VC

TechnicalWhore

SVB was not your general purpose Mom and Pop bank. It was the go to boutique bank for startups because it understands that segment exceptionally well. Truth be told a lot of banks are in the same position with regard to bond under performance as the FED jacks rates. The difference here is the VC with deposits there - servicing their startups - are aggressive at squeaking out every bit of gain. They would not tolerate a 3 pt delta in the bond portfolio allocation return. If rumors are true, nothing would have happened here if it was not for one VC panicking. The fact Newsom had any personal exposure is not surprising and his engagement is his job as governor. The last thing California's booming economy needs is for Wall Street and NYC banking to call the shots. They are woefully inept at it as history has demonstrated. They truly do not know how to build new companies, create jobs or invest for the long term, thus providing economic stability and security. They just want oscillation and quarterly profits. IMHO.

Aarschotdachaubucha

They're moving it from one bank to another in most cases. In the cases where its being spent down (i.e. a lot of the startups that are burning VC cash on payroll, OPEX/CAPEX, etc.) that money was going into the economy either way, regardless of which bank it sat at. What is happening though is a bunch of banks are getting defacto taxed to cover SVB and Signature's shortfalls on asset sales just to make sure those depositors can move banks, and that money that gets taxed will be replenishing the empty FDIC piggy bank for insurance.

akmalhot

No, they got rid of the cap to prevent runs on other banks, your pee wee pigon brain just can't understand the concepts beyond rich people bad. ​ Yes, government spending is a MASSIVE problem, its ridiculous. While connected, the actions taken on a Sunday 2 days after the collapse of SVB are acute problems. There would have been MANY more collapses the following week without that fcaility ​ the only criticism I have is they could have not backstopped 100%, but given them a 80-90% liqudiity facilty and then recover the rest at asset disposition. But, clearly, your meme brain only sees OH they did that for VC bank!, it had nothing to od with VC bank, if Key bank failed they would have done the same thing. No one has seen a run on banks happen so quickly before ever, the digital era has changed things. It required decisive action immediately.

CityofGrond

Banks just got a huge wake up call last couple weeks…they’re all readjusting their risk models right now and battening down the hatches. It was the regional banks dishing out cash like candy that was canning the flames of the VC / IPO tech bubble. HELOCS are gonna be reigned in for consumers too against risky real estate The current era of easy money ended with SVB and Signature…market just hasn’t fully realized it yet.

techphilos

The VC industry disguising itself as technology investors instead of financial goblins is a huge W for VC’s and other scams that allow this type of money syphoning, AND WALKED AWAY WITH A BAILOUT good for them, bad for everyday folk.

IndependentOwn7041

I agree with you - the VC/start-up community are, collectively, a bunch of stupid fucks. Definitely everyone fucked up and we really ended up worse off as a result. That said though, before you fling too many stones, bear Teddy Roosevelt in mind: *“It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat.”* We're just doing our best out here, we're all fallible like people. Pampered and spoiled maybe, but just doing our best. I'm sure you are too.

ThreeSupreme

>50 bps Yep, inflation is raging in Europe, over 10% in the UK, and the ECB just upped their interest rates by 50 bps in the middle of last week's bank debacle. In spite of the all the hype in the press, this was just plain midsize bank mismanagement. They plowed billions into low yielding US treasuries, thinking that interest rates were going to stay low for the next 30 years. But that wasn't what started these midsize banks to fail last week, that was caused by an old-fashioned bank run (Its a Wonderful Life?). This was an intentional and deliberate major bank run trigged by Peter Thiel... ​ **SVB Faces Bank Run as Funds Advise Pulling Cash** Unease was spreading across the financial world, as concerns about the stability of Silicon Valley Bank prompted prominent venture capitalist Peter Thiel’s Founders Fund to advise startups to withdraw their money. Thiel’s Founders Fund asked its portfolio companies to move their money out of SVB, according to a person familiar with the matter, who asked not to be identified discussing private information. Coatue Management, Union Square Ventures and Founder Collective also advised startups to pull cash, people with knowledge of the matter said. Canaan, another major VC firm, told firms it invested in to remove funds on an as-needed basis, according to another person. SVB Financial Group Chief Executive Officer Greg Becker held a conference call on Thursday advising clients of SVB-owned Silicon Valley Bank to “stay calm” amid concern about the bank’s financial position, according to a person familiar with the matter. Representatives for Founders Fund, Coatue and Union Square Ventures declined to comment. Representatives for Silicon Valley Bank, Canaan and Founder Collective didn’t immediately respond to requests for comment.

Starmedia11

Oh you mean the ones that catered to VC 🌽 people?

Gay99999

The new window is open to more than just SVB. And their clients with uninsured deposits were startups and by proxy, VC investors.

sn0lo

Having worked in startups, those companies going under wouldn't have been a massive shock to anyone involved. 99% of them would have failed naturally in 5 years. Anyone in this part of the economy has their next job already laid out if they aren't an idiot. Yeah it's pedantic but I do think this narrative of saving the jobs of startup employees is being leaned on really heavily by the VC talking heads because it's warm and fuzzy sounding. In reality they had cash there, and even when startups fail VCs have ways to get their investment back which was sitting in the bank.

notLOL

The people bank at SVB were doing all the planning themselves as VC capital. SVB probably sucked as a bank and was great at giving full service teller services to these VC clients who just wanted easy bank access. They forgot they need great accountants who can de-risk. Probably paid cheap senior accountants thinking "we have a lock on these million dollar start ups we can go wrong?" From what I understand they lobbied to reduce their own bank's requirements for stress testing which probably required people that actually know how to run the numbers on a bank. Save money on employment just to lose on rare events like a bank run. For day to day banking it seemed fine to have people who have degrees but aren't smart. But given the long dated locked sub 2% assets for a huge chunk of money? I wonder if this wasnt a long term f u prorevenge by someone inside the org to melt their company to the ground.

