[HN Gopher] Silicon Valley Bank's shares are tanking
___________________________________________________________________
Silicon Valley Bank's shares are tanking
Author : albertut
Score : 103 points
Date : 2023-03-09 21:16 UTC (1 hours ago)
(HTM) web link (techcrunch.com)
(TXT) w3m dump (techcrunch.com)
| cygnus2512 wrote:
| [dead]
| chollida1 wrote:
| Shares just fell 60%, not this year, but today, which is the
| biggest drop I can think of.
|
| This is after a $1.25B common stock offering in an attempt to
| shore up its cash reserves.
|
| Keep in mind they are raising cash by selling equity with their
| shares at $100 when they were at $500 a less than a year ago.
|
| That's pawn shop levels of selling. To say they are in trouble is
| like saying it would be tough to sell a house that is currently
| on fire.
|
| Rumour was that SIVB got alot of the old SI deposits when it
| became clear that they were going bankrupt.
|
| It looks like both SI and SIVB will go bankrupt due to the same
| two causes.
|
| The one two punch of:
|
| - loan duration mismatches(short term deposits bet against long
| term loans). More specifically to get some interest income you
| tend to have to either go to riskier assets, not an option for
| bank, or longer duration. Unfortunately this locks you into rates
| for a long term.
|
| As everyone knows, rates have really gone up quickly in a short
| duration. This makes your long duration assets drop alot in value
| so you can't easily liquidate them to move to new higher paying
| assets.
|
| Normally this would be fine as you can ride out the duration of
| your long term bets without losing money, except for the second
| issue below.
|
| - and a deluge of withdrawals meaning you can't just ride out
| your long term loans.
|
| The difference here is that while SI will go away, someone will
| probably buy SIVB. It's just that with FDIC only protecting the
| first $250,000 in deposits you don't want your corporate money at
| the bank. And you certainly don't want to wait for FDIC to step
| in and make you whole.
|
| There is a potential third issue with SIVB in that as the bank of
| alot of silicon valley startups they hold a lot of warrants for
| those companies on their balance sheet. And those have really
| been written down alot lately. Stripe, a great company by most
| measures had its valuation cut in half according to a post from
| yesterday so you can imagine what the average startup's valuation
| is worth if strip is being cut in half.
|
| SIVB got hit by a lot of different issues all at once but they
| all had the same root cause, large interest rate hikes in a quick
| timeframe.
|
| The other commonality between SIVB an SI is that both banks
| heavily concentrated on one sector only, for SI it was crypto and
| for SIVB it was silicon valley. For each bank they ran into
| interest rate hikes at the same time that the sectors they relied
| on took a huge dive in value.
|
| Diversification is important.
| supernova87a wrote:
| > _That 's pawn shop levels of selling. To say they are in
| trouble is like saying it would be tough to sell a house that
| is currently on fire_.
|
| "Motivated seller!" -- Lionel Hutz
| adam_arthur wrote:
| Re: your duration point, these loans can be sold, either on the
| open market or a private exchange.
|
| Calling it a duration mismatch is a bit misleading. They took
| on duration risk and their loans lost value is more accurate.
| Otherwise they would just sell the loans (which they stated
| they did, but clearly it wasn't enough thus the equity raise)
| roseway4 wrote:
| Rumors that sharks may be circling:
|
| https://techcrunch.com/2023/03/09/silicon-valley-bank-shoots...
| supernova87a wrote:
| Are there any key differences of VC-related/startup-related banks
| compared to regular old commercial banks? Does anyone have a good
| link or a description discussing their dynamics?
| sophacles wrote:
| Bank CEO: "That's my ask. We've been there for 40 years,
| supporting you, supporting the portfolio companies, supporting
| venture capitalists."
|
| I wonder how many people's lives and livelihoods have been
| upended by this trash saying "it's just business"? Now he wants
| people to be nice to him? Better idea - go live on the street -
| it's just business.
| exhibitapp wrote:
| this is definitely happening (context series A founder from t1
| VCs)
|
| Every VC is talking to their portfolio companies right now about
| this. Text/slacks/emails. Half of them screaming panic telling
| founders to pull money out, the other half holding the line to
| stay strong
|
| Most founders i know arent taking the risk and moving money...
| lisashm1234 wrote:
| [flagged]
| marcopicentini wrote:
| Crypto is going to have effects on traditional markets.
