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enki42 posted:"Starve" is wild hyperbole for 99% of startup employees. Unemployment insurance exists.
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Mar 12, 2023 14:03
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The impact to San Francisco as a city may be the worst part. I haven't studied it or anything, but horrible cost of living, huge developments going up right before the pandemic, then everyone moves out during the pandemic. Now there's layoffs and a bank run. Startups failing will not end the world. It sucks that it wasn't really their fault, but also managing money seems like a big part of being a.VC.
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Mar 12, 2023 14:14
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Maybe San Francisco natives will be able to afford to live in the place of their birth once all the tech companies collapse.
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Mar 12, 2023 14:19
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https://www.sandiegouniontribune.com/news/california/story/2023-03-12/yellen-says-no-federal-bailout-for-silicon-valley-bank Well drat, I thought for sure that this bailout was inevitable.
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Mar 12, 2023 15:35
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https://twitter.com/EladNehorai/status/1634809159710556160?s=20
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Mar 12, 2023 15:40
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I'm sure startup idiots want a bailout, but it is literally too late for that lol. There is no alternative to the bank getting liquidated that would make any sense here as far as I can tell, it isnt like the "too big to fail" banks where there would literally be no one left to provide services to some huge chunk of the population. The only reason the majority of people have heard of this bank is because it failed massively - the name is mud, there's no brand to uphold, and it has barely any people using it individually, given the proportion of deposits that are over the $250k line. No legislation is going to pass, because there is no benefit to anyone not on the West Coast to helping this idiotic regional bank out, it's a total culture war loser because techbros are broadly disliked, and the asset layout doesn't seem like it would do anything meaningful to the market as a whole outside of devaluing low-interest rate bonds even further as a glut of them enter the market, which is probably a minor problem for some banks but not in nearly the way that it is for the enormous idiots in start-ups who didn't bother trying to diversify their portfolios because of wild tech optimism
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Mar 12, 2023 15:41
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There Bias Two posted:https://www.sandiegouniontribune.com/news/california/story/2023-03-12/yellen-says-no-federal-bailout-for-silicon-valley-bank I guess you could say that there's... ... no point in Yellen 
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Mar 12, 2023 15:41
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no not my non-FDIC guaranteed assets, I have so many
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Mar 12, 2023 15:52
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There Bias Two posted:https://www.sandiegouniontribune.com/news/california/story/2023-03-12/yellen-says-no-federal-bailout-for-silicon-valley-bank What is inevitable is FDIC working hard to liquidate the assets so depositors get as much money back as possible, including those over 250K, but how much they manage and how long it takes is more complicated (the insured stuff they promised will be accessible by Monday). Maybe they will recover 100%. Maybe a lot less.... BougieBitch posted:... and it has barely any people using it individually, given the proportion of deposits that are over the $250k line. That may actually not be true: https://mobile.twitter.com/JosephPolitano/status/1634904512787025920 ...but then those people are guaranteed to be fine because FDIC exists. OddObserver fucked around with this message at 16:16 on Mar 12, 2023 |
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Mar 12, 2023 16:12
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BougieBitch posted:I'm sure startup idiots want a bailout, but it is literally too late for that lol. There is no alternative to the bank getting liquidated that would make any sense here as far as I can tell This is not at all what is being discussed when people are calling for bail outs. The survival of the bank or it's name is completely irrelevant to any of this. What these people want bailed out are all of the VC-provided funds over $250m in the accounts of a bunch of fart app companies they funded. What bank that account appears in on monday and what it is called is entirely immaterial.
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Mar 12, 2023 16:14
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Motronic posted:This is not at all what is being discussed when people are calling for bail outs. The survival of the bank or it's name is completely irrelevant to any of this. I think you mixed up an 'm' and 'k' there, mkaayy. I thought it was $250k that was FDIC insured.
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Mar 12, 2023 16:20
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Boot and Rally posted:I think you mixed up an 'm' and 'k' there, mkaayy. I thought it was $250k that was FDIC insured. The people with under $250k will be reimbursed. Those accounts with $250m are led by people requesting the bailout. Lot of VC salt on Twitter at this point lol.
