring for cadmium.
    - ghiculescu 4y ago
      They are, because the rules changed. Your metaphor isn’t very good but you’d be upset if someone was found to be circumventing food safety rules and poisoning food, and the government changed the rules to avoid them going out of business.
      - vkou 4y ago
        The government put them out of business for poisoning my food. That's exactly what happened to SVB and Signature. They are gone. Dead. Wiped out. Seized. All the people responsible for mismanaging those banks are now broke. [1][2] And made me, the depositors, the people impacted by that bad behaviour whole. Again, what exactly is the problem, here? Which bad outcomes have the changes to the rules produced? [1] Well, the C-suite isn't, but they are all going to be sued by the investors that lost money due to their bad management. [2] Once the FDIC finishes picking through their carcass, if there's any value left (Possible for Silvergate), those groups might get pennies on the dollar.

quickthrower2 4y ago

Yes and how does one do due diligence on a bank anyway?

ghiculescu 4y ago
That is possible. Here’s an example: https://twitter.com/RagingVentures/status/1615826088038473733 https://twitter.com/RagingVentures/status/161582608803847373... But I think it’s beyond the ability of many.
- vkou 4y ago
  It's possible, just like it's possible to do a detailed food safety inspection on every single thing you bring home from the grocery, but why would anyone want to live in a buyer-beware world where that is expected?

zamnos 4y ago

Yes, back in 2021. > Hashimoto, the original CEO, is a new billionaire, worth $1.2 billion based on the IPO price. https://www.forbes.com/sites/kenrickcai/2021/12/09/hashicorp-shares-rise-in-latest-open-source-ipo-minting-new-billionaire/ https://www.forbes.com/sites/kenrickcai/2021/12/09/hashicorp...

hn_throwaway_99 4y ago

> I think this is a good example of the financial acumen of a typical SVB customer. While I totally wouldn't expect startup founders to behave hardly any different than Hashimoto, I would expect VCs to have done a much better job helping their startups do cash management. I mean, isn't that a pitch so many VCs give, in that it's not just "we give you money", but we also help connect you with experts for different parts of the business? Even for pure self interest, if VCs are going to write a "kid" a check for $10 million, wouldn't they want to ensure it was properly safeguarded? Regardless of the above, I 100% agree with your "we should come up with rules that actually work" statement.

ghiculescu 4y ago
If your point is that despite what they'll pitch you, most VCs are just dumb money, you won't get any debate from me :)
chernevik 4y ago
This. VCs advise their portfolio companies on any number of mundane business arrangements and cash management should on that list. I strongly suspect that SVB's relations with the VCs interfered with this obvious item.

anonymousiam 4y ago

Historically, the FDIC was intended to protect consumer banking. $250k was enough coverage for most consumers, and consumers with more than that (back then) probably had an accountant savvy enough to know better than to keep all the eggs in one basket. The same goes for businesses (including startups). The SVB crash was a wake-up call for businesses that were careless with their finances, and they were lucky to get a (unprecedented) bail-out from an administration with an interest in their success.

shapefrog 4y ago
They were lucky it was a slow motion car crash, and the FDIC stepped in before the losses wiped out any customer funds.

vkou 4y ago

> I don’t say this to promote or defend a bail out. To me it says that if we are regulating the system to protect deposits, we should come up with rules that actually work. For the most part, they do. The government made it very clear last weekend that deposits are sacred, but the executives and the shareholders will be taken out back and shot if they are caught doing risky things. (Signature bank was seized, and it wasn't even insolvent.)

ghiculescu 4y ago
They had to change the rules to do so (from 250k, to infinite). That’s why so many people are understandably angry.
- vkou 4y ago
  People are angry because bank executives and shareholders ate all the losses, and the depositors were rescued at no net cost to the taxpayer? What would make those people happy, exactly, and why should anyone care about their happiness? I rather like living in a world where from the perspective of the end user, my money doesn't disappear because some moron five steps removed from me decided to YOLO the bank on 10-year treasuries. I also, for similar reasons, like living in a world where I don't need to personally test all my produce for e.coli contamination, or my food coloring for cadmium.
  - ghiculescu 4y ago
    They are, because the rules changed. Your metaphor isn’t very good but you’d be upset if someone was found to be circumventing food safety rules and poisoning food, and the government changed the rules to avoid them going out of business.
    - vkou 4y ago
      The government put them out of business for poisoning my food. That's exactly what happened to SVB and Signature. They are gone. Dead. Wiped out. Seized. All the people responsible for mismanaging those banks are now broke. [1][2] And made me, the depositors, the people impacted by that bad behaviour whole. Again, what exactly is the problem, here? Which bad outcomes have the changes to the rules produced? [1] Well, the C-suite isn't, but they are all going to be sued by the investors that lost money due to their bad management. [2] Once the FDIC finishes picking through their carcass, if there's any value left (Possible for Silvergate), those groups might get pennies on the dollar.