| elevenoh wrote:
| [dead]
| boringg wrote:
| Reminder - SVB is small bank - highest market cap was 50B --
| trading at 5B. Low level of contagion. If it does fail -
| definitely will be felt by start ups with cash at the bank.
| bink wrote:
| I think you're probably right, but "Low level of contagion"
| sounds exactly like what we heard in 2007.
| [deleted]
| cdibona wrote:
| They're not allowing approval of wires via SMS or their app, and
| no one is picking up the phone there and most numbers are fast
| busy. Smells deeply bad. I had an account at a bank that went
| under a few decades ago and it took a while for ... bofa? to pick
| up the pieces.
| pera wrote:
| Yeah sounds like textbook bank run or cryptocurrency exchange
| collapse, it's bizarre that this kind of things keep happening
| every few years.
| Terretta wrote:
| It's bizarre a recurring thing recurs?
|
| _Particularly_ when 'venturing' into areas more profitable
| because of more risk?
|
| Here's their loan risk analysis as of EOY:
|
| https://i.imgur.com/ZWG157R.jpg
|
| Don't miss 14% to "innovation economy influencers"...
| acchow wrote:
| Given there are _at least_ 3 banks in most years (with a
| handful of years with none), I would say this is actually
| expected and not bizarre
|
| https://www.fdic.gov/bank/historical/bank/
| EamonnMR wrote:
| So is this related to Silvergate?
| ttobbaybbob wrote:
| its not related, but its the same problem.
|
| They took the deposits and bough "safe" bonds (eg treasuries).
| Which they're allowed to carry on their books at cost, even
| though their market price drops as interest rates rise.
|
| But in both SVB and silvergates cases the drop in the market
| value of their assets coincided with an increase in
| withdrawals. They were forced to sell some of these bonds to
| fund withdrawals, requiring them to realize the market price.
| The accounting distorted the value of their assets to an
| extent, and the withdrawals laid that distortion bare
| ttobbaybbob wrote:
| we're they specifically unsophisticated in the way they bought
| treasuries/other bonds? One could look at the zero risk weighting
| of treasuries and buy only those to satisfy capital requirements,
| but you'd think it would be obvious that you would end up with
| more exposure to interest rate risk than is prudent. Or is this
| truly such an improbable swing in interest rates coupled with
| demand for withdrawals that it is reasonable that they aren't
| expected to anticipate it ?
| rippercushions wrote:
| From https://techcrunch.com/2023/03/09/silicon-valley-banks-
| share... :
|
| _Becker said the bank has "ample liquidity" to support its
| clients "with one exception: If everybody is telling each other
| that SVB is in trouble, that will be a challenge."_
|
| Pro tip: if you're CEO of a bank that's facing a bank run, don't
| tell the press that you'll be in trouble if everybody takes their
| money out.
| anon291 wrote:
| Perhaps I'm overly skeptical, but everyone should know that all
| banks have the risk of 'if everyone takes their money out, the
| bank won't be able to make it work', right?
| WeylandYutani wrote:
| Yes and at that point the boss of the ECB shows up, calmly
| does a press conference at which he says "whatever it takes"
| and everyone goes back to sleep knowing the Germans are on
| the job.
| barnabee wrote:
| Yes, but if a bank has to remind people of that, it may be a
| signal it has already lost.
| phphphphp wrote:
| Sure, and everyone _knows_ that their favourite person in the
| world could just run them over in a car and kill them in
| seconds, but if your best friend says to you, "you know, I
| could drive my car into you and you would die... your life
| could be snuffed out with a moments notice" you may start to
| question your friendship.
| burnished wrote:
| This situation isnt like that at all.
| ncallaway wrote:
| The relevant similarity is the *act of making* the
| statement is what's problematic. In both cases the
| statement is true, but the act of making the true
| statement raises concerns.
|
| Obviously there are important differences between the
| scenarios, but that critical aspect is what'a relevant in
| this context.
| tshaddox wrote:
| Well, the big difference is that the bank CEO's statement
| doesn't suggest that he will or could do something awful
| himself.
|
| It is indeed quite common to hear aphorisms like "live
| every day like it's your last" which make the same point as
| your analogy, but remove the suggestion that the speaker
| could be a murderer and are thus much more analogous to the
| bank CEO's statement.
