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shame on an IGA posted:the backstop for most businesses is spreading it around to more than one bank and using banks that are huge and have a diverse customer base that won't all get crunched at the same time. This is a fairly good thread on the business practices that led to their downfall. https://twitter.com/jonwu_/status/1634250754486857729?s=20
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Mar 11, 2023 03:22
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Oxygenpoisoning posted:This is a fairly good thread on the business practices that led to their downfall. That person has a cornucopia of red flags (etherium in the handle, web3 person, Twitter Blue subscriber, etc), but I think they've kinda nailed it. I wasn't aware of the sweetheart loan deals they were giving VCs in exchange for "bank with us too!". There was also a report that SVB hasn't had a chief risk officer since around May 2022, right around the time rates started accelerating. And the customer they sought was exactly the type to immediately stop throwing money into the bank when rates accelerated, while also demanding withdrawals. And somehow bank execs thought it was right to shove the money into long-term investments. Wrong strategy, wrong customer, wrong time, and kablooey. I refinanced my 30-year 4.125% mortgage down to a 15-year 2.875% back in December 2021. SVB was probably acting like that loaning environment was going to keep on rolling. With the Fed's interest rate hikes, my credit union's 30-year rate is now 6.5% and the 15-year is 6%. Woops!
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Mar 11, 2023 03:59
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Hi, I'm high and stupid; I live in the Midwest, does that bank failing affect me in any way? What kind of far reaching effects could this have? Could it ripple across the country like that? Leave fucked around with this message at 04:33 on Mar 11, 2023 |
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Mar 11, 2023 04:28
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Leave posted:Hi, I'm high and stupid; I live in the Midwest, does that bank failing affect me in any way? no
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Mar 11, 2023 04:35
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Leave posted:Hi, I'm high and stupid; I live in the Midwest, does that bank failing affect me in any way? Currently, no. Its unlikely to go far but no promises.
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Mar 11, 2023 04:42
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One payroll company did run into issues sending out checks due to it, but they scrambled and should have everything out by Monday. Sucks for those who were counting on having money hit their accounts today, though.
Arrath fucked around with this message at 05:07 on Mar 11, 2023 |
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Mar 11, 2023 04:55
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Leave posted:Hi, I'm high and stupid; I live in the Midwest, does that bank failing affect me in any way? Unless you got your weed from a west coast techbro startup looking to disrupt the marijuana space, sit back and enjoy the show.
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Mar 11, 2023 05:06
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The circumstances that led to this aren’t really something that other banks would do. SVB had a client base with a near perfect correlation in risk/behavior coupled with some really stupid use of deposits that they would not have been able to do if they hadn’t led the charge to lobby Trump to get rid of Dodd-Frank. Had they diversified anything, they’d be fine. Instead they locked themselves into things that pay basically nothing for ten years. When they had to sell a little bit of these things at a substantial loss to cover liquidity, it prompted a bank run. Subsequent attempts to satisfy withdrawals meant selling their reserve bonds at greater discounts magnifying their problem. I believe they were still in the black on the books at the time the FDIC took over, so some bank will probably step in to take over their assets and liabilities.
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Mar 11, 2023 05:35
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facialimpediment posted:Unless you got your weed from a west coast techbro startup looking to disrupt the marijuana space, sit back and enjoy the show. On the other hand, if you're beholden to the functionality of "joints.io" in order to get stoned, you probably deserve your impending T-break.
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Mar 11, 2023 05:40
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Mr. Nice! posted:
Yeah, recievorship moves fast too. SVB very well might have a new daddy by Monday, who will happily take all of those VC customers and assets at a fat discount in exchange for liquidity.
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Mar 11, 2023 12:20
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Meanwhile, in Florida https://twitter.com/NPR/status/1634171012127367174
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Mar 11, 2023 14:42
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Saw some Right Wing mud slinging claiming "Biden" caused 2 banks to fail this week, but only found SVB. Oh, and of course, Uncle Same pulled an FTX- it had nothing to do with the bank being bad at investing or being a bank. Has to be Biden.
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Mar 11, 2023 15:57
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Yeah there's already poo poo about how SVB was woke and therefore Biden is responsible for the bank collapsing when the major trigger was the 2018 regional bank Dodd-Frank rollback (which did get democratic votes). The main reason I'm having a giggle about the whole thing is like what Mr. Nice! said. Unless there's something we REALLY don't know about what SVB was doing, they should probably get bought or at worst, yield a 20% haircut. The bankers were idiots, but we don't know of anything truly crazy like crypto investments that went to zero. That won't cascade through the system and it will make VC really, really mad, which is a net positive. The worker bees should get paid on Monday.
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Mar 11, 2023 16:51
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If all they had to do was chase a minimal return why did they lock their money up like a regular person investing in CDs?
