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You know what I hate the most in all of it ? There was no panic to begin with - in the worst case scenario, the cut for depositors was definitely less than 10%

You know what I hate the most in all of it ? There was no panic to begin with - in the worst case scenario, the cut for depositors was definitely less than 10%, most probably 0. The Jason Calacanis, David Sacks & co, decided that even that small % of losses were enough to start a bank run in order to get government involved - and make sure they are made whole. Stress on 'THEY'. Just look at their recent tweets - did Mark Cuban said today that unlimited FDIC is a very bad thing - should 'Never' be a thing ? Amazing stuff. (edit: Here is the link => https://twitter.com/mcuban/status/1635282882259476486?s=20 https://twitter.com/mcuban/status/1635282882259476486?s=20 ) Make no mistake - the 3 banks in trouble (there will be more. Once the fire is lit, it's hard to stop it) were extremely specific and were crypto / VCs banks. It's not random banks that failed. They failed specifically because of business they were servicing.

huffmsa 4y ago
Gotta keep those 2020-2022 vintages on a slow decline so they can raise the next fund.
nailer 4y ago
The bank had long term bets if government bonds that after the rate change massively weakened their value, threatening the bank’s capitalisation levels. This has nothing to do with their clients.
- TheAlchemist 4y ago
  This has everything to do with their clients. Do you know any other bank recently which faced 42B $ of withdrawals ? Thing is, this bank was servicing people basically juicing the system of free money. This cut both ways.
  - qwytw 4y ago
    What's the direct relationship between these two. Are you saying if all of those deposits were kept in JPM the same would have happened? Why?
    - solarpunk 4y ago
      The size of JPM would've made it so a bunch of VC funds abruptly withdrawing all their money would look like a tiny drop in the bucket rather than a bank-destabilizing balance sheet issue. JPM banks in the trillions; SVB, 200 billion.
      - qwytw 4y ago
        Then a better questions is why would they suddenly decide to withdraw their money if the had deposited it at JPM?
  - TechBro8615 4y ago
    The withdrawals happened because the client base was sophisticated enough to realize (based on publicly available information), and interconnected enough to communicate to each other, that the bank was insolvent. But it's not the client base that caused the bank to be insolvent. That was entirely the fault of the bankers.
    - TheAlchemist 4y ago
      The bankers did a very poor job here, for sure ! But it was far from insovlent - it was insovlent if everybody decided to pull out their funds at once - which is what happened. Not a single bank could withstand that. But so did the client base - we're not talking about small depositors here - if I read the documents correctly, Circle had >8B $ in SVB and they moved 5B $ before the week-end. It was a handful of wealthy individuals that organized this bank run.
      - UncleEntity 4y ago
        > it was insovlent if everybody decided to pull out their funds at once Which is the definition of insolvent. A normal bank just goes to the Fed as the lender of last resort but, apparently, they won’t lend money to insolvent banks so here we are.
      - HDThoreaun 4y ago
        > Not a single bank could withstand that. Wrong. Banks whose assets are worth more than liabilities can get unlimited low interest loans from the fed.
  - michaelt 4y ago
    It depends. If Company A wants a bank account with x% interest and instant access to all their deposits at any time (which might be impossible to provide) and Company B offers them such a bank account, wagering that they won't use that instant access at the same time as everyone else who is at fault?
    - TheAlchemist 4y ago
      Does it matter ? They are companies - they just go to court with that. They are or should be prepared to deal with this stuff. What I'm saying is that this bank run has nothing to do with small depositors withdrawing their money here.
colesantiago 4y ago
> were extremely specific and were crypto / VCs banks. It's not random banks that failed. They failed specifically because of business they were servicing. Agree. Now that the crypto industry in the US have no banks supporting them, perhaps it is time for crypto completely die (and it should) which should reduce the amount of VCs fueling the ponzi scheme.
- PretzelPirate 4y ago
