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What were SVB customers getting in exchange for encouraging every company to keep their $ in uninsured deposits earning low interest? Was it 2.5% 30yr mortgage

What were SVB customers getting in exchange for encouraging every company to keep their $ in uninsured deposits earning low interest? Was it 2.5% 30yr mortgages for founders? Was it liquidity, in the form of loans against illiquid pre-IPO stock? Were the interests of the companies aligned with those of the people who were getting the perks? (At 4-5% for parking excess cash in simple T bill it seems like a pricey perk)

indymike 4y ago
> What were SVB customers getting in exchange for encouraging every company to keep their $ in uninsured deposits earning low interest? Sometimes the issue is that there is nothing better, that is known to be available. I can't recall being in a treasury management meeting where the CFO or VP of finance raised a concern about maxing coverage by FDIC insurance. In fact, many transactions that even a $2-3M per year company does require pooling more than FDIC covered amounts in a bank account just to cover receiving payments or making payments. Incidentally SVB did have very comparable treasury management feature to other banks. Finally, to address the perk part of the post, at no time did I see SVB offer anything other than market rates for mortgages - the difference is that they would not reject founders immediately because they were a business owner with no W-2 income.
- JumpCrisscross 4y ago
  > can't recall being in a treasury management meeting where the CFO or VP of finance raised a concern about maxing coverage by FDIC insurance This is standard issue for corporate America. People who cut their teeth in the last decade's tech boom didn't learn it. But managing counterparty risk is one of the core jobs of corporate treasurers.
- empathy_m 4y ago
  Frankly I don't think the deposit insurance thing is a big deal -- It's really really hard to imagine a world where a big enough bank fails and people don't get $1. But the interest rate spread ... Seems like a lot now? Wasn't, for a long time?
- whodidntante 4y ago
  I am very curious about this: "Sometimes the issue is that there is nothing better, that is known to be available." Where SVB customers money in a money market fund that failed, or was it simply a "bank deposit" ? There are plenty of money market funds that are ungated and that are based on very short term treasuries that can be used as cash: write checks,ue credit cards, wire money, schedule payments, use autopay, etc, etc. This is what I do - I keep $0 in the "bank", have almost all the services a bank can provide, and all my "cash" is guaranteed by the federal government. Maybe I am misunderstanding something here. I am not, and never have been, a CFO.
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indymike 4y ago

> What were SVB customers getting in exchange for encouraging every company to keep their $ in uninsured deposits earning low interest? Sometimes the issue is that there is nothing better, that is known to be available. I can't recall being in a treasury management meeting where the CFO or VP of finance raised a concern about maxing coverage by FDIC insurance. In fact, many transactions that even a $2-3M per year company does require pooling more than FDIC covered amounts in a bank account just to cover receiving payments or making payments. Incidentally SVB did have very comparable treasury management feature to other banks. Finally, to address the perk part of the post, at no time did I see SVB offer anything other than market rates for mortgages - the difference is that they would not reject founders immediately because they were a business owner with no W-2 income.

JumpCrisscross 4y ago
> can't recall being in a treasury management meeting where the CFO or VP of finance raised a concern about maxing coverage by FDIC insurance This is standard issue for corporate America. People who cut their teeth in the last decade's tech boom didn't learn it. But managing counterparty risk is one of the core jobs of corporate treasurers.
empathy_m 4y ago
Frankly I don't think the deposit insurance thing is a big deal -- It's really really hard to imagine a world where a big enough bank fails and people don't get $1. But the interest rate spread ... Seems like a lot now? Wasn't, for a long time?
whodidntante 4y ago
I am very curious about this: "Sometimes the issue is that there is nothing better, that is known to be available." Where SVB customers money in a money market fund that failed, or was it simply a "bank deposit" ? There are plenty of money market funds that are ungated and that are based on very short term treasuries that can be used as cash: write checks,ue credit cards, wire money, schedule payments, use autopay, etc, etc. This is what I do - I keep $0 in the "bank", have almost all the services a bank can provide, and all my "cash" is guaranteed by the federal government. Maybe I am misunderstanding something here. I am not, and never have been, a CFO.

deleted 4y ago

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