ilikerashers

Pretty damning report on Dorsey. I do hate all the SV bs though. "Banking the unbanked", "Empowering small business owners", and "Increasing the GDP of the internet", puke. No guys, you skim payments using VC funds to put prettier lipstick on the pig than your predecessor. No innovation here, move on.

dbag127

How many small/midsize banks have SVB's distribution of deposit amounts though? The vast majority of banks have the vast majority of their deposits both by total and per customer under the FDIC limit. SVB had an extremely abnormal number of depositors way above the FDIC limit. Other non VC funded firms have their own Treasury departments that manage all this and stay below FDIC limits or close to them to avoid exposure.

shortsteve

He's a big VC guy. VC's are getting destroyed in the current environment since a lot of startup valuations is contingent on being able to raise money. In an environment when it's easy to raise money his net worth skyrockets. In an environment where money is scarce like now, his portfolio of start ups is basically garbage.

MormonReformist

A personal acquaintance founded a luxury pet food startup and they just failed. The reasons are obvious. 1. Stupid product solving a non-problem. 2. No barrier to market entry (no durable advantage can be obtained, making it a costs only equation). 3. VC funding dried up because risk is expensive now. As for psychedelics, focus on private equity. Those products work and solve a problem. Clearing FDA hurdle will provide a durable advantage.

LingeringDildo

Why do high risk VC deserve to get bailed out but everyone else in the regional banking system doesn’t? Tech workers would have found other jobs. Farmers in Iowa won’t.

cloudiett

Bank run? Where do you transfer your money to? I don’t get it. SVB was an unique case because startup is burning cash too quickly without additional capital from VC. For normal business, why do they need to transfer money from one bank to another?

-Right-Tackle-

Yesterday’s news: Crappy VC bank failures  The New Hotness: Deep recession and you losing your job 

CityofGrond

Anybody bullish on equities rn does not understand at all how much the stock market pumping has relied on risk free credit. The credit market is about to completely crunch and businesses are gonna get crushed. Fuckwads with 600 credit scores getting financing for their new Teslas … gone. All those shitty VC financed Web3 blockchain startups paying $250k per year to front end Devs… vaporized Your dumbass neighbor starting his home flipping empire on HELOCS… toast Even with a pivot the Fed rate is not gonna come down enough to counteract the rebalancing of credit risks across the entire financial sector right now. Nasdaq is going to pop harder than we’ve ever seen in history

therealkobe

he's a billionaire/VC... SOFI was his exit hahah

buggysoftware

>BTW - shouldn't there be more banking regulations and if they want less - no bailouts There were, but the last congress/administration gutted the parts of Dodd-Frank (passed in the previous meltdown) that would have dodged this. Apparently food stamps are "hand outs" but making VC's that ignore FDIC insurance limits whole is "free market". And I bet the Fox viewer who lives in a train derailment toxic plume while unable to get at their life savings because the FDIC insurance fund is empty will still echo "all regulation is bad".

Droidvoid

Still have recruiters reaching out about some jobs across the goddamn US. No bro, I’m not trying to move to Ohio or Nee Jersey for some wackass startup bleeding VC money. 50bp would be enough of a jolt to lead to some actual joblessness lol

RN_Geo

The VC case spigot got shut off. These companies actually have to make money now and they make it off people who don't mind paying inflated prices for cold and soggy food.

SDtoSF

While I generally agree, the problem of sivb isn't a systemic problem. Sivb was a combination of shitty risk management on the executives part and VC's telling their companies to jump. Had either of those not happened, Sivb would prob still be limping along today. My argument for 50, while I think it won't happen, is 50 really gets people scared and will start to pull back demand. Given the tough time companies have had hiring, I don't see anyone letting them go just yet. 50 shows they are serious and will get companies to start shedding debt.

Many_Easy

Taken out of context. He’s trying to support social equity and those harmed by cannabis and current systemic laws and institutions that unfairly/unequally hurt certain demographics. He’s talking about traditional companies like tobacco, alcohol, Wall Street, big banks, VC vultures like Thiel and Andreesen, Geologic’s list of sharks, PE, celebrities, etc. Nothing wrong with trying to help fellow Americans who have been harmed.

Accountant1040

In 2017 we were fine. When JPOW was elected chair he said we needed to increase rates which would have prevented the VC bubble from getting even bigger and bursting. But then Trump literally cried and said Obama got low rates and he should too. He broke the Chinese wall that’s supposed to exist between the fed and politics. After trumps tantrum the fed didn’t increase rates leading to an even bigger bubble. Not sure why no one talks about this.

zxc123zxc123

While I know you guys are clowning around. I'll just want to say that let's not shit on SVB/Signature/2023banks like this. ​ They invested in low interest rate US TREASURIES and locked in at low rates. The Fed decided to hike 5% within a year after 3 decades of low rates like regards. And then they got rugged by their own VC investors and the startups/techs those VCs had stakes in. ​ OP just a fucking regard who went margin into Signature bank trying to catch a falling knife of a company that could literally go bankrupt. Even doubled down with margin. Now they want to sue Fidelity? They would be lucky if their broker doesn't sue his ass. ​ The level of regardedness is completely different.