| dylan604 wrote:
| waiter, i'd like what they're having
| WJW wrote:
| It's true that all banks have that problem, but for most
| banks it is not necessary for the CEO to remind everyone of
| that fact in a press release. The fact that they feel the
| need to make this statement makes it clear that SV bank is
| having much higher withdrawals than normal right now.
| cjensen wrote:
| If the Bank is federally insured, it's not a problem that the
| bank won't be able to make it work. That's why generally
| speaking bank runs only happen on uninsured banks in the US.
| SVB is not, as far as I can see, insured and should
| definitely be careful in their choice of words.
| mikeiz404 wrote:
| That's true however there is a limit.
|
| > The standard insurance amount is $250,000 per depositor,
| per insured bank, for each account ownership category. [1]
|
| 1: https://www.fdic.gov/resources/deposit-
| insurance/brochures/d...
| FormerBandmate wrote:
| Washington Mutual and Wachovia were both insured
| anon291 wrote:
| FDIC insurance is worthless for companies, as most would
| need more than $250k monthly just to make payroll.
| toast0 wrote:
| They've got an FDIC page, https://www.svb.com/fdic, and
| they show up in the FDIC bank finder
| https://banks.data.fdic.gov/bankfind-
| suite/bankfind/details/...
|
| Although the Assets, Liabilities, and Capital reporting
| available if you click "create financial reports for this
| institution" estimates 5.69% of deposits are insured. Is a
| corporate account limited to $250K of deposit insurance? If
| so, I imagine many of them may have much more than that,
| and the reporting does show almost 75% of the deposits are
| in accounts with greater than $250K, assuming I'm reading
| the report correctly.
| dmoy wrote:
| > Is a corporate account limited to $250K of deposit
| insurance?
|
| yes
| silisili wrote:
| How do you mean? SVB is FDIC insured -
| https://banks.data.fdic.gov/bankfind-
| suite/bankfind/details/...
| [deleted]
| tempsy wrote:
| You're kidding right? There's a limit of like $250k
|
| An individual could easily have that much let alone a
| startup with millions.
| [deleted]
| notch898a wrote:
| It's crazy to me there aren't banks with 100% reserve
| ratio fully insured for a nominal fee of 0.4% or whatever
| (gold/silver storage with full insurance is ~0.4% so this
| probably isn't far off).
|
| I'd much rather lose 0.4% of my money than lend it out at
| +0.01% to whatever checking accounts pay nowadays while
| they lend out to some asshole that does business with the
| bank.
| bluGill wrote:
| In a bank? If you have that much you really should invest
| in something better than a bank account. Banks should be
| petty cash that you spend in a couple months.
| tempsy wrote:
| i'm not talking about what the savvy thing to do is, just
| taking issue with the assertion that "it doesn't matter
| if a bank fails cause it's insured" when there's a limit
| that the OP either failed to mention or didn't know about
|
| and not that it matters but this is specifically about a
| startup or business not talking about personal finances
| of an individual
| mikesun wrote:
| FDIC only insures up to $250K
| johnbellone wrote:
| Per account.
|
| Edit: It seems I am incorrect.
|
| > The standard deposit insurance coverage limit is
| $250,000 per depositor, per FDIC-insured bank, per
| ownership category. Deposits held in different ownership
| categories are separately insured, up to at least
| $250,000, even if held at the same bank.
| notyourday wrote:
| > Per account.
|
| Per account "type" and structure. For DDAs if you are
| married it will be:
|
| You: $250k
|
| Your+your wife: $250k
|
| You POD your wife : $250k
|
| Your wife: $250k
|
| Your wife POD you: $250k
| jfim wrote:
| What's POD in this context?
| htrp wrote:
| Payable on Death...
| TMWNN wrote:
| >The standard deposit insurance coverage limit is
| $250,000 per depositor, per FDIC-insured bank, per
| ownership category
|
| My understanding is that this might cause an unwelcome
| surprise to (for example) someone with a personal account
| at Bank A, and a sweep account at Brokerage P that sends
| its funds into accounts at Banks A, B, and C.
| jjulius wrote:
| >... everyone should know...
|
| I'm going to go out on a limb and say that that might not be
| common knowledge.
