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> The board was asleep at the switch. They are now unemployable. That's not really how this works. The CAO of the bank was CFO of Lehman. People in these posit

> The board was asleep at the switch. They are now unemployable. That's not really how this works. The CAO of the bank was CFO of Lehman. People in these positions just get credit for the fact that they had a front row seat for this sort of financial implosion, so they can (theoretically) help whoever else's board they join avoid that sort of thing. > But those players within the venture capital community who were singularly responsible for triggering and then exacerbating this run will not escape accountability. The people in the VC community who triggered the bank run did the right thing by their startups. They don't have a responsibility to SVB. If they saw a run on the bank starting, it was in their best interests and the best interests of the startups in which they invested for those startups to get their money out as quickly as possible.

gmd63 4y ago
It's unknown whether it was in their best interest, because we can't observe the alternate reality where 42 billion dollars wasn't withdrawn in one day. The raindrop never feels responsible for the flood, but it is.
cowpig 4y ago
> The people in the VC community who triggered the bank run did the right thing by their startups. How do you arrive at this conclusion? Without a run on the bank none of this would have happened.
- simonh 4y ago
  You are in charge of a startup and are responsible for its finances and the jobs of the people who work there. You can see that a bank run is starting. If you don’t pull out your money, what are the chances this will prevent the bank run happening?
  - manquer 4y ago
    Nobody is blaming any startup who took that decision, the rational decision is to take out the money. However it was not the rational decision for a fund to do so. You have a) substantially larger voice and also ability to coordinate for better outcomes, for a fund it is no longer a gamer theory 101 standard prisoner's dilemma. The larger funds could have - Banded together and made a joint statement ( like they were able to organize and do after the run) reassuring every startup of their confidence in the bank - Participated in the equity infusion into the bank - Organized and bought debt in the bank to give it liquidity - Simply moved their own money as new deposits into the bank. Just doing a joint statement - which wouldn't have costed them a single penny would have gone long way to reassure the markets and also gained the key guys a lot of clout and established their influence J P Morgan style.
- RA_Fisher 4y ago
  They ostensibly noticed the bank was insolvent and shared that important information with their startups. The bank should never have been anywhere near insolvent.
- nickff 4y ago
  The bank run seems to have occurred after the insolvency. The bank was appears to have been insolvent (from the currently available information), though they avoided their books showing the fact by having bonds marked as “HTM”. When a bank is insolvent, it’s best to shut it down as soon as possible, to avoid the bank engaging in risky behavior to ‘make back’ the missing money.
  - bandrami 4y ago
    Not insolvent, illiquid. Calling SVB insolvent is like calling Elon Musk "poor" because his income this year was $0.
    - taxman22 4y ago
      SVB was insolvent.
      - ineedasername 4y ago
        SVB became insolvent.
        taxman22 4y ago
        SVB was insolvent last quarter.
        remote_phone 4y ago
        You don’t know what the definition of insolvent is, if you believe that.
        danielmarkbruce 4y ago
        There isn't an agreed upon definition of insolvent. SVB certainly was insolvent under some definitions of the word.
    - 4y ago
- 23B1 4y ago
  Rumor is uncontrollable and often unattributable – and each organization acted in the best interests of its employees and shareholders, as is their duty. Ugly, but rational.
- deleted 4y ago
  [deleted]
- nl 4y ago
  > Without a run on the bank none of this would have happened. A bank run is an almost inevitable consequence of a loss of confidence in a bank. The loss of confidence was caused by their $1.8B loss on securities sales and plan to go to the market for $2B in funding. The next day shares plummeted, and people began to remove their money (including those advised by VCs)[1] Given the fact that only $250K of funds is FDIC guaranteed, in the face of a balance sheet crisis at the bank the withdrawal of funds was entirely rational. Arguably not doing it would have been irresponsible. Even if there hadn't been a bank run it's pretty easy to see cases where the bank would have "temporarily restricted the amount of money an entity can withdraw in a day" or something. That potential restriction on liquidity is something any responsible business owner would want to avoid. [1] https://abcnews.go.com/Business/timeline-silicon-valley-bank-collapse/story?id=97846565 https://abcnews.go.com/Business/timeline-silicon-valley-bank...