WuTang360Bees

I don’t see why it would. Fed has given zero indication that they give a fuck what the market thinks and the lending rate to banks is not the problem (at all) with liquidity bottlenecks or leverage ratios. What do the banks have to do with CPI? Or employment? Or oil? Or supply chains? Or corporate profiteering? No one gives a single fuck about some Silicon Valley VC yokels

yabadabadoomf

small banks have been dying for a long time. Actually allowing SIVB to fail and tarnishing the venture capitalist industry/Silicon valley would have been a much greater death blow, since VC tech is the one thing US leads the world in

robotlasagna

Pacwest has VC exposure as well. I haven't looked into how much they have as far as depositors but they have a separate issue where their lending portfolio (which they count as an asset) is mostly made up of real estate owned by VC firms... who are also depositors with them. Right now Pacwest claims they are solvent and can cover outflows but this creates an issue where if things start to unwind in the economy the value of those assets can get marked down and things quickly change.

robotlasagna

>the uninsured/business depositors were somewhere around 60% for FRC Correct, and it probably has at least something to do with why FRC isn't dead in the water right now. I was thinking about this a bit more and I think one of the ways FRC might live on is that guys like Dimon who were part of putting together the $30B lifeline might be pulling a JP Morgan bank rescue like he did in 1907. We don't know what has already gone on behind closed doors but there could be a deal where they provide a lot more money but demand that all the VC and startups quietly get their houses in order in terms of burn rate and keep their money at FRC (or even bring it back). This would restore stability and ensure the long term viability of the bank because it will have depositors that aren't just going to run out of money in a couple years anyway. Of course if they are doing this they are going to be buying some FRC stock but also very likely convertible debt and stock warrants so they can profit as well. So what we want to watch for is any evidence of these things happening.

cartim33

If I remember right there is a lot of VC exposure, but the uninsured/business depositors were somewhere around 60% for FRC, which is very high but not nearly as alarming as the 98% SVB had. Like I said before, with the big banks giving 30 bil deposits, it should survive in the short term (unless it gets bought out). If it survives long term depends on if they can restore that trust.

robotlasagna

FRC does not have the same exposure to startups that SVB did but it does indeed have lots of exposure to startups, VC money, founders, etc and that is where the contagion spread next. If you take a look at similarly sized and capitalized banks in the Midwest for example those banks have many clients with larger balances at the bank. and while those banks are feeling some stress they are not seeing nearly the outflows. The reason is because the manufacturing concern in Indiana making boring old thermostat equipment isn’t doing poorly and is keeping spending under control. Now I am not saying the contagion cannot spread to those banks, indeed it can and there is risk but for right meow it’s the banks with clients who are most effected when the cheap low interest money goes away and cannot adjust or are not willing to adjust. We are early in the news cycle so this doesn’t have a lot of reporting but if you look you see some where people are starting to connect the dots.

je7792

The amount the VC had was way over the 250 insured amount, rather than taking the risk of being the last one out they just went and withdraw it to be safe. Once someone started doing it everyone is doing it.

Moist_Lunch_5075

No, but it's more complicated than that and OP doesn't understand what the FDIC did here so I'll explain it. We're getting worked up over an accounting maneuver, basically. SVB, at the end of 2021, bought a ton of longer term bonds. When rates shot up, those bonds lost relative value on the secondary market. If played out to maturity, or if the Fed didn't juice up the treasury market by executing one of the fastest rate tightening maneuvers in recent history, those bonds would have been fine. Instead, they lost marginal speculative value... again, totally fine, until a bunch of a VCs realize that you're vulnerable to a capital underrun attack, and tell their clients that **\*they all put in your bank\*** to withdraw their money all at once. This causes a bank run. Since those highly concentrated funds are against a mix of loans with questionable terms negotiated by VC backers all given to unprofitable tech startups, corporate real estate, and lower-interest bonds, the bank had to tap its bonds to try to get cash for customers, trying to arrange for a sale at a loss. This wouldn't have worked, and so the FDIC stepped in and took over the bank. In order to cover deposits, since the value is in these assets, the FDIC has to loan out cash to cover the bank run. They are arranging for the sale of the assets and covering some of the excess. The actual difference will be the amount leftover once all assets are sold, and most of them will be sold at a more ideal value than SVB would have gotten because the FDIC and the Fed are in a better position to apportion them. The rest will be paid off by other banks, either through demands for capital from the FDIC, or through money taken in by the new Fed bond loan-out facility returns. Basically, no, the Fed didn't print money and the banks will ultimately pay the cost.

longdrive95

They will all have a bank run led by a circle jerk group chat of VC losers pumping fear porn out into all of their partner companies while they actively short it?

robotlasagna

>Had an account with them and loved their service. Any founders I know that have/had accounts at them had positive experience. Whether or not you decide for yourself if FRC has a chance depends on understanding the core reason why SVB failed. SVB didn't make particularly poor investments. Yes they could have done a better job of hedging risk but the main reason they failed is because when interest rates went up and startups lost access to cheap easy money, startups had the option to clean house and run more efficiently and they didn't, choosing instead to keep their burn rates high which meant needing to pull money out of the bank. Now you yourself know founders, so ask yourself, all the people you know in the startup culture, the people who get paid 200K salaries but kind of just go to zoom meetings all day and when you ask them what they do they don't give a particularly good answer, well do you see those people getting laid off or reassigned to more productive work? If the answer is 'no' then that means money is going to keep leaving FRC to pay those people and FRC suffers outflows until they become insolvent. Side note: I know startup people too and even before this watched people I know had very cushy jobs... right up until they couldn't make rent and sold me all their sweet office equipment, Herman miller office chairs and $1000 coffee makers all for pennies on the dollar simply because they couldn't even afford to put the stuff in storage. This was how unwilling many startups are to end the party at a reasonable hour, they simply cannot break out of that culture. I don't hold out much hope for FRC simply because I know that lots of startups entire business model was to simply try to get to the next round of VC funding and you and I know that is not happening in the foreseeable future. Maybe what you are seeing is different.