| danielmarkbruce wrote:
| Everyone doesn't need to know or care in many cases. The FDIC
| insures deposits up to $250k. That covers the vast majority
| of accounts at most banks. So a run won't occur at most
| banks. There were hardly any runs in 2008 for this reason -
| the relatively few "run type things" which happened were
| where big interbank exposures existed.
|
| SVB's customers are weighted significantly more towards
| businesses who will have more than $250k in the bank. So,
| they have to be ready to take action fast, so a bank run on
| SVB is much more likely.
| Enginerrrd wrote:
| That FDIC thing is so laughable to me because it's purely
| symbolic. Even the feds would have some serious trouble
| absorbing bank-run losses.
| billsnow wrote:
| It's not symbolic, it's literally an insurance company
| that the banks pay premiums to.
| JohnFen wrote:
| > SVB's customers are weighted significantly more towards
| businesses who will have more than $250k in the bank.
|
| If you have that much money, FDIC is not adequate for you
| (and isn't intended to be). There are other mechanisms for
| those sorts of depositors. Surely, those businesses got
| solid financial advice and are using them, right?
| fallingknife wrote:
| Every bank is screwed if everybody takes all their money out.
| And everybody already knows it.
| [deleted]
| FormerBandmate wrote:
| If it becomes an internet meme/viral story however, which it
| looks like it's becoming, they're especially fucked. He
| should have never said this, this is very concerning
| FormerBandmate wrote:
| This is how every bank has always worked since banks were
| invented
| ncallaway wrote:
| Yes, but it's pretty much always been problematic when a bank
| leader has had to make a statement akin to "We're fine as
| long as there's not a run".
|
| That's the kind of thing that only gets said when there's
| some concern that there will be a run.
| FormerBandmate wrote:
| They're selling equity to get capital. That's pretty dire
| straits, FTX was doing that before they went under (I'm not
| saying this is FTX, I'm just saying it can be akin to the
| nuclear option)
| JKCalhoun wrote:
| We're fine as long as we don't hit an iceberg.
| dylan604 wrote:
| except when all of banks failed their stress tests, a) who
| remembers, b) who cared when it was announced?
| FormerBandmate wrote:
| All the banks passed their stress test this year
|
| https://www.federalreserve.gov/newsevents/pressreleases/b
| cre...
| orangepurple wrote:
| Regulators have been putting immense pressure on big
| banks to hold adequate capital reserves since 2008 and
| they have been especially turning up the heat for the
| last 5 years. Moreover, it is clear that regulators will
| never allow a US bank to hold more than 3% of assets as
| crypto ever again.
| [deleted]
| anonymouse008 wrote:
| Why didn't he just say, "I'm excited for whatever everyone must
| be buying with their cash. We are looking forward to the
| sellers' new deposits"
| boringg wrote:
| Poor move by the CEO. It's like he wanted to be honest with
| everyone but that wasn't a strong signal.
|
| Also out most of the banks - you would expect that the clients
| of SVB are a little more sophisticated than your retail bank
| demographic being start-up companies and all (big assumption).
| johnbellone wrote:
| This guy. Wow.
| dublinben wrote:
| Matt Levine is fond of this highly relevant quote by Bagehot:
| "Every banker knows that if he has to prove that he is worthy
| of credit, however good may be his arguments, in fact his
| credit is gone."
|
| It seems that CEOs of banks haven't learned anything since 1873
| when this was observed.
| cm2187 wrote:
| A variant of Thatcher's "Being powerful is like being a lady,
| if you have to tell people you are, you aren't".
| the_optimist wrote:
| Representing that you have certainty--when you do not--may
| well land you in jail. You can only show your measures and
| sell the story.
| kencausey wrote:
| Or that very simply banks are never 100% liquid.
| daniel-cussen wrote:
| [dead]
| nimbius wrote:
| its the most cynical response ive seen in a long time, to
| basically reiterate a fundamental limitation of modern central
| banking in response to the very event thats occurring.
| vonnik wrote:
| SVB is an institution that has supported a lot of businesses in
| tech.
|
| There are a lot of harmful clowns out there fearmongering. They
| should stop.
|
| The failure of a bank like this, if it occurs, would be bad for a
| lot of people.
| influx wrote:
| I urge you to withdraw your funds before they collapse. These are
| the same frauds that closed my account because they didn't like
| the business I was in.
|
| Enjoy bankruptcy you frauds.
| ffssffss wrote:
| What was the business? They told you it was okay and then
| changed their minds?
