Late Stage Capitalism? Silicon Valley Bank Collapses in 48 Hours

[Forogil]

So correct me if I'm wrong here as I'm reading a bit more...

So if customers hadn't all rushed to pull out their money and had kept it in there for the most part, giving SVB time to raise a few billion to shore up its balance sheets...none of this would have happened? Everyone's money would still likely be safe? The bank would still likely be operating, either seeking the capitol investment or having secured it in the past few days?

Am I understanding this correctly?

Maybe you, maybe you aren't.

The problem is that we don't know whether those assets are actually worth that much with current interest rates; as the Bloomberg article states and see also https://www.youtube.com/watch?v=kxcwn7xoXhU

[Lynarii]

To a point, sure. That it needed $2B to balance its sheets ain't great for a bank.

But the point I'm trying to highlight is that this didn't have to result in the bank closing and everyone being fucked. If everyone had just "Stayed calm and carried on.", keeping their money in the bank and allowing the bank to secure that investment, everyone wins at the end of the day. The bank stays open, customers don't potentially lose huge sums of money that is above the FDIC insurance threshold.

Part of the problem with the idea of "Stay calm and carry on" though is that the CEO just dumped a whole bunch of his shares right before this all came out. That flat out tells everyone that the CEO of the company doesn't believe that they'll actually secure the investment they need and move forward. If he doesn't, why should anyone else?

[Edge-]

Part of the problem with the idea of "Stay calm and carry on" though is that the CEO just dumped a whole bunch of his shares right before this all came out. That flat out tells everyone that the CEO of the company doesn't believe that they'll actually secure the investment they need and move forward. If he doesn't, why should anyone else?

Yeah, seeing that now. So definitely seems like things were more shady/fucked behind the scenes.

Also, Bloomberg's got a good explainer on this but it's paywalled. I'll drop this tidbit for the lulz - https://twitter.com/jpinesavag/statu...46393912352768

[Rasulis]

The biggest question is the bank solvent?

The last 10-k filing (Dec, 2022) says yes to the tune of $220B plus in assets and $173B in deposit. The regularor's court filing on 03/10 stated that the bank was in “sound financial.” So likely all the depositors will get their money back.

What happened?

Lost of faith and herd mentality.

On 03/08 SVB disclosed losses in its securities portfolio. Start up companies started getting calls from investors to withdraw their funds.

On 03/09 depositors withdrew $42B. By Thursday COB the bank cash balance was negative $958M. So the bank had around $40B in reserve. Around 20% of the total deposits. Twice as much as the highest reserve held by the typical US banks.

What's next?

FDIC created Deposit Insurance National Bank of Santa Clara to pay insured deposits up to $250K. Those funds should go out on Monday. SVB also had private insurance for corporate accounts of up to $125M. These funds should become available in matter of weeks. Funds of over $125M will have to wait until the SVB assests are liquidated.

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USDC getting wrecked letsss gooooo

A lot of other companies will be affected by this. SVB accounts are mostly corporate accounts. Not only do they keep their funds there, but they also use it to process payrolls, payments, etc.

Etsy warns sellers of delay in processing payments due to Silicon Valley Bank collapse

[Twdft]

depositors withdrew $42B

As a mere person I can withdraw €1.000 per day via atm from my normal bank account. No max withdraw for corporate customers?

[edit] ah yeah, that is cash. I'm sure I could transfer as much as is in my account to another banks account. nvm

[Edge-]

Man, this is having some fun ripples through the crypto world too. Coinbase shut off USDC:USD conversions throughout the weekend, so if you had USDC there it's still just magic beans right now.

https://twitter.com/AutismCapital/st...00558286266369

I do enjoy some apparently fairly large financial/crypto account asking about keeping USDC at 1:1 with USD and like...why could Coinbase have anything to do with that as the exchange? Either way, dude is probably pretty unhappy now that it's at its lowest it's ever been.