  There are still plenty of banks that serve blockchain and crypto companies: https://cointelegraph.com/news/svb-and-silvergate-are-out-but-major-banks-are-still-backing-crypto-firms https://cointelegraph.com/news/svb-and-silvergate-are-out-bu... Most of the scams in crypto probably don't need direct banking services because they aren't running long-term businesses, just quick marketing schemes to pump their token value before cashing out. Unless exchanges world wide are shutdown, this are unlikely to stop. There are plenty of non-scam blockchain companies that aren't hurting anyone, just building interesting tech. I don't see any reason other than personal bias to want those startups to be debanked since they aren't any worse than the typical startup.
- HPsquared 4y ago
  In this case it's the banking system having a crisis (perhaps revealing some Ponzi-like elements). Surely that is a boost to the crypto bros, in the abstract at least.
  - nibbleshifter 4y ago
    It is. Bitcoin went up a fair bit during the SVB/SBNY crisis.
danenania 4y ago
"They failed specifically because of business they were servicing." I don't think so. All banks are facing major markdown issues right now due to the Fed raising rates. SVB and the crypto banks were just canaries in the coal mine. First Republic also needed a bailout even though they're a lot more diversified in their client base. Edit: before you downvote, please read this analysis by our friend patio11 - https://www.bitsaboutmoney.com/archive/banking-in-very-uncertain-times/ https://www.bitsaboutmoney.com/archive/banking-in-very-uncer... TLDR: The U.S. banking system (as a whole) has $620 billion in unrealized losses due to the Fed raising rates. This is way bigger than SVB and crypto.
- chiefalchemist 4y ago
  Right. So the next important question(s) is: Why didn't The Fed anticipate the downside of their actions? Follow up by: Isn't The Fed supposed to prevent bank failures, not cause them? Mind you, there are other (loop) holes that enable such things. Nonetheless, are these random-y bank failure or failures of The Fed and its associated regulatory friends?
  - rob74 4y ago
    So the Fed is supposed to keep its interest rates at 0 forever just because some banks based their business decisions on the assumption that interest rates will stay at 0 forever?
    - chiefalchemist 4y ago
      [flagged]
      - ericmay 4y ago
        If you’re placing the blame at the feet of the FED then you can’t also blame the FED for correcting the mistake. Also the FED doesn’t exist in a vacuum - saying that it’s the “key contributor” doesn’t make a lot of sense. For example the FED didn’t mandate that Congress overspend by so much during the Trump admin and then produce subsequent pandemic payouts under the same admin. The FED has a mandate to get inflation down. If your business relies on low interest rates that is your fault and your problem. It’s not the government’s job to babysit your business just as it’s not the government’s job to interfere with someone taking out a high interest rate loan for a car purchase.
drexlspivey 4y ago
These guys only started all caps tweeting after the bank was closed on Friday. The bank run started on Thursday when $42B (20-30% of all deposits) were withdrawn.
- mateus1 4y ago
  Yet their sensationalistic tweets probably caused bank runs on other banks, which is the article’s argument.
- unityByFreedom 4y ago
  The run they were tweeting about was a wider one on all regional banks. Did not happen at time of their tweets, they were speculating about the future. Why was it the VCs impacted by the SVB collapse, and not the wider banking world, who stood to lose more, who were loudest to make that claim?
- afavour 4y ago
  There are numerous accounts of 200+ group chats between SV CEOs and VCs all deciding to withdraw their money too, FWIW.
- cced 4y ago
  This weekend, J. was Tweeting about: 1. firearms 2. people needing to be terrified 3. bank runs If you're of the opinion that their Tweets (ignoring what may or may not have happened in certain private chats leading up to) did not lead to the public start of SVB's bank run, maybe? How much pressure did this add on regulators to act NOW to avert an IMMEDIATE and CATASTROPHIC COLLAPSE? However, is it really a stretch to say that those Tweets may have downstream effects on other banks?
consumer451 4y ago
I wonder if this behavior will lead banks to be even less likely to take on startups as clients in the future. edit: in an attempt to be more clear, I thought the reason SVB was used by startups was because "regular" banks were not open to startup finances. Is this not the case?
BlandDuck 4y ago