retard-is-not-a-slur

These declines are the markets coming back to reality again. All those shit 'unicorn startups' with barely any revenue and no profit for years backed only by idiot VC money are going to finally go to shit. They were always shit, but now that the free money printer has gone off, and the post-pandemic-panic has started to set in, the people with poor financials themselves/no liquidity are withdrawing out of stupid assets into safe assets. Give it 5-7 years. We'll be out of the recession, and if there isn't WWIII, I suspect markets will be where they were just a short while ago, sky high on cheap money.

borrowedbook1

Sub prime mortgage products in 08. If you do not know the distinction. Oh well. No loss on the bonds in 23 if held the duration, which to be not marked to market, meant by definition zero risk and held to duration. Those subprime products could have been held for eternity and still have been worthless. Do not doubt the Boomer King. If idiotic VC's hadn't panicked wouldn't have happened. No bank can survive a run. No bank.

SannySen

So all VC is speculation? That doesn't seem right either. I think VC investors do have a basis for their investment, but they look to other factors, like market opportunity and business case, rather than past performance. If you take this broader view of what it means to invest based on "fundamentals," then I think any kind of investment in an alternative asset can also be an "investment," so long as it's based on some view around the market generally (e.g., macroeconomic/monetary system structures). Otherwise, you are just definitionally excluding investments in anything other than blue chips or stock indexes from the term "investments."

borrowedbook1

In 08 the assets (loans) were absolute dogshit and most didn't know it. In 23 assets (bonds) are solid gold and everyone knows it. Except for dipshit VC college dropouts. Not the same.

Theeliteshitposter

Hello, I’m a VC analyst for some shit fund! Please let me DM you so I can give you my worthless PowerPoints

_Klarum

I know that this is a forum for regards but still... The difference is that in 2008 we were talking about people's deposits and credits. With SVB we are talking about VC money put into 'unicorns'. AKA fairy dust money that real people dont give a shit about.

MrSamsonite

>You don't know how much he actually has in bitcoin and are making projections Correct. >based off similarities in the 2 graphs.did you try lining his net worth up with PayPal stock Yes, but also because: - We know Thiel just triggered a run on the bank (intentional or not) - Thiel has a long history of publicly hyping bitcoin and asserting astronomica returns - The limited concrete evidence of Thiel's holdings suggest that he's hasn't missed a single big surge of BTC since before 2017 - At the time of the bank run,, one of the largest, most important crypto banks collapsed >I'm sure they could all correlate to a certain degree You're correct, and that's why if he had a completely balanced portfolio, it wouldn't correlate with any single security: all the little different correlations with individual securities would combine to create a line that doesn't look like any one particular line of one of their holdings' value. If he had a well balanced tech VC portfolio, his net worth would correlate lass with BTC and more with the Nasdaq

willsajna

Wow, are you a propaganda mouthpiece for the DNC or what is going on. I do not hold any political allegiance, but keep living your life projecting your shit onto others. Here are some hard facts and then I am out (this is for anyone that is reading) Modern Monetary Theory (MMT): MMT is an economic theory that has gained attention in recent years. It suggests that a government that issues its own currency can never run out of money, and therefore can pay for government spending by creating new money. Critics argue that implementing MMT could lead to uncontrollable inflation, while proponents believe that it offers a new way to address economic inequality and fund public programs. A venture capitalist (VC) is an investor who provides capital to startups and early-stage companies with high growth potential in exchange for equity or an ownership stake. Venture capitalists are typically part of venture capital firms or funds that pool money from various investors and manage investments in a diverse portfolio of startups. Venture capitalists play a crucial role in the business ecosystem by helping startups and early-stage companies grow and scale. They often invest in companies that are considered too risky for traditional banks and financial institutions. In addition to providing funding, venture capitalists may also offer strategic guidance, industry connections, and other resources to help the companies they invest in succeed. The process of venture capital investment typically includes: Deal sourcing: Venture capitalists actively search for investment opportunities by networking, attending industry events, and monitoring the market for promising startups. Due diligence: Once a potential investment is identified, the VC conducts thorough research on the company, its team, market, competitors, and financial projections to assess the potential risks and rewards of the investment. Investment decision: If the due diligence process is favorable, the venture capitalist negotiates the terms of the investment, which include the amount of capital provided, the percentage of equity taken, and any other conditions or rights associated with the investment. Post-investment support: After investing in a company, venture capitalists often take an active role in the business by providing strategic advice, introductions to potential customers or partners, and helping the company secure additional funding if necessary. Exit: Venture capitalists aim to realize returns on their investments through a successful exit, which typically involves the sale of the company or an initial public offering (IPO). This process can take several years, and the returns generated are used to fund new investments and provide returns to the venture capital firm's investors. I am not going to address the rest I mean it's really not worth any more of my time I think anyone reading this can discern for themselves which one of us is the "CULTIST" here and which one is simply stating factually correct information free of political bias. Enjoy being you I guess...