- ineedasername 4y ago
  Once the run started then VCs who had not previously had a negative stance on SVB may have done right by their startups, but yeah not the ones who actually started it in the first place.
  - twelve40 4y ago
    I have no idea if this is correct or not, but by some accounts, there were noticeable issues with regular transfers which caused the initial concern about the bank. It's not like someone started this out of boredom. 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...
    - danielmarkbruce 4y ago
      They lost $12 billion on an interest rate bet. The fact they didn't need to mark it to market under an accounting rule didn't mean people ignored it. It was a giant, known problem. It's why they were out trying to raise capital.
      - twelve40 4y ago
        I'm talking about the "rumors" that caused the bank run. From what I've read (quoted above), these weren't really rumors but problems with day-to-day transfers that prevented the fund(s) from completing their deals, in which case one has to be insane not to let their friends know that the bank is not transferring money like they are supposed to. In hindsight we know they had problems like you said, but the "spread rumors" part seems to have been triggered by legitimate problems with regular transfers.
        danielmarkbruce 4y ago
        It wasn't hindsight though. They filed their 10-k well before the run and it showed a disaster of a situation. Their balance sheet was progressively getting worse, it was already bad the 10-q before. People knew it was problematic months ago, this didn't come out of nowhere.
mikesena 4y ago
+1 this
davidw 4y ago
> The people in the VC community who triggered the bank run did the right thing by their startups. I don't really have a horse in this race, but: while the above argument makes sense, what about all their future startups? Everyone says nice things about how it was good to have this bank that understood startups and treated them well, and now that is all gone. And no one who had deposits lost their money anyway. It seems to me that everyone is worse off. It was a lose/lose move.
- simonh 4y ago
  As individuals they couldn’t stop the bank run happening, so pulling out their money was the rational thing to do. If all the depositors could have got together in a room, they could all have agreed to keep their money in. That coordination wasn’t possible though.
  - ineedasername 4y ago
    This is incorrect. such coordination was possible and did happen, only in the opposite direction. A relatively small group of VC firms effectively did coordinate the depositors very effectively to organize except it was to take money out Saying coordination wasn’t possible is therefore incorrect. And had it not occurred, getting people to keep their money in would have been a moot point, the whole thing a non issue.
    - simonh 4y ago
      Propagating a run simply takes propagating the info that a run is happening. No other communication is necessary. That signal is enough. Coordinating stopping a run would take a huge amount of much more sophisticated and time consuming back and forth communication and negotiation, reassurance and confidence building. You’d have to convince people that together right now in this situation you can stop the run. How would you do that? That coordinated consensus building would have to happen and propagate through the community, all of the community, at least as fast as the news of a run in order to stop the run. If it’s slower it’s too late, the people that heard there’s a run before they heard there was a movement to stop it already pulled out their money. You see the problem?
lotsofpulp 4y ago
https://www.verifythis.com/article/news/verify/business-verify/joseph-gentile-former-lehman-brothers-exec-not-involved-in-svb-collapse/536-89448c06-0507-4e94-b469-a68438304701 https://www.verifythis.com/article/news/verify/business-veri... >Joseph Gentile, the subject of the viral tweets, is currently the Chief Administrative Officer at SVB Securities, which is an investment firm. SVB Securities is a subsidiary of Silicon Valley Bank’s former parent company that is financially independent from the collapsed bank. He had previously been the CFO of a division within the greater Lehman Brothers’ bank and left about a year and a half before the bank filed for bankruptcy.
deleted 4y ago
[deleted]
tptacek 4y ago
Isn't this misinformation? The Chief Admin Officer of SVB Securities was an exec at Lehman, but SVB Securities is independent of SVB. If you Google [svb lehman], you get pages and pages debunking this.
- idopmstuff 4y ago
  The fact that SVB securities is independent is irrelevant to the point, which is that people who play roles in financial catastrophes do not become unemployable as a result.
  - tptacek 4y ago
    You didn't say that. You said "the CAO of the bank" was a Lehman person. That's not true.
deleted 4y ago
[deleted]
cmurf 4y ago
Wasn't it in the best interest of everyone's best interest to avoid having such high amounts of uninsured deposits? Was it a requirement or recommendation to concentrate cash in SVB, and why?