I agree, and I see three fallouts from this event: - Yellen folded fast, so the market will test her again (moral hazard) - Powell will hesitate to raise rates further, concerned about hidden stresses building up in the system. This was basic duration risk, and the fact that they missed it entirely will raise the worry of what else they are missing. - FDIC will probably have to be reformed. You cannot guarantee everything, all the time. Maybe an opt in system where large depositors can buy individual coverage.
- qwytw 4y ago
  > FDIC will probably have to be reformed Why? Isn't the guaranteed deposits above 250k mainly 'insured' through Fed offering unlimited loans back by the nominal price of bonds owned by affected banks?
  - BlandDuck 4y ago
    I should have explained better. My sense is that right now there is an implicit expectation in the market that the 250k threshold is no longer relevant, and that the FDIC is implicitly insuring everything that looks remotely like a deposit, regardless of the amount. This doesn't work. The only way to draw a new line in the sand is some sort of reform. The key issue is that the new line has to be "subgame perfect", meaning it has to be credible that if a bank steps over the new line, it will not simply be bailed out again.
    - unityByFreedom 4y ago
      Yes, now I wonder if anyone is allowed to fail. David Sacks complained that if the regionals aren't protected, then everyone will only bank with the big four. Yet if everyone is protected even when the bank makes poor decisions, that's a run on the FDIC itself. So as you say, where is this new line, and who can be trusted to allow those who cross it to fail?
      - A4ET8a8uTh0 4y ago
        << Yes, now I wonder if anyone is allowed to fail. That was one of the questions on the call/presentation I was recently on and no one has a clear answer at the moment ( I suppose it is not a surprise since we can't take Yellen at her word ). Some clarity will be needed and sooner rather than later if stated policy and rules are to be believed to be real policy and rules. FWIW, odds are, just about every bank by now has either reviewed or scrambling to review their exposure. I do not envy the weight of Yellen's decisions, because from where I sit it is still hard to tell if it was a 'less bad choice' available.
loonster 4y ago
A bank should keep the money secure. Anything >0% loss is unacceptable. They were greedy and had a duration mismatch. Interest rates rise and the value of the longterm bonds go down. The regulators should have stepped in and stopped that. Why didn't they? No one should be made whole. Looks like the stock holders will have a 0 and bond holders will take a significant cut. Depositors will be safe. The executives should all be in prison for this. Only have to do this once. The other banks would wisen up and get their act together.
- TheAlchemist 4y ago
  What about the CFOs and wealthy individuals that where just bailed out ? Shouldn't they were in prison (the CFOs, for wealthy individuals - it's just their money) too ? They were fully aware of the 250k$ limit of FDIC insurance.
  - sensanaty 4y ago
    I'm not really qualified to comment on these things so correct me if I'm wrong, but I thought the FDIC insurance was a minimum insurance, meaning that everyone regardless of balance is insured up to 250k and will get that 250k (or whatever they had on the accounts less than 250). In the case of the ones with more than 250k, they'd still be made whole once all the bank's assets are sold/redistributed, right?
    - watwut 4y ago
      Not really. They would be paid as much as possible from selling assets. That does not imply they would be paid everything. They would probably lost some money over that limit.
- tarsinge 4y ago
  Dumb question but is just keeping customers funds without investing them (even in bonds) and just collecting fees not a viable business model for banks? Is it a necessity or greed?
qwytw 4y ago
> there will be more. Once the fire is lit, it's hard to stop it) For now bonds yields have come down significantly so most banks in a similar situation should be in a much safer position until/unless yields start going back up again.
spaceman_2020 4y ago
SVB was the only bank (or maybe one of the only banks) that allowed anyone to set up a bank account with them without visiting the country - they were a part of Stripe Atlas. That sounds great in a libertarian, everything goes world. But the reality is that there are plenty of bad actors and they will abuse it to launder money and commit fraud. Every other bank was conservative enough to avoid this by enforcing some basic in-person kyc/aml processes. But not SVB. If you were banking with them, you should have asked yourself at least once: why is my bank doing something no other bank does? And is my money as safe there as it would be with a more conservative bank?