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Mar 12, 2023 16:30
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Boot and Rally posted:I think you mixed up an 'm' and 'k' there, mkaayy. I thought it was $250k that was FDIC insured. Yes, it's $250k insured by the FDIC. I don't think using the term 'bailout' when it comes to the depositors is very accurate. Bailout implies some sort of failure that the government is stepping in to fix. The only failure here is SVB's - and there's pretty much unanimous agreement to let the shareholders and creditors of SVB eat poo poo. Contrary to the depositors whose only mistake was using one specific bank instead of another. They weren't engaging in risky or illegal behaviors that led to SVB's downfall, it was SVB's management that screwed everyone here.
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Mar 12, 2023 16:35
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Has there been anything more written about why/how SVB was encouraging folks to keep all their money with them, instead of spreading it around to other banks? Or how the run started or was coordinated? I'd heard Thiel told his VC buddies to pull out, and I can see how that may not be illegal but it definitely seems shady.
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Mar 12, 2023 16:36
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StumblyWumbly posted:Has there been anything more written about why/how SVB was encouraging folks to keep all their money with them, instead of spreading it around to other banks? It seems like you're asking why a bank was seeking wealthy depositors instead of telling them to give someone else money and I'm confused as to why you think this needs an explanation.
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Mar 12, 2023 16:45
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So the CEO of SVB sold a bunch of shares a weekish before the troubles. He acquired e options at the same time and indicated the sale late January, but it’s still not great optics. There’s no way the high ups there didn’t know there was impending liquidity crisis a few months beforehand.
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Mar 12, 2023 16:57
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eXXon posted:It seems like you're asking why a bank was seeking wealthy depositors instead of telling them to give someone else money and I'm confused as to why you think this needs an explanation. Banking risk is pretty small, but also seems pretty easy to avoid.
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Mar 12, 2023 17:33
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There Bias Two posted:https://www.sandiegouniontribune.com/news/california/story/2023-03-12/yellen-says-no-federal-bailout-for-silicon-valley-bank What she means here is that in 08 a lot of banks were saved in the sense shareholders weren't wiped out. Citibank failed, but wasn't put into receivership or bought out so its shareholders were not wiped out. SVP's shareholders are getting zeroed here. That does not mean a buyer with financial support from the FDIC that assumes all deposit liability is off the table (from all reporting and from everyone I talk to they're working very hard with some optimism on this).
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Mar 12, 2023 17:33
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StumblyWumbly posted:The impact to San Francisco as a city may be the worst part. I haven't studied it or anything, but horrible cost of living, huge developments going up right before the pandemic, then everyone moves out during the pandemic. Now there's layoffs and a bank run. When RIM, aka Blackberry, aka "lol nobody's gonna buy an iPhone with no keyboard." started dying, the entire downtown core of Waterloo hollowed out, and they were just ONE tech company in a small (for US standards) university city. I say let em die, normal people don't get bailouts. Mister Facetious fucked around with this message at 17:40 on Mar 12, 2023 |
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Mar 12, 2023 17:37
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Smaller towns are extremely vulnerable to their one-big-employer going away... Anyway: https://mobile.twitter.com/modestproposal1/status/1634948185469902850 (Dunno about the source account, but seems to match the beginning of): https://www.bloomberg.com/news/articles/2023-03-12/fdic-auction-for-svb-said-to-be-underway-final-bids-due-sunday
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Mar 12, 2023 17:40
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https://twitter.com/torrenegra/status/1634573234187407369 Why, yes, I participated in a bank run, but there was all upside no downside. Look, I'm a computer toucher and I suck, but venture capital is not the only thing at stake. Some significant companies kept their working capital, the stuff you use to pay vendors, pay employees, and do day-to-day stuff with, in SVB. Other people used SVB to process payments, like the payroll company Rippling. There is fanout beyond Silicon Valley. What is happening right now is that paychecks "in flight" through Rippling, meaning cut last week but not yet deposited in the final bank, are gone. That money vanished. So any business that used Rippling for payroll may well see their employees' paychecks bounce immediately, with no recourse. Rippling doesn't have the money. The employer doesn't have the money. The employer made no decisions based on "this is a cool place to bank because I am a startup." Rippling stated that they moved to use a different processing bank as soon as things looked bad, but that doesn't change what happens to the in-flight checks. Along similar lines, Etsy is saying vaguely that there will be problems with their payments to Etsy sellers. A friend of mine works at a payroll company that has nothing to do with Silicon Valley -- except that some of their clients banked with SVB. Friday was merry hell because they couldn't transfer money for those clients. And that payroll company, for an extra fee, cuts paychecks for their clients before the money transfer from the client arrives. (This is for complicated reasons involving inter-bank transfer that I frankly don't understand.) When a bank fails, it takes out people just running their businesses as well as greedy assholes. Note: All the stuff about Rippling is from a straightforward twitter thread by their CEO, explaining what the problem was and what they were trying to do about it.