gmd63 4y ago

It's unknown whether it was in their best interest, because we can't observe the alternate reality where 42 billion dollars wasn't withdrawn in one day. The raindrop never feels responsible for the flood, but it is.

cowpig 4y ago

> The people in the VC community who triggered the bank run did the right thing by their startups. How do you arrive at this conclusion? Without a run on the bank none of this would have happened.

simonh 4y ago
You are in charge of a startup and are responsible for its finances and the jobs of the people who work there. You can see that a bank run is starting. If you don’t pull out your money, what are the chances this will prevent the bank run happening?
- manquer 4y ago
  Nobody is blaming any startup who took that decision, the rational decision is to take out the money. However it was not the rational decision for a fund to do so. You have a) substantially larger voice and also ability to coordinate for better outcomes, for a fund it is no longer a gamer theory 101 standard prisoner's dilemma. The larger funds could have - Banded together and made a joint statement ( like they were able to organize and do after the run) reassuring every startup of their confidence in the bank - Participated in the equity infusion into the bank - Organized and bought debt in the bank to give it liquidity - Simply moved their own money as new deposits into the bank. Just doing a joint statement - which wouldn't have costed them a single penny would have gone long way to reassure the markets and also gained the key guys a lot of clout and established their influence J P Morgan style.
RA_Fisher 4y ago
They ostensibly noticed the bank was insolvent and shared that important information with their startups. The bank should never have been anywhere near insolvent.
nickff 4y ago
The bank run seems to have occurred after the insolvency. The bank was appears to have been insolvent (from the currently available information), though they avoided their books showing the fact by having bonds marked as “HTM”. When a bank is insolvent, it’s best to shut it down as soon as possible, to avoid the bank engaging in risky behavior to ‘make back’ the missing money.
- bandrami 4y ago
  Not insolvent, illiquid. Calling SVB insolvent is like calling Elon Musk "poor" because his income this year was $0.
  - taxman22 4y ago
    SVB was insolvent.
    - ineedasername 4y ago
      SVB became insolvent.
      - taxman22 4y ago
        SVB was insolvent last quarter.
        remote_phone 4y ago
        You don’t know what the definition of insolvent is, if you believe that.
        danielmarkbruce 4y ago
        There isn't an agreed upon definition of insolvent. SVB certainly was insolvent under some definitions of the word.
  - 4y ago
23B1 4y ago
Rumor is uncontrollable and often unattributable – and each organization acted in the best interests of its employees and shareholders, as is their duty. Ugly, but rational.
deleted 4y ago
[deleted]
nl 4y ago
> Without a run on the bank none of this would have happened. A bank run is an almost inevitable consequence of a loss of confidence in a bank. The loss of confidence was caused by their $1.8B loss on securities sales and plan to go to the market for $2B in funding. The next day shares plummeted, and people began to remove their money (including those advised by VCs)[1] Given the fact that only $250K of funds is FDIC guaranteed, in the face of a balance sheet crisis at the bank the withdrawal of funds was entirely rational. Arguably not doing it would have been irresponsible. Even if there hadn't been a bank run it's pretty easy to see cases where the bank would have "temporarily restricted the amount of money an entity can withdraw in a day" or something. That potential restriction on liquidity is something any responsible business owner would want to avoid. [1] https://abcnews.go.com/Business/timeline-silicon-valley-bank-collapse/story?id=97846565 https://abcnews.go.com/Business/timeline-silicon-valley-bank...
ineedasername 4y ago
Once the run started then VCs who had not previously had a negative stance on SVB may have done right by their startups, but yeah not the ones who actually started it in the first place.
- twelve40 4y ago
  I have no idea if this is correct or not, but by some accounts, there were noticeable issues with regular transfers which caused the initial concern about the bank. It's not like someone started this out of boredom. 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...
  - danielmarkbruce 4y ago
    They lost $12 billion on an interest rate bet. The fact they didn't need to mark it to market under an accounting rule didn't mean people ignored it. It was a giant, known problem. It's why they were out trying to raise capital.
    - twelve40 4y ago
      I'm talking about the "rumors" that caused the bank run. From what I've read (quoted above), these weren't really rumors but problems with day-to-day transfers that prevented the fund(s) from completing their deals, in which case one has to be insane not to let their friends know that the bank is not transferring money like they are supposed to. In hindsight we know they had problems like you said, but the "spread rumors" part seems to have been triggered by legitimate problems with regular transfers.
      - danielmarkbruce 4y ago
        It wasn't hindsight though. They filed their 10-k well before the run and it showed a disaster of a situation. Their balance sheet was progressively getting worse, it was already bad the 10-q before. People knew it was problematic months ago, this didn't come out of nowhere.