- zaroth 4y ago
  Why take a random small program being run at the bank, and imply that it was somehow linked to their failure, when their failure is well understood and has nothing to do with the Atlas program?
  - spaceman_2020 4y ago
    If your bank is willing to take on excess risk in one area, it's reasonable to assume that it's also willing to take on excess risk in other areas. The very fact that it was catering to startups was high risk behavior. And let's not pretend that extending loans to 15 year old "startups" that have never made a dime in profits and have no clear exit path was a sound business.
    - HPsquared 4y ago
      Their problem wasn't customers defaulting on loans, wasn't criminal money laundering, wasn't crypto meltdowns. Their depositors were simply more flighty than average.
    - zaroth 4y ago
      Who is pretending what about some made up thing that didn’t happen? The failure of SVB had nothing to do with extending loans to their client base.
mathattack 4y ago
SVB failed because of an interest rate bet gone bad. If they invested in short duration treasuries instead of long duration, none of this would have happened. The main difference is their bonuses would have been lower the past few years.
throwingrocks 4y ago
> They failed specifically because of business they were servicing. This is so disingenuous. They failed because they made risky investments, interest rate hikes put their investments in jeopardy, and when they tried to raise extra capital (responsible thing to do), people were alerted of the problem and left the bank (responsible thing to do).
- worrycue 4y ago
  IMHO it’s both. Although the risky investing probably played a bigger part.
- pclmulqdq 4y ago
  I used to think that it was entirely about the risky investments, but $42 billion left SVB (which managed about $200 billion in total) in 2 days. Literally no bank today could withstand a bank run for 20% of its asset base.
  - cloverich 4y ago
    Per their mid quarter update[1] there was ~20bn outflowing per quarter, so the question I have is if they had to sell their MBS for 20bn at a 2bn loss, that seems it would only buy them an extra quarter or so of liquidity. Surely they couldn't do that every quarter and remain solvent? Did this trigger their insolvency or accelerate it? [1]: https://s201.q4cdn.com/589201576/files/doc_downloads/2023/03/Q1-2023-Mid-Quarter-Update-vFINAL3-030823.pdf https://s201.q4cdn.com/589201576/files/doc_downloads/2023/03...
  - HDThoreaun 4y ago
    Bank runs are the rational thing to do in the face of an insolvent bank whose deposits are decreasing. SVB mainly serviced startups who would need to withdraw deposits in the current macro climate so there is a good chance they would eventually run out money. As soon as people realize that it's about the correct game theory choice to pull the money and run.
- atchoo 4y ago
  It's part of the story. They had a non-diverse group of interconnected customers prone to herd behaviours led by a small influencer elite. Few banks represent such a high risk of a run.
BurningFrog 4y ago
There is always no panic until the panic starts! Even if the worst case scenario was only losing 10% of deposits, that's a very good reason to remove your money. But in reality, everyone knows this will trigger a bank run, which will lose much more, so the only thing that matters is to get out ahead of it. This is just the inherent logic of the situation, not the fault of whoever realized it first.
- bena 4y ago
  "This will cause a bank run, so you gotta a make a run on the bank to get your money first." I mean, I kind of get it. That first 10% could very likely be people who know something you don't. So you use it as an indicator. But then the very perception of instability causes that same instability.
nova22033 4y ago
Jason Calacanis had a personal interest in SVB https://twitter.com/one4thecashbag/status/1635337106376769538?s=46&t=k1bKF6kVnqmdvlZlMt0pmQ https://twitter.com/one4thecashbag/status/163533710637676953...
dundarious 4y ago
They couldn’t afford to keep treating founders and VCs like personal royalty[0]: the yields were too low. But they feared what would happen if they stopped. So they made a bad bet to cover the extra expense. [0] Video of Jason Calacanis expounding on his love of royal treatment by SVB: https://twitter.com/one4thecashbag/status/1635337106376769538 https://twitter.com/one4thecashbag/status/163533710637676953...
Rapzid 4y ago
This just looks like the system working. California swiftly pulled the plug and FDIC is sorting it out. Lessons will be learned, buy the dip, move on.
deleted 4y ago
[deleted]