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Mar 12, 2023 17:49
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Rodenthar Drothman posted:So the CEO of SVB sold a bunch of shares a weekish before the troubles. He acquired e options at the same time and indicated the sale late January, but it’s still not great optics. There’s no way the high ups there didn’t know there was impending liquidity crisis a few months beforehand. I was reading about how this is one weird trick to do insider trading. Like in January the CEO doesn't have any insider info, so they set up that future trade for March 5. then on March 1st if their insider info let's them decide to cancel that trade if everything is going great (can't be insider trading to not trade right?), but if it's going to poo poo then they just let the trade proceed. And it's not insider trading because it was set up in January.
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Mar 12, 2023 17:50
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Arsenic Lupin posted:people just running their businesses as well as greedy assholes.
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Mar 12, 2023 17:58
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ianmacdo posted:I was reading about how this is one weird trick to do insider trading. Like in January the CEO doesn't have any insider info, so they set up that future trade for March 5. then on March 1st if their insider info let's them decide to cancel that trade if everything is going great (can't be insider trading to not trade right?), but if it's going to poo poo then they just let the trade proceed. And it's not insider trading because it was set up in January. I think if you announce you're going to sell shares you are committed to selling them, no backing out.
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Mar 12, 2023 18:00
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Absurd Alhazred posted:This "added context" business is a surprising ratio-adjacent own (I will touch grass I promise) David Sacks and others like him should force congress to act by taking a swan dive of of the tallest building on wall street (or the tallest building wherever they currently are). StumblyWumbly posted:The impact to San Francisco as a city may be the worst part. I haven't studied it or anything, but horrible cost of living, huge developments going up right before the pandemic, then everyone moves out during the pandemic. Now there's layoffs and a bank run. I hope SF's housing market collapses and the prices fall off a cliff as everyone packs up and leaves. Maybe then regular people will be able to afford to live there. Evil Fluffy fucked around with this message at 18:09 on Mar 12, 2023 |
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Mar 12, 2023 18:07
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OddObserver posted:Smaller towns are extremely vulnerable to their one-big-employer going away... There's a giant auto plant in Belvidere Illinois, they made the neon there in the 90s when I was in high school nearby, a lot of kids families work there . It's adjacent to Rockford, formerly the second biggest city in Illinois. That area of the rust belt (50 miles from O'Hare airport) has been dying since before I was born. The auto plant was one of the last big employers in the area. All lines were permanently idled by management last day of February. Absolutely no one gives a poo poo. Tens of thousands of people can just get hosed (not just the workers and their families, but all the component manufacturing left in the area too is dead now). Theres no beautiful climate or mountains, just grey misery. Just move! Learn to code! Blah blah
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Mar 12, 2023 18:23
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First time I've talked about this more then bitching in a couple of discords, but I don't actually understand what's going on. I was locked out of my account Friday and found out I was laid off at the end of the day for <company> I can't withdraw my personal funds from SVB where I had an account, my manager isn't taking my calls, and I'm starting to get the feeling that I'm not going to get my severance. I'll get the money out of my account because of insurance, so I'm not super worried about that, but can someone explain what actually happened that would cause a company to fold or panic like that? I'm not a finance person, so I can't really even formulate the questions to learn what I need to know. Is it possible this isn't related to that? I work in San Francisco, but I don't want to give too many details. e: I don't normally post in DND because politics posting is exhausting, so if this isn't the right thread to learn from that lmk and I'll piss off.