I won't pretend to understand all the extremely dank memes, but the schadenfreude is sure fun.

[Endus]

As a mere person I can withdraw €1.000 per day via atm from my normal bank account. No max withdraw for corporate customers?

[edit] ah yeah, that is cash. I'm sure I could transfer as much as is in my account to another banks account. nvm

"Via ATM" is also important. You can withdraw your entire account if you go to a teller. It might raise some eyebrows if it's a huge amount and if it's more than $10k you're gonna get watched by government officials (but not that closely; they're tracking large suspicious transaction to fight money laundering and such).

[Rasulis]

Man, this is having some fun ripples through the crypto world too. Coinbase shut off USDC:USD conversions throughout the weekend, so if you had USDC there it's still just magic beans right now.

https://twitter.com/AutismCapital/st...00558286266369

I do enjoy some apparently fairly large financial/crypto account asking about keeping USDC at 1:1 with USD and like...why could Coinbase have anything to do with that as the exchange? Either way, dude is probably pretty unhappy now that it's at its lowest it's ever been.

I won't pretend to understand all the extremely dank memes, but the schadenfreude is sure fun.

We'll see how it goes. The problem is that half of all U.S. venture-backed tech and life science companies and more than 2,500 venture capital funds are SVB customers. That does not mean that all of their funds are at SBV. Roku has $500M or 26% of its cash reserve with SVB. That still left them with $1.5B. So, they are okay. Roblox is in for $150M or 5% of their cash reserve. Most of these accounts are what is referred to as Corporate Sweep accounts. Basically, companies use these accounts for receiving and making payments.

[Logwyn]

We'll see how it goes. The problem is that half of all U.S. venture-backed tech and life science companies and more than 2,500 venture capital funds are SVB customers. That does not mean that all of their funds are at SBV. Roku has $500M or 26% of its cash reserve with SVB. That still left them with $1.5B. So, they are okay. Roblox is in for $150M or 5% of their cash reserve. Most of these accounts are what is referred to as Corporate Sweep accounts. Basically, companies use these accounts for receiving and making payments.

So we really do not need to bail them out then?

[Endus]

We'll see how it goes. The problem is that half of all U.S. venture-backed tech and life science companies and more than 2,500 venture capital funds are SVB customers. That does not mean that all of their funds are at SBV. Roku has $500M or 26% of its cash reserve with SVB. That still left them with $1.5B. So, they are okay. Roblox is in for $150M or 5% of their cash reserve. Most of these accounts are what is referred to as Corporate Sweep accounts. Basically, companies use these accounts for receiving and making payments.

And?

Why isn't the answer "these corporations are about to learn some uncomfortable lessons". If these were working-class individuals, they wouldn't get anything; the banks would foreclose on their mortgages and that'd be that. Corporations deserve less protection and support than actual people; if a company can't survive on its own merit, then it's a shitty company that should probably go bankrupt and no longer exist.

[Forogil]

"Via ATM" is also important. You can withdraw your entire account if you go to a teller.

However, if you can get it in cash depends on the country and the bank. (And it might be prudent to call ahead.)

Several years ago I broke my card, the bank teller promptly proceeded to give me some cash from my account while waiting for the replacement - by going to the ATM and using their company card, as the bank tellers don't have any cash...

[hellhamster]

Scumbags like Bill Ackman are already going in on the action and telling people on twitter to do bankruns on Monday.

I'm going to bet both my right AND my left nut he's hedged on a massive shorting position on many banking instruments.

The thing that really worries me is contagion. If this madness continues, we will see another Lehman Brothers, now spreading to Credit Suisse and Deutsche Bank.

I don't think it will go that far though, but investors are already running scared during this period with increasing interest rates, anything is fucking possible.

[Rasulis]

So we really do not need to bail them out then?

Bailout as in 2008 bailout of AIG, Fannie Mae and Freddie Mac, etc. No.

Bailout as in speeding up the process. Yes.