huffmsa 4y ago

Gotta keep those 2020-2022 vintages on a slow decline so they can raise the next fund.

nailer 4y ago

The bank had long term bets if government bonds that after the rate change massively weakened their value, threatening the bank’s capitalisation levels. This has nothing to do with their clients.

TheAlchemist 4y ago
This has everything to do with their clients. Do you know any other bank recently which faced 42B $ of withdrawals ? Thing is, this bank was servicing people basically juicing the system of free money. This cut both ways.
- qwytw 4y ago
  What's the direct relationship between these two. Are you saying if all of those deposits were kept in JPM the same would have happened? Why?
  - solarpunk 4y ago
    The size of JPM would've made it so a bunch of VC funds abruptly withdrawing all their money would look like a tiny drop in the bucket rather than a bank-destabilizing balance sheet issue. JPM banks in the trillions; SVB, 200 billion.
    - qwytw 4y ago
      Then a better questions is why would they suddenly decide to withdraw their money if the had deposited it at JPM?
- TechBro8615 4y ago
  The withdrawals happened because the client base was sophisticated enough to realize (based on publicly available information), and interconnected enough to communicate to each other, that the bank was insolvent. But it's not the client base that caused the bank to be insolvent. That was entirely the fault of the bankers.
  - TheAlchemist 4y ago
    The bankers did a very poor job here, for sure ! But it was far from insovlent - it was insovlent if everybody decided to pull out their funds at once - which is what happened. Not a single bank could withstand that. But so did the client base - we're not talking about small depositors here - if I read the documents correctly, Circle had >8B $ in SVB and they moved 5B $ before the week-end. It was a handful of wealthy individuals that organized this bank run.
    - UncleEntity 4y ago
      > it was insovlent if everybody decided to pull out their funds at once Which is the definition of insolvent. A normal bank just goes to the Fed as the lender of last resort but, apparently, they won’t lend money to insolvent banks so here we are.
    - HDThoreaun 4y ago
      > Not a single bank could withstand that. Wrong. Banks whose assets are worth more than liabilities can get unlimited low interest loans from the fed.
- michaelt 4y ago
  It depends. If Company A wants a bank account with x% interest and instant access to all their deposits at any time (which might be impossible to provide) and Company B offers them such a bank account, wagering that they won't use that instant access at the same time as everyone else who is at fault?
  - TheAlchemist 4y ago
    Does it matter ? They are companies - they just go to court with that. They are or should be prepared to deal with this stuff. What I'm saying is that this bank run has nothing to do with small depositors withdrawing their money here.

colesantiago 4y ago

> were extremely specific and were crypto / VCs banks. It's not random banks that failed. They failed specifically because of business they were servicing. Agree. Now that the crypto industry in the US have no banks supporting them, perhaps it is time for crypto completely die (and it should) which should reduce the amount of VCs fueling the ponzi scheme.

