Oh no, our private VC firm is screwed by a private bank going under, time to get tax payers to help fund risky ventures in one of the worlds most expensive cities to foot the bill so our equity is stable! How else with other startups be able to access improved mail campaign APIs or ACID-compliant IAAS tooling?! The public need us!
All I want is for the rules to be followed — the ones we all agreed to before this happened. That means no bailouts for anybody, and unfortunately that means some tough lessons would have to be learned.
When an event like this happens and all the sudden the government puts the rest of the public on the hook for the losses, it disastrously erases trust. After 15 years, MOST Americans still have zero trust that the rules are fairly applied. The hidden expense is a lot of cynicism and unrest. We can’t tolerate more of that.
The public can’t mitigate the risks of depositors, and unless you want to invite them into that arena, follow the written rules. We already have a process in place, we only need to follow it now.
The political side of me wants this, no handouts for wealthy. The contractor who works for startups in me, is afraid of not getting payroll, and we live paycheck to paycheck, so I'm just hoping my clients bank elsewhere.
Reading this call to Congress, it feels like people believe SVB collapse is similar to FTX. There seems to be a perception that all the uninsured deposits are gone. This just isn't true - SVB had substantial assets and they will cover a lot more than just the insured deposit amount. SVB also had a business which is worth a lot of money to a company like JP or BofA, and a private company is reasonably likely to pay enough for it that depositors will be made whole. No taxpayer money should be needed here.
I think only startups of a certain 'level' should be covered, but NOT their VCs, angel investors, etc. I.e. startups w/ currently under 10 mill funded/earned.
Edit: alternately they could just add upto 1 million dollars of extra FDIC coverage, but again that should only cover those w/ 10 million or less in losses. Etsy, and Roku will do fine, or can just raise more money from somewhere, or wait till the finish the FDIC process.
We can't let the taxpayer cover such mistakes. Even though they have "explicitly" said that the taxpayer won't you simply have to follow the money to figure it's the case. Someone will be on the hook for the other end of their loan should it go bad. If you didn't insure your capital over FDIC you honestly deserve what came to you. I've never been a controller but I've been close enough to the bank accounts to know this is absolutely common sense.
The system is working as designed. Take stupid risks, win stupid prizes. I don't mean to be so mean about it but the alternative is unfortunately what we've done as of today. The FDIC insured everyone will be made whole. This means, effectively, FDIC insurance is limitless for a big enough failure and banks are free to do as they please knowing daddy G will come bail them out before it gets too bad. Worse there won't be jail time for the problem. I'm not sure who was responsible for thinking taking short money and buying long bonds was brilliant but it feels like at the very least a breach of fiduciary duty. I might have a softer view if they at least diversified along the yield curve and tranched their other investments properly.
There's far too much astroturfing going on here and elsewhere that these banks "did everything right and got crushed by a run". No, the run was the effect. The cause was piss poor risk management. The spin going on right now is dizzying and if you weren't paying close attention on Thursday and Friday you might even be forgiven for thinking the banks are innocent.
As a side note I'd be interested in a deep dive into why VCs recommended Silicon Valley Bank so feverishly. Perhaps there's a connection there to explore beyond "it's a popular stable bank" considering there are many better stable banks available.
Whoever calling for bailout or any government intervention in this incident should disclose how much money they have tied up with SVB for others to understand the level of conflict of interest the person has.
I have read that a chief risk assessment officer at SVB was hyper focused on diversity issues, perhaps to the detriment of their grasp of the perilous situation.
Perhaps the was a self-inflicted wound to some degree?
Genuine question: can anyone confirm if SVB required startups participating in their venture loans to use them as their exclusive bank for deposits to ensure collateral?
I heard that mentioned elsewhere and it seems like maybe its indicated at item 5.2 in this registered loan agreement[1], but the internet is a tricky place and legal language doesn’t always say what you think.
That said, it would explain why there was so many uninsured, exclusive deposits and why VC’s who had built those loans into their fundraising recommendations/strategies are freaking out. The usual risk management strategies for large deposit accounts get thrown out the window when they’re disallowed by the loan agreement you depend on, for a loan you’re unlikely to have secured anywhere else.
ML-powered ads engine at the edge? Auto-documenting API libraries for JS? Billing analytics for SaaS managers? You know - the important stuff America needs (:
We need to be rich so we can continue to pretend we're not working class; let us into the club to use your money to bail us all out to prove our point for us!
Does any one have the data(or where to look for the data) on how many banks depositor's were reimbursed over and above the FDIC insured amount of 250k in the last 1-2 years of bank failures?
The "act" they want Congress to make is just a "backstop" of depositors. The thing is, if SVB is bought by another bank, that happens without any action by Congress. (For what it's worth, Nancy Pelosi said today there are multiple potential buyers and "What we would hope to see by tomorrow morning is for some other bank to buy the bank.")
Yeah, I don't agree. SVB was so poorly capitalized that any any due diligence whatsoever should have turned up malfeasance - take a look at the JPMorgan note posted here (https://news.ycombinator.com/item?id=35120416). If you have billions in assets then you can't demand the government protect you from not diversifying your portfolio by buying into a single asset class. Any halfway competent CEO could have opened a Vanguard Flagship account or JPMorgan Asset Management account or any other account at a large institutional supplier and created a diversified portfolio.
Just holding a 40/60 split of mixed maturity treasury and corporate bonds and Russel 1000 stocks with low transaction fees would be satisfactory for the majority of companies. And for those that are over that limit or feel they need a more diversified exposure they should have hired a competent asset manager.
And many did do those things. Asking to bail out the people who invested millions of dollars without paying financial professionals to make sure that they did it correctly and with competence is punishing those people that did the right thing. We should provide a safety net in this country for the little guy, but if you have 100s of millions of dollars and you're not willing to hire a few people to make sure you're handling your money correctly I don't have that much sympathy.
People were asking the CEO of SVB what his favorite thing to do to relax was in the last earnings call - the answer is bicycle riding.