All the depositors should eventually get their deposits back, but eventually is too long when you have payroll to meet next week.

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And?

Why isn't the answer "these corporations are about to learn some uncomfortable lessons". If these were working-class individuals, they wouldn't get anything; the banks would foreclose on their mortgages and that'd be that. Corporations deserve less protection and support than actual people; if a company can't survive on its own merit, then it's a shitty company that should probably go bankrupt and no longer exist.

These aren't mortgages. Nor investments. We are talking about regular bank accounts. As in we keep our money in banks.

[mbit2]

https://www.bloomberg.com/news/artic...ecomes-reality

Bank went yolo on us treasuries and those turned trash when fed raised interest to combat inflation which put them in broke territory. The guys pulling weren't hysterical. They simply wanted to get out before the music stops.

[Edge-]

https://www.axios.com/2023/03/11/sil...d-bonuses-fdic

Silicon Valley Bank on Friday paid out annual bonuses to eligible U.S. employees, just hours before the bank was seized by the U.S. government, Axios has learned from multiple sources.

What to know: The bonuses were for work done during 2022, and were previously scheduled to be disbursed on March 10. That date ultimately coincided with the bank's takeover by the Federal Deposit Insurance Corporation.

Bonuses for employees in some other countries were scheduled for later in the month, so those haven't yet been paid.
State of play: An unknown number of SVB employees were emailed by the FDIC on Friday evening, offering them employment with the remnant organization for the next 45 days.

The employees would be compensated 1.5x times their normal salaries, while hourly workers would receive 2x their normal wages for overtime.
An FDIC spokesperson tells Axios: "Without commenting on salaries, it’s our standard practice to ask retain [sic] bank employees to assist with an orderly transition as part of our resolution process."

rrroooffffllllll, holy fuck this shit keeps getting shadier and shadier, I take back my earlier fuckin comment

[jonnysensible]

read some more about this and it just seems like the TLDR is that - SVB were reckless and greedy.

[ringpriest]

https://www.axios.com/2023/03/11/sil...d-bonuses-fdic



rrroooffffllllll, holy fuck this shit keeps getting shadier and shadier, I take back my earlier fuckin comment

The bonuses were likely done with a degree of deliberation. But keeping on former employees is SOP, as is paying them more.

Think of it this way. You come into work, and you find out the your employer has gone under, but the people handling the bankruptcy would really like you stay on for another month and a half to help wind things down because you have irreplaceable short-term knowledge. The time-and-a-half pay is an incentive for you to stay at a job you know will be gone in two months, instead of immediately putting your time into getting a more reliable job somewhere else.

[jonnysensible]

lol the SV guys are getting big mad on twitter because people are mocking them and are trying to create bank runs elsewhere. They are trying to create a systemic banking crisis to force the Fed or the US government to bail them out.

I hope noone buys the uninsured deposits and they get wrecked.

[hellhamster]

https://www.reuters.com/business/fin...ut-2023-03-12/

It's not looking that great, paranoia is seeping through the cracks. When fear, uncertainty and doubt are rampant, the first human instinct is to secure whatever assets are left.

Fractional Reserve Banking working as intended, lmao.

I guess we will see the fallout on Monday.

[NED funded]

SVB depositors won't go hungry. They won't lose their money either. The bank had enough capital to make all the depositors whole. It's just unclear when the fund will be made available. It is definitely not your typical bank. Only 2.7% of the bank accounts are under 250k.

Isnt the capital tied on t bills they have to sell at a discount? Thats the entire issue, SVB is well capitalized it just cant get the money on time cuz their assets have longer maturities so they cant demand the money now. They have to sell at a discount. Most companies will be fine tho, ppl are exagerating

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read some more about this and it just seems like the TLDR is that - SVB were reckless and greedy.

They were fine. Banks need to make money and being the bank of startups is complicated cuz you yourself are at risk of the same interest rate risk than the startups