PretzelPirate 4y ago
There are still plenty of banks that serve blockchain and crypto companies: https://cointelegraph.com/news/svb-and-silvergate-are-out-but-major-banks-are-still-backing-crypto-firms https://cointelegraph.com/news/svb-and-silvergate-are-out-bu... Most of the scams in crypto probably don't need direct banking services because they aren't running long-term businesses, just quick marketing schemes to pump their token value before cashing out. Unless exchanges world wide are shutdown, this are unlikely to stop. There are plenty of non-scam blockchain companies that aren't hurting anyone, just building interesting tech. I don't see any reason other than personal bias to want those startups to be debanked since they aren't any worse than the typical startup.
HPsquared 4y ago
In this case it's the banking system having a crisis (perhaps revealing some Ponzi-like elements). Surely that is a boost to the crypto bros, in the abstract at least.
- nibbleshifter 4y ago
  It is. Bitcoin went up a fair bit during the SVB/SBNY crisis.

danenania 4y ago

"They failed specifically because of business they were servicing." I don't think so. All banks are facing major markdown issues right now due to the Fed raising rates. SVB and the crypto banks were just canaries in the coal mine. First Republic also needed a bailout even though they're a lot more diversified in their client base. Edit: before you downvote, please read this analysis by our friend patio11 - https://www.bitsaboutmoney.com/archive/banking-in-very-uncertain-times/ https://www.bitsaboutmoney.com/archive/banking-in-very-uncer... TLDR: The U.S. banking system (as a whole) has $620 billion in unrealized losses due to the Fed raising rates. This is way bigger than SVB and crypto.

chiefalchemist 4y ago
Right. So the next important question(s) is: Why didn't The Fed anticipate the downside of their actions? Follow up by: Isn't The Fed supposed to prevent bank failures, not cause them? Mind you, there are other (loop) holes that enable such things. Nonetheless, are these random-y bank failure or failures of The Fed and its associated regulatory friends?
- rob74 4y ago
  So the Fed is supposed to keep its interest rates at 0 forever just because some banks based their business decisions on the assumption that interest rates will stay at 0 forever?
  - chiefalchemist 4y ago
    [flagged]
    - ericmay 4y ago
      If you’re placing the blame at the feet of the FED then you can’t also blame the FED for correcting the mistake. Also the FED doesn’t exist in a vacuum - saying that it’s the “key contributor” doesn’t make a lot of sense. For example the FED didn’t mandate that Congress overspend by so much during the Trump admin and then produce subsequent pandemic payouts under the same admin. The FED has a mandate to get inflation down. If your business relies on low interest rates that is your fault and your problem. It’s not the government’s job to babysit your business just as it’s not the government’s job to interfere with someone taking out a high interest rate loan for a car purchase.

drexlspivey 4y ago

These guys only started all caps tweeting after the bank was closed on Friday. The bank run started on Thursday when $42B (20-30% of all deposits) were withdrawn.

mateus1 4y ago
Yet their sensationalistic tweets probably caused bank runs on other banks, which is the article’s argument.
unityByFreedom 4y ago
The run they were tweeting about was a wider one on all regional banks. Did not happen at time of their tweets, they were speculating about the future. Why was it the VCs impacted by the SVB collapse, and not the wider banking world, who stood to lose more, who were loudest to make that claim?
afavour 4y ago
There are numerous accounts of 200+ group chats between SV CEOs and VCs all deciding to withdraw their money too, FWIW.
cced 4y ago
This weekend, J. was Tweeting about: 1. firearms 2. people needing to be terrified 3. bank runs If you're of the opinion that their Tweets (ignoring what may or may not have happened in certain private chats leading up to) did not lead to the public start of SVB's bank run, maybe? How much pressure did this add on regulators to act NOW to avert an IMMEDIATE and CATASTROPHIC COLLAPSE? However, is it really a stretch to say that those Tweets may have downstream effects on other banks?

consumer451 4y ago

I wonder if this behavior will lead banks to be even less likely to take on startups as clients in the future. edit: in an attempt to be more clear, I thought the reason SVB was used by startups was because "regular" banks were not open to startup finances. Is this not the case?