mikesena 4y ago

+1 this

davidw 4y ago

> The people in the VC community who triggered the bank run did the right thing by their startups. I don't really have a horse in this race, but: while the above argument makes sense, what about all their future startups? Everyone says nice things about how it was good to have this bank that understood startups and treated them well, and now that is all gone. And no one who had deposits lost their money anyway. It seems to me that everyone is worse off. It was a lose/lose move.

simonh 4y ago
As individuals they couldn’t stop the bank run happening, so pulling out their money was the rational thing to do. If all the depositors could have got together in a room, they could all have agreed to keep their money in. That coordination wasn’t possible though.
- ineedasername 4y ago
  This is incorrect. such coordination was possible and did happen, only in the opposite direction. A relatively small group of VC firms effectively did coordinate the depositors very effectively to organize except it was to take money out Saying coordination wasn’t possible is therefore incorrect. And had it not occurred, getting people to keep their money in would have been a moot point, the whole thing a non issue.
  - simonh 4y ago
    Propagating a run simply takes propagating the info that a run is happening. No other communication is necessary. That signal is enough. Coordinating stopping a run would take a huge amount of much more sophisticated and time consuming back and forth communication and negotiation, reassurance and confidence building. You’d have to convince people that together right now in this situation you can stop the run. How would you do that? That coordinated consensus building would have to happen and propagate through the community, all of the community, at least as fast as the news of a run in order to stop the run. If it’s slower it’s too late, the people that heard there’s a run before they heard there was a movement to stop it already pulled out their money. You see the problem?

lotsofpulp 4y ago

https://www.verifythis.com/article/news/verify/business-verify/joseph-gentile-former-lehman-brothers-exec-not-involved-in-svb-collapse/536-89448c06-0507-4e94-b469-a68438304701 https://www.verifythis.com/article/news/verify/business-veri... >Joseph Gentile, the subject of the viral tweets, is currently the Chief Administrative Officer at SVB Securities, which is an investment firm. SVB Securities is a subsidiary of Silicon Valley Bank’s former parent company that is financially independent from the collapsed bank. He had previously been the CFO of a division within the greater Lehman Brothers’ bank and left about a year and a half before the bank filed for bankruptcy.

deleted 4y ago

[deleted]

tptacek 4y ago

Isn't this misinformation? The Chief Admin Officer of SVB Securities was an exec at Lehman, but SVB Securities is independent of SVB. If you Google [svb lehman], you get pages and pages debunking this.

idopmstuff 4y ago
The fact that SVB securities is independent is irrelevant to the point, which is that people who play roles in financial catastrophes do not become unemployable as a result.
- tptacek 4y ago
  You didn't say that. You said "the CAO of the bank" was a Lehman person. That's not true.

deleted 4y ago

[deleted]

cmurf 4y ago

Wasn't it in the best interest of everyone's best interest to avoid having such high amounts of uninsured deposits? Was it a requirement or recommendation to concentrate cash in SVB, and why?