CityofGrond

People still don’t get it… the Fed wasn’t the one pumping the market in 2021. They were just tossing breadcrumbs to keep the banks fed. All that free money came from banks dishing out no questions asked credit to every piece of shit VC sweetheart that mentioned blockchain…or the flood of suburbia goombas building their home flipping empire. That free money era died with SVB, SBNY, SI, FRC The Fed could cut rates to 0 tomorrow.…after what just happened your dumpster fire negative cash flow tech startup moonshot is not gonna get new financing. Compliance officers have every loan officer and mortgage broker in a barbed wire testicle vice right now. The Nasdaq tech bubble hasn’t even begun the pop that’s about to happen once the cash runways dry up in a few months.

MrSamsonite

Their financials were trash and they were headed for big trouble. If the recession were upon us, they totally could collapse like Bear Stearns. but there isn't a single competent VC who would have looked at that bond sale and said "THE INVESTORS NEED TO PULL OUT NOW!" And you're telling me that's what Peter fucking THIEL did?? And he didn't stop to think that mayyyyyyyyyyyyyyyybe the most influential player in tech VC telling all of his investors to pull out of the most popular bank in the industry might have some...adverse effects? It's batshit.

ThreeD710

You make a fair point. But why do you think they were holding for free or being the least greedy? Because the money that were actually in the bonds were required to be there by regulation and is just a % of the total deposits they receive. Banks don’t hold anyone’s money for free as far as I understand. Banks take your money and pay you a x rate and then lend out that money at a x+ rate, that’s where they make their money. So if they take 100 in deposits, they can’t lend out all of it. They lend out let’s say 80 and 20 needs to be held in bonds by regulations. If no regulations, they would have lent out all 100, the banks wouldn’t bother keeping anything. They probably would have kept enough as required for liquidity by depositors, but that’s about it. Now coming to being greedy or the least greedy. I am of the opinion that they were greedy and dumb because the way their business model was structured, they were bound to fail. Banks usually try as much as possible to reduce concentration risk, that is they try to lend to as many diverse industries as possible. Probably SVB lent to diverse industries, but if majority of them are startups or young and growing companies then you open yourself to massive credit risk (the risk of not being paid back). SVB played the credit risk game knowingly and received compensation for it (in terms of higher interest rates on its loans). This was one part of being greedy. The second part of being greedy was not insuring their deposits, because lower cost and higher profits. So yeah. Between the assets (money lent out) and the liabilities (the deposits they have), believe it or not, they actually need to have some money in their bank to pay their depositors when required. If you take a big chunk of that required liquidity and invest it in bonds to “gain a little more” and thereby taking on more interest rate risk, without being insured, yes, you are greedy. They just didn’t have enough money when their depositors wanted it, and all their depositors wanted their money at the same time, so they got wrecked. But honestly, that’s part of the business. Tough luck. I believe they got bailed out because apart from losing a lot of jobs in the tech industry, the biggest risk would have been a handful of PE’s and VC’s getting absolutely wrecked and their investments all over the World getting wrecked in return. Definitely would have been some crazy contagion. But honestly, it should have allowed to be happen. The pain would be shared by everybody, but the biggest takeaway would be that nobody is bailed out. NOBODY. Maybe the general public doesn’t realize what they are asking for, but so be it. Because the bailing out isn’t helping either as nobody is responsible and the risk just keeps getting piled on.

Reduntu

It wasn't interest rates that did them in. It was having all their customers be in the VC industry and have them informally organize a bank run. No bank can withstand a bankrun. They all use the fractional reserve system. Most banks have a more diverse customer base though.

notheusernameiwanted

SVB didn't even need to fail. If the same assholes in the VC group chats that started the bank run had gathered up some pocket change they could have solidified the bank easily.

Stock_Tradition_3344

I was also thinking similar, fake demand & supply, when I started with stocks, but realized it is not ! Think this way: **When VC funded startup are able to withdraw 42B in a single day from SVB**, trading 250B to Trillions are easy with stock market. There are plenty of frenzied Wallstreet people/funds buys and sells on the market depending one news, sentiments..etc

longdrive95

Looking back Chat GPT was just another VC pump and grift

manymaniacs

A lot of myths about this one. MOST of the big deposits were from hedge funds, not businesses with lmiddle class employees. Think I'm wrong? Why? Cause some VC said so on Twitter? Why did they crash? Because the fed raised rates and decreased the value of what were supposed to be very stable bonds. When the VCs figured it out they coordinated a run on SVB. Likely that did huge shorts as well. So why did SVB get bailed out? To prevent more bank runs. That's all. They'd rather do a huge bailout than risk uncontrollable bank runs. The Fed is TRYING to shrink the economy. They want to see people lose their jobs. They didn't do a bailout to save jobs.

RlCKJAMESBlTCH

Their model was essentially attracting VC deposits in large amounts by giving favorable deals on products to VCs if they and their portfolio companies exclusively used SVB as their bank. Since about 2011, there have been large in-flows to VCs and their portfolio companies so SVB had massive deposit growth. They essentially took these deposits and invested them in bonds and made a spread. This worked well when rates were steady. But as the Fed aggressively raised rates, the value of the bonds went down (since bond prices are inversely correlated to rates) dramatically. The bond losses were only on paper though so it might not have been a huge deal If SVB didn’t need a bunch if liquidity. However, when they announced a large unrealized loss on the securities portfolio, all the depositors were like holy shit, the size of the loss is about the same as the amount of equity in the bank, meaning the bank was, on paper, almost insolvent. The depositors then were like, fuck, we gotta get our cash out as the bank is on the brink and we only are protected to 250k despite having millions in our account. Everyone started pulling out cash and SCB was like, fuck, we don’t have the cash to give people their money back so we need to sell off some assets, so they sold binds that they probably did not want to sell but had to and realized the loss and took an actual loss which had an actual effect on the bank’s equity. Then the regulators were like, Fuck, the bank’s equity is now almost zero and there is nothing to absorb anymore losses and other large depositors are also likely going to want to withdraw so they don’t get fucked too and the bank would need to sell more binds and realize more losses, which eventually was going to render the bank insolvent. So the regulators sent the US Marshalls in on a Friday to take over the bank. They also announced full coverage for all depositors to cure the fear that their deposits would not be covered in a failure. Essentially, the bank failed to manage interest rate and liquidity risks, the equity if the bank got fucked when large depositors got scared and the bank was forced to sell binds with unrealized losses that they didn’t want to sell but had to in order to raise cash for depositors who were withdrawing funds in mass. When the regulators saw the writing in the wall, they took over the bank.