BlandDuck 4y ago

I agree, and I see three fallouts from this event: - Yellen folded fast, so the market will test her again (moral hazard) - Powell will hesitate to raise rates further, concerned about hidden stresses building up in the system. This was basic duration risk, and the fact that they missed it entirely will raise the worry of what else they are missing. - FDIC will probably have to be reformed. You cannot guarantee everything, all the time. Maybe an opt in system where large depositors can buy individual coverage.

qwytw 4y ago
> FDIC will probably have to be reformed Why? Isn't the guaranteed deposits above 250k mainly 'insured' through Fed offering unlimited loans back by the nominal price of bonds owned by affected banks?
- BlandDuck 4y ago
  I should have explained better. My sense is that right now there is an implicit expectation in the market that the 250k threshold is no longer relevant, and that the FDIC is implicitly insuring everything that looks remotely like a deposit, regardless of the amount. This doesn't work. The only way to draw a new line in the sand is some sort of reform. The key issue is that the new line has to be "subgame perfect", meaning it has to be credible that if a bank steps over the new line, it will not simply be bailed out again.
  - unityByFreedom 4y ago
    Yes, now I wonder if anyone is allowed to fail. David Sacks complained that if the regionals aren't protected, then everyone will only bank with the big four. Yet if everyone is protected even when the bank makes poor decisions, that's a run on the FDIC itself. So as you say, where is this new line, and who can be trusted to allow those who cross it to fail?
    - A4ET8a8uTh0 4y ago
      << Yes, now I wonder if anyone is allowed to fail. That was one of the questions on the call/presentation I was recently on and no one has a clear answer at the moment ( I suppose it is not a surprise since we can't take Yellen at her word ). Some clarity will be needed and sooner rather than later if stated policy and rules are to be believed to be real policy and rules. FWIW, odds are, just about every bank by now has either reviewed or scrambling to review their exposure. I do not envy the weight of Yellen's decisions, because from where I sit it is still hard to tell if it was a 'less bad choice' available.

loonster 4y ago

A bank should keep the money secure. Anything >0% loss is unacceptable. They were greedy and had a duration mismatch. Interest rates rise and the value of the longterm bonds go down. The regulators should have stepped in and stopped that. Why didn't they? No one should be made whole. Looks like the stock holders will have a 0 and bond holders will take a significant cut. Depositors will be safe. The executives should all be in prison for this. Only have to do this once. The other banks would wisen up and get their act together.

TheAlchemist 4y ago
What about the CFOs and wealthy individuals that where just bailed out ? Shouldn't they were in prison (the CFOs, for wealthy individuals - it's just their money) too ? They were fully aware of the 250k$ limit of FDIC insurance.
- sensanaty 4y ago
  I'm not really qualified to comment on these things so correct me if I'm wrong, but I thought the FDIC insurance was a minimum insurance, meaning that everyone regardless of balance is insured up to 250k and will get that 250k (or whatever they had on the accounts less than 250). In the case of the ones with more than 250k, they'd still be made whole once all the bank's assets are sold/redistributed, right?
  - watwut 4y ago
    Not really. They would be paid as much as possible from selling assets. That does not imply they would be paid everything. They would probably lost some money over that limit.
tarsinge 4y ago
Dumb question but is just keeping customers funds without investing them (even in bonds) and just collecting fees not a viable business model for banks? Is it a necessity or greed?

qwytw 4y ago

> there will be more. Once the fire is lit, it's hard to stop it) For now bonds yields have come down significantly so most banks in a similar situation should be in a much safer position until/unless yields start going back up again.

spaceman_2020 4y ago

SVB was the only bank (or maybe one of the only banks) that allowed anyone to set up a bank account with them without visiting the country - they were a part of Stripe Atlas. That sounds great in a libertarian, everything goes world. But the reality is that there are plenty of bad actors and they will abuse it to launder money and commit fraud. Every other bank was conservative enough to avoid this by enforcing some basic in-person kyc/aml processes. But not SVB. If you were banking with them, you should have asked yourself at least once: why is my bank doing something no other bank does? And is my money as safe there as it would be with a more conservative bank?

