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SVB had loads of venture debt that is completely worthless. They were doomed from their own mistakes well before “the Fed closed for the day.”

georgeecollins 3y ago
I didn't know that, I thought the issue was that they were holding too many long term bonds at a low interest rate. What is your source for that information?
- choppaface 3y ago
  Wow some pretty pointed responses that ignore important context around the collapse. SVB had about $7b venture debt, and the total venture debt market ballooned during the pandemic. VCs and banks like SVB were hyper-inflating start-ups with venture debt (which is totally worthless unless it can be flipped) and they continued doing this into 2022 and 2023 despite inflation and rising rates. 10 years ago venture debt was a fraction of what it became because it’s stupid-risky, especially for a bank. But with crypto and especially the rampant fraud within crypto, VCs found a few friendly banks and created a bubble. That $7b might as well have been a hole in the balance sheet, just like what FTX did. The banks and VCs had 12-16 months to de-risk and all they did was cut deal volume. Blaming the collapse in any way on the Fed is as specious as Musk trying to walk out on Twitter because of “bots.” Here’s e.g. one article on the SVB loanbook https://www.forbes.com/sites/amyfeldman/2023/03/19/silicon-valley-banks-demise-tightens-spigot-on-30-billion-of-venture-lending/?ssp=1&setlang=en-US&safesearch=moderate&sh=2a9ac8f42b99 https://www.forbes.com/sites/amyfeldman/2023/03/19/silicon-v...
- mrosett 3y ago
  The comment you're responding to is incorrect. SBV was blown up by 10 year US bonds (ironically the quintessential safe investment): https://www.npr.org/2023/03/19/1164531413/bank-fail-how-government-bonds-turned-toxic-for-silicon-valley-bank https://www.npr.org/2023/03/19/1164531413/bank-fail-how-gove...
- hnfong 3y ago
  What you said is true. But the aggravating factor is that the vast amount of their deposits was VC money fueled by QE and "easy money" that was no more. Even without a bank run in the first place, the total deposit amount would drop significantly, and easy to put two and two together and realize SVB is in trouble... and then the bank run becomes inevitable.

georgeecollins 3y ago

I didn't know that, I thought the issue was that they were holding too many long term bonds at a low interest rate. What is your source for that information?

choppaface 3y ago
Wow some pretty pointed responses that ignore important context around the collapse. SVB had about $7b venture debt, and the total venture debt market ballooned during the pandemic. VCs and banks like SVB were hyper-inflating start-ups with venture debt (which is totally worthless unless it can be flipped) and they continued doing this into 2022 and 2023 despite inflation and rising rates. 10 years ago venture debt was a fraction of what it became because it’s stupid-risky, especially for a bank. But with crypto and especially the rampant fraud within crypto, VCs found a few friendly banks and created a bubble. That $7b might as well have been a hole in the balance sheet, just like what FTX did. The banks and VCs had 12-16 months to de-risk and all they did was cut deal volume. Blaming the collapse in any way on the Fed is as specious as Musk trying to walk out on Twitter because of “bots.” Here’s e.g. one article on the SVB loanbook https://www.forbes.com/sites/amyfeldman/2023/03/19/silicon-valley-banks-demise-tightens-spigot-on-30-billion-of-venture-lending/?ssp=1&setlang=en-US&safesearch=moderate&sh=2a9ac8f42b99 https://www.forbes.com/sites/amyfeldman/2023/03/19/silicon-v...
mrosett 3y ago
The comment you're responding to is incorrect. SBV was blown up by 10 year US bonds (ironically the quintessential safe investment): https://www.npr.org/2023/03/19/1164531413/bank-fail-how-government-bonds-turned-toxic-for-silicon-valley-bank https://www.npr.org/2023/03/19/1164531413/bank-fail-how-gove...
hnfong 3y ago
What you said is true. But the aggravating factor is that the vast amount of their deposits was VC money fueled by QE and "easy money" that was no more. Even without a bank run in the first place, the total deposit amount would drop significantly, and easy to put two and two together and realize SVB is in trouble... and then the bank run becomes inevitable.