bran_0434

Definitely agree with you on all those points. Any of the banks too heavily focused on tech and VC may be in trouble when it comes to liquidity. Failed to diversify in clientele. Can’t blame them for investing some funds into long term bonds though. Normally that is a safe investment. But SVB went too hard on long term bonds. Failed to diversify in fund management too. I’ve seen people say the banks were caught off guard with the rising rates. I don’t believe that. Fed has been forecasting rate hikes for quite a while. Plus the dot plus shows what they plan on doing years out. They just didn’t want to dump their bonds earlier, but now that financial reports are due…can’t hide mismanagement any longer.

bigfartchili

They literally only did it to restore confidence in the general population. They couldn't care less if VC's lost their asses. The banking system is entirely reliant on trust because the banks can never and will never be able to liquidate all their holdings if everyone withdrawals. I just find it funny that the US Government is issuing 5% bonds at the same time they are purchasing back 1% bonds. Basically all that work to curb inflation with rate hikes was stupid because now they are basically working in the opposite direction.

Jaamun100

Way to point out something irrelevant to my point. Apple Cards are for consumers, not businesses… I speak from experience, my seed-stage business ($10M VC funding, $0 revenue) was denied at all the big banks.

MartyJezer

If I want to avoid nervous techie and VC money, Alabama banks sound pretty decent TBH.

PapiGoneGamer

Buffett sees some kind of value in FRC and they’re not some overleveraged VC or crypto bank. They’re a solid regional bank with a good balance sheet that are holding the bag on their longer dated bonds. Now that the lending facility is open, Buffett can take that underwater paper and swap it out for cash at current rates to make depositors whole and Berkshire Hathaway is then left with a good regional bank with a lot less liabilities than they had when they acquired them.

JeromePowellsEarhair

There was zero risk management. Proper risk management would have been digging out of their long positions because their depositors are all VC funded and that tap was about to dry up. A near laymen could have seen the writing on the wall that their liquidity was too low for their clientele base. They’re not just an average bank.

Sonofman80

Here you can read up that it wasn't people moving billions looking for interest. It's not like these VC companies were rate shopping. https://www.theguardian.com/business/2023/mar/16/the-first-twitter-fuelled-bank-run-how-social-media-compounded-svbs-collapse >Michael Imerman, a professor at the Paul Merage School of Business at the University of California-Irvine, says that what happened to SVB was, “a bank sprint, not a bank run, and social media played a central role in that.” But yeah, you're going to know better than a college professor haha

ahminus

I think if the FDIC and Yellen start picking and choosing who gets made whole and who does not, there is going to be absolute hell to pay. Especially if a bunch of VC billionaires who should have known better get bailed, but other people don't.

Jaamun100

The thing is the big banks are also more picky with who can make deposits and obtain credit cards. They don’t typically allow businesses with little revenue. This is why tech startups with tens of millions in VC capital but little revenue are forced to use little banks like SVB. It’s really a weird system where these startups have no way of keeping bank deposits safe.

needsadvice1999

VC's hate this guy

unlikelycandidates

How about a second vacation house for a VC bro? 

SeymourGlassy

10,000 SSSS 4,000 NCLH 3,000 HBAN 1,000 KRE 40 DIA 200 FRC (for fun) 2,300 IGBH 500 SQQQ Go easy on me. The killer is SSSS , bought at $6. Down to $3. But I think hope and pray it will eventually recover as their a VC fund with decent cash and $16 mill to do buyback by September. Overall down 40% and sweating it. Any advice is welcome. Would like to at least get back to even in 3-5 years. Retire in 12 years or start working at Wendy’s.

neothedreamer

Fair point. It isn't this clear cut though. All banks take deposits and invest then in mortgage loans, business loans etc. They don't just keep a ton of cash on hand. They also invest in bonds Treasures etc to earn interest to pay the depositors. The rapid increase in rates has caused banks to flip to a situation where depositors are expecting more than the banks are getting on their 30 year mortgages that we originated sub 4% and longer dated bonds/treasures that have lost a significant amount of value. They are losing money on the now negative spread between the two. The other issue is the run on the bank to pull out all their money. I have heard VC like Peter Thiel helped cause this by pushing his VC funded companies to pull all their money. Hard reality about banking, if everyone rushed to the bank tomorrow and wanted to pull out all their funds as cash all banks would fail. There is a mismatch because much of these deposits are not that liquid. You can call up the guy with the 30 mortgage and demand full early repayment

Highlanderlynx

Sounds like a systemic regulatory issue. Perhaps banks and VC and Hedgefucks need to be Uber regulated again a la FDR policies.