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Mar 12, 2023 18:30
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Boba Pearl posted:First time I've talked about this more then bitching in a couple of discords, but I don't actually understand what's going on. I was locked out of my account Friday and found out I was laid off at the end of the day for <company> I can't withdraw my personal funds from SVB where I had an account, my manager isn't taking my calls, and I'm starting to get the feeling that I'm not going to get my severance. I'll get the money out of my account because of insurance, so I'm not super worried about that, but can someone explain what actually happened that would cause a company to fold or panic like that? I'm not a finance person, so I can't really even formulate the questions to learn what I need to know. Is it possible this isn't related to that? I work in San Francisco, but I don't want to give too many details. The bank had most of it's money invested in long term assets that go down in value the higher the interest rate goes. Interest rates skyrocket, the bank does nothing to fix their issue. Meanwhile VC and startups are just pouring cash into the bank and keeping it all in accounts in a manner that doesn't protect them via FDIC. Someone gets tipped off that there is an issue, pulls their cash, and tells all their buddies to do the same. The bank runs out of money. The end
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Mar 12, 2023 18:36
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i think contacting the fdic might be the best thing to do when you have the chance? either today by e-mail or tomorrow by phone. either to get some clarity or to try to light a fire under the rear end of your former employer as far as what happened, it's basically the above kliras fucked around with this message at 18:40 on Mar 12, 2023 |
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Mar 12, 2023 18:37
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Right but like does a company really just run out of money over night like that? Like, they had the money in the bank, how does the bank run out of your money?
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Mar 12, 2023 18:41
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Boba Pearl posted:Right but like does a company really just run out of money over night like that? Like, they had the money in the bank, how does the bank run out of your money? Peter Thiel got to it first, and the rest is in invested assets.
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Mar 12, 2023 18:43
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Boba Pearl posted:Right but like does a company really just run out of money over night like that? Like, they had the money in the bank, how does the bank run out of your money? IDK about your severance, but all sub-250k deposits will be made whole, and the majority of the rest will be recovered after some months.
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Mar 12, 2023 18:44
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Boba Pearl posted:Right but like does a company really just run out of money over night like that? Like, they had the money in the bank, how does the bank run out of your money? fractional reserves the bank has $50 in people's money, so it can loan out $500 because what are the odds more than 10% of its investments fail, right?  When everything fails (like they were heavily in on investments that, once inflation rises, are worthless), they don't have the $500 to pay it back because they only have $50 on hand, and more like $35 because those in the know got their $15 out first.
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Mar 12, 2023 18:45
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Evil Fluffy posted:I hope SF's housing market collapses and the prices fall off a cliff as everyone packs up and leaves. Maybe then regular people will be able to afford to live there. Sounds like a golden opportunity for an investor with deep pockets to go and play Monopoly with real buildings! 
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Mar 12, 2023 18:46
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e:f, b So, this is a classical bank run. People feel nervous about the bank, people run to withdraw all their money while it's still possible, more people panic, the wave spreads outward, and no bank anywhere is prepared to have more than a certain percent of depositors withdraw simultaneously. That's not how banks work. They keep some cash around, but most of it is invested so they can pay interest. This guy whose tweet I posted upthread was one of the panickers, and describes his POV. He was panicking Friday morning. Thursday night Peter Thiel had told his clients to get their money out of SVB. Was he right that there was something wrong, or did he start the whole thing with no good reason?  We don't know yet if there was anything substantially wrong with SVB. There's been a lot of analysis flying around, but I'm not literate enough in big finance to know whose analysis is trustworthy. What FDIC is doing this weekend is looking at the bank's assets -- the part that wasn't just liquid money -- and seeing what they're worth. FDIC is looking for another bank buy the assets and liabilities of the old bank. They're taking the bids right now. Again, if nothing was substantially wrong with the bank, this sale can raise a lot of money. Internet rumors, worth what you just paid for them, say that people are bidding for SVB at 90 cents per dollar of asset, which is a very very high rate of confidence in the value of the assets. See the official FDIC page here. https://www.fdic.gov/consumers/banking/facts/payment.html Secured depositors (deposited < $250K) are guaranteed to get their money back; that's what the FDIC is for. If there isn't enough money to pay them back, the government picks up the rest. After that, there's a cascading line of classes of people who get paid back. If you can pay back all of the insured depositors without invoking the FDIC, then you pay off all the uninsured depositors. If you still have money left over, I forget who gets paid next. The people who actually owned the bank -- the bondholders, the stockholders, and like that -- are at the bottom of the list and get very little if anything. Etsy screenshot: https://twitter.com/maridahdotcom/status/1634349779881689088 Arsenic Lupin fucked around with this message at 18:49 on Mar 12, 2023 |
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Mar 12, 2023 18:47
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Welp, lol, that was way simpler answer than I thought it would be. I'll be fine, and now I get it, even if it sucks.