zaroth 4y ago
Why take a random small program being run at the bank, and imply that it was somehow linked to their failure, when their failure is well understood and has nothing to do with the Atlas program?
- spaceman_2020 4y ago
  If your bank is willing to take on excess risk in one area, it's reasonable to assume that it's also willing to take on excess risk in other areas. The very fact that it was catering to startups was high risk behavior. And let's not pretend that extending loans to 15 year old "startups" that have never made a dime in profits and have no clear exit path was a sound business.
  - HPsquared 4y ago
    Their problem wasn't customers defaulting on loans, wasn't criminal money laundering, wasn't crypto meltdowns. Their depositors were simply more flighty than average.
  - zaroth 4y ago
    Who is pretending what about some made up thing that didn’t happen? The failure of SVB had nothing to do with extending loans to their client base.

mathattack 4y ago

SVB failed because of an interest rate bet gone bad. If they invested in short duration treasuries instead of long duration, none of this would have happened. The main difference is their bonuses would have been lower the past few years.

throwingrocks 4y ago

> They failed specifically because of business they were servicing. This is so disingenuous. They failed because they made risky investments, interest rate hikes put their investments in jeopardy, and when they tried to raise extra capital (responsible thing to do), people were alerted of the problem and left the bank (responsible thing to do).

worrycue 4y ago
IMHO it’s both. Although the risky investing probably played a bigger part.
pclmulqdq 4y ago
I used to think that it was entirely about the risky investments, but $42 billion left SVB (which managed about $200 billion in total) in 2 days. Literally no bank today could withstand a bank run for 20% of its asset base.
- cloverich 4y ago
  Per their mid quarter update[1] there was ~20bn outflowing per quarter, so the question I have is if they had to sell their MBS for 20bn at a 2bn loss, that seems it would only buy them an extra quarter or so of liquidity. Surely they couldn't do that every quarter and remain solvent? Did this trigger their insolvency or accelerate it? [1]: https://s201.q4cdn.com/589201576/files/doc_downloads/2023/03/Q1-2023-Mid-Quarter-Update-vFINAL3-030823.pdf https://s201.q4cdn.com/589201576/files/doc_downloads/2023/03...
- HDThoreaun 4y ago
  Bank runs are the rational thing to do in the face of an insolvent bank whose deposits are decreasing. SVB mainly serviced startups who would need to withdraw deposits in the current macro climate so there is a good chance they would eventually run out money. As soon as people realize that it's about the correct game theory choice to pull the money and run.
atchoo 4y ago
It's part of the story. They had a non-diverse group of interconnected customers prone to herd behaviours led by a small influencer elite. Few banks represent such a high risk of a run.

BurningFrog 4y ago

There is always no panic until the panic starts! Even if the worst case scenario was only losing 10% of deposits, that's a very good reason to remove your money. But in reality, everyone knows this will trigger a bank run, which will lose much more, so the only thing that matters is to get out ahead of it. This is just the inherent logic of the situation, not the fault of whoever realized it first.

bena 4y ago
"This will cause a bank run, so you gotta a make a run on the bank to get your money first." I mean, I kind of get it. That first 10% could very likely be people who know something you don't. So you use it as an indicator. But then the very perception of instability causes that same instability.

nova22033 4y ago

Jason Calacanis had a personal interest in SVB https://twitter.com/one4thecashbag/status/1635337106376769538?s=46&t=k1bKF6kVnqmdvlZlMt0pmQ https://twitter.com/one4thecashbag/status/163533710637676953...

dundarious 4y ago

They couldn’t afford to keep treating founders and VCs like personal royalty[0]: the yields were too low. But they feared what would happen if they stopped. So they made a bad bet to cover the extra expense. [0] Video of Jason Calacanis expounding on his love of royal treatment by SVB: https://twitter.com/one4thecashbag/status/1635337106376769538 https://twitter.com/one4thecashbag/status/163533710637676953...

Rapzid 4y ago

This just looks like the system working. California swiftly pulled the plug and FDIC is sorting it out. Lessons will be learned, buy the dip, move on.

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