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Mar 11, 2023 17:50
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That's a great question and one that a risk manager would be able to answer, a job they reportedly left unfilled for awhile
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Mar 11, 2023 17:53
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Tiny Timbs posted:If all they had to do was chase a minimal return why did they lock their money up like a regular person investing in CDs? It's part of how banks make money in a typical yield environment. Then things changed suddenly in the last year, and they had not given themselves as much of a cushion as other banks. It's the same reason there's also concern about other banks now, SVB wasn't doing anything particularly crazy as far as banking goes, but poor risk management meant they painted themselves into a corner when the underlying environment changed. Forward rates a year ago:  And today: 
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Mar 11, 2023 18:16
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Tiny Timbs posted:If all they had to do was chase a minimal return why did they lock their money up like a regular person investing in CDs? maffew buildings posted:That's a great question and one that a risk manager would be able to answer, a job they reportedly left unfilled for awhile From what we know right now, 100% of what SVB did operated under the assumption that 2021 would continue forever. And SVB had Way Too Much loving Money on-hand in deposits: https://twitter.com/mbdailyshow/status/1634225063737151489 You can easily lock up $80B of deposits if an additional new $80B in deposits is going to come rolling in from new VC startups to cover that investment. The problem is that in 2022, money stopped being free and VCs stopped throwing endless money into startups. No more new customers, no more new deposits, and oops the Peter Theils want their money back in liquid form: https://www.businessinsider.com/peter-thiel-founders-fund-pulled-cash-svb-before-collapse-report-2023-3 SVB died because they didn't realize money was no longer going to be free. That obviously kills the startups of pizza arbitrage and smartphone taxi-calling disruption - their customer base!
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Mar 11, 2023 18:23
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So I consider the details of business and finance to be exceptionally tedious and therefore have trouble following exactly what went on. Would it be accurate to say that SVB failed because it acted like the tech startups it catered to - freely tossing money around to attract VC under the assumption that current economic conditions would last forever and so they'd make it up years down the road?
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Mar 11, 2023 18:36
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Stultus Maximus posted:So I consider the details of business and finance to be exceptionally tedious and therefore have trouble following exactly what went on. Would it be accurate to say that SVB failed because it acted like the tech startups it catered to - freely tossing money around to attract VC under the assumption that current economic conditions would last forever and so they'd make it up years down the road? I think it's more people trying to do the 'during a gold rush, sell picks and shovels' bit, which is usually a safer bet, but they loaded up on pick and shovel inventory right when the gold dried up and all the would-be miners started looking for other work. So they had an actual business plan, they just hosed it up. They were trying to be Stanfords but ended up Taboring. A different, rarer kind of hubris. e: I actually read the Tabor article and I realized that all the history I've read about him was Colorado based (I grew up in CO and do outdoorsy poo poo around Leadville fairly often) but all that leaves out the actually cool part his life as an abolitionist who picked up and moved to Kansas to fight against slavery. the JJ fucked around with this message at 18:47 on Mar 11, 2023 |
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Mar 11, 2023 18:44
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Again, SVB would not have been in the position they were in but for the Dodd-Frank repeal they specifically lobbied for. They would have been required to maintain more cash on hand and would have easily handled the bank run. However, they did not hedge for this risk at all because the money faucet surely won’t ever turn off!
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Mar 11, 2023 19:02
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Mr. Nice! posted:Again, SVB would not have been in the position they were in but for the Dodd-Frank repeal they specifically lobbied for. https://twitter.com/kenklippenstein/status/1634613860823887873?t=EK2YanBM7vHJceCNgJbnwQ&s=19 Working hard, thanks!
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Mar 11, 2023 19:47
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SVB would also not be in this position had they not called in their biggest customers and tried to calm them down ahead of time. As it turns out, VC's don't respond to the George Bailey treatment by taking the long view and riding it out; they immediately yank all their money and immediately tell everyone in their portfolios to do the same.
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Mar 11, 2023 19:50
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Madurai posted:SVB would also not be in this position had they not called in their biggest customers and tried to calm them down ahead of time Oh my god no kidding that would cause a run
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Mar 11, 2023 19:53
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funds are safu
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Mar 11, 2023 19:58
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Spending money to de-regulate then begging for a public bailout is so loving unbelievably stupid it really calls into question what the gently caress bankers think it is they do. gently caress em
Grip it and rip it fucked around with this message at 20:18 on Mar 11, 2023 |
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Mar 11, 2023 20:00
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Grip it and rip it posted:Spending money to de-regulate then begging for a public bailout is so loving unbelieably stupid it really calls into question what the gently caress bankers think it is they do. gently caress em https://en.wikipedia.org/wiki/Rent-seeking
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Mar 11, 2023 20:07
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Grip it and rip it posted:Spending money to de-regulate then begging for a public bailout is so loving unbelievably stupid it really calls into question what the gently caress bankers think it is they do. gently caress em The VCs bleating on twitter in various forms of rage and depression kinda shows SVB's business model. The same VCs had their businesses, mortgages, and personal accounts all tied up in SVB. Nothing ever entered into their mind that the bank giving them 25% of the rates of normies might suddenly have problems. Now suddenly things became closer to fair in a whole loving hurry and they're demanding both a bailout and sympathy. https://twitter.com/screaminbutcalm/status/1105577845642878976?t=vGkcUnD5AajCb1faXvXpvQ&s=19 Should've learned from the Greek Freak. https://twitter.com/TrungTPhan/status/1634401487593033729?t=HuW13i823IPGtzUMPxEVOg&s=19
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Mar 11, 2023 20:27
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facialimpediment posted:The VCs bleating on twitter in various forms of rage and depression kinda shows SVB's business model. The same VCs had their businesses, mortgages, and personal accounts all tied up in SVB. Nothing ever entered into their mind that the bank giving them 25% of the rates of normies might suddenly have problems. Kind of like how my depression era grandparents saved aluminum foil, Greek citizens who lived through the last decade take precautions.