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Mar 12, 2023 18:48
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Boba Pearl posted:Right but like does a company really just run out of money over night like that? Like, they had the money in the bank, how does the bank run out of your money? Banks use your deposits to make loans and purchase investments, that's how they make money. They only keep a small percentage of deposits on hand in liquid funds because what are the odds that people are going to want to take out 25% of all deposits in one day? And usually they're right. But if people lose confidence in the bank all at once and rush to take out their money, they run out of cash on hand and they can't fulfill the withdrawal requests. They technically have all your money still but most of it is locked up in investments that they can't get at right this moment. This is a classic bank run. Edit oh my god beaten like six times
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Mar 12, 2023 18:54
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Historically, the reason the FDIC exists is that when banking was unregulated, everybody knew that if their bank went tits-up their money was gone for good. This meant that the prudent thing to do was be paranoid about your bank, and if anything worried you, to pull out your money before the other suckers did. Hey presto, bank run, bank does collapse, self-fulfilling prophecy. This was a plague of US economics through the 19th century and well into the 20th. The FDIC was created because the crash of 1929 led to banks failing all over the US, into 1930 and 1931. FDR took office in March 1933* and began slamming legislation through to "restore confidence in the American banking system" AKA "stop worrying your bank is going to collapse and take your money with it". FDIC essay on the 1930-1931 banking panics here. I have another window open and am hopping from page to page and learning stuff. * Inauguration didn't move to January until 1937, after the passage of the 20th Amendment, aka the Lame Duck Amendment, aka Why Was Hoover Allowed To Keep loving Up For So Long.
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Mar 12, 2023 19:12
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Boba Pearl posted:First time I've talked about this more then bitching in a couple of discords, but I don't actually understand what's going on. I was locked out of my account Friday and found out I was laid off at the end of the day for <company> I can't withdraw my personal funds from SVB where I had an account, my manager isn't taking my calls, and I'm starting to get the feeling that I'm not going to get my severance. I'll get the money out of my account because of insurance, so I'm not super worried about that, but can someone explain what actually happened that would cause a company to fold or panic like that? I'm not a finance person, so I can't really even formulate the questions to learn what I need to know. Is it possible this isn't related to that? I work in San Francisco, but I don't want to give too many details. It was a bank run. Banks don't keep 100% of client money available as ready cash, they invest a portion of it. These investments will make a profit over the long run, but can't immediately be converted to cash, so that money is effectively unavailable to the bank (and its customers) for the duration. The theory is that it's very unlikely for a lot of customers to pull out all their money at the same time, so the bank only has to keep a reasonable amount available, not the entire amount. But if a lot of customers do pull out all their money at the same time, then it's possible the bank doesn't have enough cash immediately available to provide those withdrawals. The invested money isn't gone, it's still on the bank's balance sheets as an asset, but it's inaccessible. And that means that if your company goes to the bank and says "hey, I need to withdraw $X right now and use it to pay bills", they get turned away because the bank doesn't have $X in cash available. The bank has the money tied up in bonds, but it can't convert those bonds to cash on-demand, which means they can't use that money to pay out withdrawals. Silicon Valley advisors like Peter Thiel started advising their clients to pull their money out of SVB, which got a bunch of other SVB customers nervous enough to start pulling out all their money too, which got other customers nervous, and the whole thing snowballed till SVB ran out of liquid cash. It's uncertain whether SVB was actually in any real trouble, but even a totally irrational panic can throw a bank into crisis if it spreads to enough of the bank's big customers. What all this means for your company is that although the bank has your company's money, they can't pay it out right now because it's tied up in fixed-term investments. But your company is withdrawing that cash because they need it right now. The bank will eventually be able to pay out that money, but rent, payroll, and other crucial expenses aren't going to wait around for that "eventually". If your company had all their money in SVB, then they no longer have access to that money, and that could very well be a fatal blow. The FDIC will take over the bank and try to convert its assets into cash for the depositors as soon as possible, but the process could still take months or even years, and it's likely that some of the value will be lost in the process.
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Mar 12, 2023 19:17
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Arsenic Lupin posted:Historically, the reason the FDIC exists is (...) https://twitter.com/FDICgov/status/1527702777316753410
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Mar 12, 2023 19:21
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