BernedTendies

Sure, but I’ve seen one chart from Michael Burry saying they’re number of accounts are somewhere around 94% insured similar to SVB. But I know $41B were pulled out of SVB in like 48 hrs leading to its fall. I also know they sold $21B worth of bonds at a 10% loss and were going to continue to do so because they had no interest swaps, duration hedge. Their average HTM was yielding 1.96% aka picking pennies up in front of a steamroller while their VC clients were having liquidity dry up faster than anytime in American history. I haven’t heard any of those numbers or story for SBNY 🤷‍♀️

--Warmonger--

>If l'm OK with even more volatility to get higher returns but I'd try to minimize a loss of principal So you want the potential higher returns of more risk, while simultaneously minimizing risk of principle loss. The entire market was crazy for that kind of thing in the early 2000’s. They were called CDO’s. You get the higher earnings that come with more risk, but don’t worry, your principle is protected because these CDO’s are so diversified so there’s virtually no downside risk. Basically what you’re asking for is impossible. There’s no way to reap the upside rewards of risk without simultaneously subjecting yourself to increased chance of losing principal. If you want more upside you have to be willing to accept more downside risk. One strategy that might be what you’re looking for is basically the principle of asymmetric risk. You could make risky investments with limited downside and potentially unlimited upside. Basically, the potential upside far outweighs the potential downside. This is basically what VC’s do. They know 9 out of 10 of their investments will go to 0. But the tenth one will be so successful it will compensate for all the losses and then still be very profitable after that. Buying options or penny stocks works the same way. Put in say $1000 that you know could go to $0. But also could go to $10,000 or more. Max risk = $1,000 Potential profit = unlimited The strategy is, if you make enough of these bets, eventually one of them will pay off, especially if you try to be as smart as possible with those bets you make. That’s basically what VC’s do. So asymmetric risk/reward opportunities sort of fulfill what you’re looking for due to the limited downside (total amount invested) and potentially unlimited upside. The key is to only make small bets that you could afford to lose. Definitely don’t bet the farm on something like that.

techphilos

VC’s trying to pump Btc to save SVB and related trash companies is laughable, we are far from the bottom, but likely will go higher in the short term

osogordo

I thought it was the SVB itself who lobbied for the fewer regulations and not their VC depositors.

idLogger

Was Silicon Bank Used2️⃣Launder Funds4️⃣Naked Short Stocks Sold By Hedge Funds/VC? Using Silicon/Embezzle💰💵 w/ Loans4️⃣Ponzi Companies ie FTX, BlockFi, Voyager; Buying Homes/Cars/School Fees? Then Use Signature Bank/Equities2️⃣Swap Naked Stock4️⃣USDC/BitCoin2️⃣Convert2️⃣FTT2️⃣Pump FTX, BlockFi, Voyager 2️⃣Rehypo Assets w/in (100 Plus Umbrella Companies) Which Increase Equity, Silicon Valley Bank Issue More Loans2️⃣Deposit/Swap Into Hedge Fund/VC Many Banks Accounts? The Math Doesn’t Add Up? Normally Opening a Single Business is Leverage? StartUps are Losing Money4️⃣More Than 5 Years & Maybe Survive? Hedge Funds/Venture Capitalist are Using Their Own Money2️⃣Pay Until Startups In VC Terms Become IPO’s & Sell Stocks (ie CoinBase)? During Covid Most Businesses Shut Down, That Alone Should Have Been Leverage That Bankrupt Both Hedge Fund/VC & StartUps? Instead, Hedge Funds/VC/Stock Market & Startups Increased in Value & Size? 🧮 Doesn’t Add Up Unless♾️Bernie Madoff Style Stock Selling of Naked Stocks, Laundered Into Banks, Some Converted2️⃣ Crypto, Some2️⃣🏠, Some2️⃣Loans, Investments, & Sponsorships? Bernie Madoff w/ Credit Line Wrapped Up Into Loans Creating ETFs that Sells Options against? These May Cause the Banks & BIS’s Assets/Liabilities MisMatch & Systematic Risk Issues? Bailed Out Ponzi Creators & Not Depositors? CNBC’s @andrewrsorkin: https://twitter.com/squawkcnbc/status/1635239805276626944?s=12&t=hwjyFGafbqnCz7cW8lm9Jg Financial Time’s @Tabby_Kinder @AntoineGara: https://www.ft.com/content/6e23a2fb-484e-418d-b309-bf558b3a6a17 CNBC’s @carlquintanilla: https://twitter.com/carlquintanilla/status/1634999696828825600?s=20 Market Rebellion’s @petenajarian @jonnajarian: https://twitter.com/marketrebels/status/1636389591413563393?s=61&t=zvpE_UYDJ4UAq7dTHOVYdQ Yahoo Finanace @kevinolearytv: https://twitter.com/yahoofinance/status/1635728335618686976?s=61&t=zvpE_UYDJ4UAq7dTHOVYdQ Fox Business @SusanLiTV: https://twitter.com/susanlitv/status/1635316755735416837?s=61&t=zvpE_UYDJ4UAq7dTHOVYdQ Random Elon55447675 Guy: https://twitter.com/elon55447675/status/1634729758368976898?s=12&t=hwjyFGafbqnCz7cW8lm9Jg BIS (Bank of International Settlements): https://twitter.com/bis_org/status/1600324305186848768?s=46&t=hwjyFGafbqnCz7cW8lm9Jg

phileo99

\> while you make some good points I agree with, a lot of that is irrelevant when it comes to a traditional bank run. SVB was not a traditional bank run. The demographics of Its depositors were very concentrated - they were mostly tech and biotech startups. And the VC's who invested in these startups knew and were connected each other, and also banked with SVB.. Also the depositors who got investment/financing from SVB Investment division had to leave a big chunk of their funding with SVB