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Mar 11, 2023 20:32
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I'm a big fan of GOP reps calling for a bailout of a badly run bank failing to abide by regulations and common sense, but gently caress those kids and their student loans.
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Mar 11, 2023 20:38
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Reminder: it can still get worse https://www.ndtv.com/feature/silicon-valley-bank-elon-musk-reacts-after-razer-ceo-says-twitter-should-buy-the-us-bank-3851645
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Mar 11, 2023 20:51
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Always keep your money in more than one place. I learned this the hard way when I was younger.
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Mar 11, 2023 20:56
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bulletsponge13 posted:I'm a big fan of GOP reps calling for a bailout of a badly run bank failing to abide by regulations and common sense, but gently caress those kids and their student loans. Are they?
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Mar 11, 2023 20:58
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It was noted that SVB tanked almost exactly 15 years after Bear Stearns. https://www.youtube.com/watch?v=3vkZMbTdV3Q https://www.youtube.com/watch?v=gUkbdjetlY8
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Mar 11, 2023 21:00
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Stultus Maximus posted:Are they? Yeah, saw some GOP reps on Twitter calling for it, because 250k isn't enough. Well, that's their fault, ain't it? They know what insurance covers- it's posted at every teller, window, and ATM. This whole thing seems like the Bank was pulling a Nigerian Prince Scam for Sillicon Valley, and those dumb dumb saw dollars signs instead of warning lights. But I'm dumb and poor, and don't deserve healthcare.
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Mar 11, 2023 21:38
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bulletsponge13 posted:Yeah, saw some GOP reps on Twitter calling for it, because 250k isn't enough. The only one I saw was Swallwell, who is a Democrat.
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Mar 11, 2023 21:39
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Sacrist65 posted:Kind of like how my depression era grandparents saved aluminum foil, Greek citizens who lived through the last decade take precautions. Oh yeah, that was bizarre to read about how in the 20s banks would just close shop and if you had money there you don’t anymore. Definite reason FDR’s first fireside chats were to reassure citizens that banks were in better shape to stop runs and get stuff calmed down.
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Mar 11, 2023 21:46
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Alrighty, finally some solid numbers with a side of lol The lol first: hedge funds are offering to buy out companies' accounts at SVB, but only at 60-80 cents on the dollar The numbers: quote:The bank was slammed by $42 billion in withdrawals on Thursday, leaving it with a negative cash balance of about $958 million by the end of the day, according to California’s financial services regulator, the primary watchdog for SVB. https://twitter.com/semaforben/status/1634644926683045897?t=f5pHUw8eM-3mcTlCZvHwnA&s=19 The end stuff is some rampant conjecture about FDIC somehow being able to insure depositors above $250k while loving over SVB bondholders/shareholders. That would be a loving funny result, but this poo poo's going to be in legal hell unless someone outright buys the bank from FDIC.
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Mar 11, 2023 21:48
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facialimpediment posted:Alrighty, finally some solid numbers with a side of lol So are the jackals eating the vultures or vice versa?
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Mar 11, 2023 22:05
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Stultus Maximus posted:So are the jackals eating the vultures or vice versa? gently caress 'em all, they all know what they did But lol at SVB for thinking that saying "please be loyal and not bank run us" to their customer base of Peter Thiels was going to end up working out at all. Everyone involved deserves each other except for the workers getting their paychecks delayed (hopefully not killed). So I really don't have an answer! Part of the reason why I'm so entertained. SVB's collapse is so much bigger than Silvergate Capital's (cryptobank) that I can't even laugh hard at Silvergate because that's like a stubbed toe versus a kick in the balls.
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Mar 11, 2023 22:20
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You know, for centuries, in the Latin alphabet ‘V’ and ‘U’ were the same thing. What I am saying here is that that “SUB” bank has gone under. It has been financially dominated. Please don’t probe me for bad puns.
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