Greenappleflavor

Frc is not the premier of private banking. JPMC has jpm which is private banking at $10mm (could have been lowered or raised, this was back in 2013/2014) and the c private banking (cpc) has as low as $500k (could be $250k now to compete with Citi gold). FRC has a niche of private clients that are in VC/PE/tech world which is one of the reasons why SVB fail got people looking at FRC. However, that doesn’t mean they’re crown jewel. CPC has been around for almost a decade now. JPMC struggle is not only competing against FRC. It’s against the likes of fidelity, schwab/td, E*Trade/morgan Stanley, etc when it comes to cash management alongside investment offerings (pricing wise they’ve lagged behind in trading commissions as well as loads/expense ratio for funds never mind the active management % charged). FRC has that similar wealth space clientele as SVB and similar dominance in lending. JPMC has always been conservative (fortress balance sheet) and Wells Fargo beats them often in lending (they’re more known for that along with fraud bank accounts) and FRC (from what former wells banker tells me) beat Wells, sometimes by almost a full 1%. That’s also what’s hurting FRC in a rising interest rate environment and would no doubt (unless they have some arrogant or stupid or both, leaders) change the way their mortgage business competes in the future. And focus more so then they have on the investment arm (including third parties and alternatives like LPs) as well as truly building a private client experience revolving around that and wealth management.

UCNick

What an uneducated and misleading post. This has everything to do with QE and the huge surge in VC money flowing into startups. The regulations had nothing to do with it.

RepairThrowaway1

She's not even wrong VC is enormously fucked

Hacking_the_Gibson

The next time a bank needs to buttress its liquidity, they will not go to the market for it, they will just go straight to the Fed. That is what started all of this. SIVB sold down some of its holdings to reposition its duration profile and then did a secondary offering. That was the catalyst for the bank run, which was further exacerbated by Peter Thiel, a noted piece of shit. If the depositors were always going to be backed 100%, there was no need for SIVB to do any of that. They could have just used the existing repo facility to get cash for their Treasuries at market values to carry ordinary operating costs and wait all of this out. As a result, the next bank that faces this problem will be able to preserve its shareholders and bond holders because they can just got to the fancy new lending facility the Fed provisioned to borrow 100% of the value of their Treasuries at the par value! Put that together with a 0% reserve requirement, and now you have infinite money! Huzzah! All of this because VC backed startups cannot figure out that it might be a good idea to have your tens of millions in even just two separate banks. Giannis Antetokounmpo had 50 separate bank accounts when he was on his original contract. The reason? FDIC insurance limits. He probably has a future as a risk management consultant for idiot tech companies and VCs that cannot figure out the point of business is to make money.

traversecity

Perhaps that was one mistake of perception. Bank has many start up class depositors, customers. But they didn’t step back to see the risk presented by a small number of venture capital steering so many customers. I don’t recall which VC, maybe a few, no twitter social stuff, they picked up the telephone and called. Something like “Don’t ask why, we’ll talk later, you need to immediately withdraw all cash from the SVB, right now.” The San Francisco fed should have caught this much sooner, like months and months ago.

UCACashFlow

Not to equal extents across the board, no. Have loan rates and deposit and wealth management rates been impacted? Yes. But like I said the banks being impacted are in very tech/VC specific situations, not general or systematic situations. But banks also have the backstop of the Fed and fdic right now, and the top 5 banks are benefitting the most of all. They’re seeing large inflows of commercial and retail deposit relationships from smaller institutions due to their perceived stability. They would have never put such a low return deposit into first republican without all their deposits being fully covered by FDIC. So basically the top 5 banks have the backing of the government right now.

UCACashFlow

The biggest institution in this case SVB is #16 in the country and below $250bln, so this is nothing like what happened when all 10 of the biggest lenders were in trouble in 2009. The issue was subprime with $1trln-$2trln, so it touched every institution in the system. Loans going bad to borrowers who should have never qualified, impacting all banks. Nothing close to this is happening today. We’ve had aggressive expansion especially in the last 3 years and with that there’s naturally going to be some trash that needs to be taken out. The 2023 event impacts a few regional lenders, that’s not necessarily the sign of a broader systematic issue like 2009. It makes sense these lenders are the first to go down, they may not be the last, but they’re all related to tech, a capital intensive industry, especially when you consider newer start ups and research firms which these banks catered to. In other words, companies hoping to make money next year, or the year after that, because they’re not making money today. They don’t have to have any income and when capital costs rise these companies have issues and thus their banks also see issues. Tech has has a boom since Covid when everyone including businesses bought softwares and various tech to work remotely and work from home and meet Covid restrictions. There should have been expectations for somewhat of a tech slowdown just because of this. Normally, bank runs or crashes are stemming from the loan side. There’s been a capital or liquidity crunch sure, but in the tech start up space, these kinds of companies don’t go get normal loans. They get financing from venture capital. VC has less capital to throw around, and these startups have to draw down their own cash so this is a deposit issue for the banks not a lending portfolio issue. At the end of the day these banks didn’t have enough operational cash to meet their needs. Typically bank and financial industry meltdown exposure are fueled by loans. Loans that are sold from one institution to another, the secondary market, MBS, etc. this is not the case today so the overall exposure to the entire industry is low. Sure, any banks that continued to buy short term bonds in an aggressively rising rate environment would be in trouble. And they have $2trln “line” secured by bonds lent out at face value. 15% of that has been used (low advance rate) with 5% concentrated in SVB alone, which we know is in a liquidity tech related crunch. Bad for the tech industry and venture capital. Not as nightmare mode for the banks and financial companies.