| nico wrote:
| SVB CEO to VCs: please don't tell anyone to withdraw their money
| or we could be in trouble
|
| VCs: [immediately texting after hearing the above from the CEO]
| attention all portfolio companies, SVB seems to be in trouble,
| don't keep your money with them
| [deleted]
| samwillis wrote:
| Ongoing discussion here:
| https://news.ycombinator.com/item?id=35086336
| dang wrote:
| Thanks! Since that submission is just a single-sentence tweet,
| I guess we'll merge those comments hither, so the (slightly)
| more substantive article remains the basis for discusion.
| n0us wrote:
| I almost signed up for them via Stripe Atlas recently but hadn't
| pulled the trigger yet. Glad I didn't
| cs702 wrote:
| In theory, a bank can borrow reserves from/via the Fed to fulfill
| redemption requests, so long as the Fed and other lenders in the
| financial system think the bank has a sound balance sheet (i.e.,
| its assets, including the loans it has made, are truly worth more
| than its liabilities, including the deposit balances it owes to
| depositors). The Fed can never run out of money to lend; it
| creates it out of thin air to lend them as needed with the push
| of a button.
|
| If a bank does get in trouble, it's usually because its balance
| sheet is not sound (i.e., assets are not really worth more than
| liabilities). In the case of SVB, a big portion of its assets are
| loans made to startups. Who knows how many of those loans are at
| risk of default in this environment? Simultaneously, many of
| SVB's depositors are also startups that at the moment can't raise
| more capital and thus have been withdrawing money from their bank
| accounts to fund their cash burn. I suspect SVB can't sell its
| doubtful loans, or use them as collateral, so it has been forced
| to sell high-quality long-duration assets purchased when rates
| were much lower, recognizing large losses.
| colesantiago wrote:
| Is this an incoming tech crash?
| pjc50 wrote:
| It's more slow dominoes from the crypto crash, I suspect. I'm
| not worrying about contaigion yet, these guys aren't exactly
| Lehman.
| throwaway20222 wrote:
| Anecdotally about SVB and crypto; I really wanted to put my
| funding round assets into Silicon Valley Bank for my last
| start up. However, when I was speaking to their bankers, I
| mentioned that there was a possible element of the platform
| that would be Web3 based. The SVB team immediately paused my
| application and insisted that they do a deep dive into all of
| my investors, my bank accounts, and my pitch decks. My pitch
| deck did not include materials about web3 since it was so
| tertiary to our core strategy, and this discrepancy between
| what I had told them and the paper materials was such that it
| raised enough of an alarm at SVB that the refused to take my
| deposit.
|
| They were really concerned about anything web3 so I wonder if
| they limited their exposure. Or maybe it was just us they
| didn't like.
| capableweb wrote:
| Probably they just perform more extensive due diligence
| because of the market, as cryptocurrencies are more risky.
| I know of plenty of cryptocurrency companies that use SVB.
| popcalc wrote:
| I would have done the same.
| paulgb wrote:
| I think it's more that the crypto crash and SVB liquidity
| issues are dominoes from the interest rate environment. SVB
| wasn't particularly deep in crypto AFAIK, although if I'm
| remembering correctly I think I once met someone on a
| specifically crypto-focused team there. (It stands out in my
| memory because I consider it a minor red flag when dealing
| with banks.)
| pvarangot wrote:
| If it's tech that was giving out USD loans and accepting crypto
| as collateral yes maybe.
| tekla wrote:
| Doubt it. FTX has shown crypto is completely irrelevant to the
| rest of the economy.
| antibasilisk wrote:
| FTX collapsed in 2022, I don't think we should be so quick to
| dismiss contagion given we're still watching the fall out.
| The subprime mortgage crisis didn't happen overnight.
| adam_arthur wrote:
| More likely a credit event affecting low quality
| debt/companies. Usually these trigger broader recessions
|
| Will be hard to raise for startups without compelling
| profitability metrics, though
| jbverschoor wrote:
| Wouldn't be surprised if some tech or crypto whales stated this,
| to show that banks aren't more "save" than crypto
| recursive wrote:
| Don't think it will work. Banks accounts are federally insured.
| jbverschoor wrote:
| Here in Europe is's only 100k per account per holder. (Used
| to be 20K in NL)
| recursive wrote:
| Having 100k in a bank account seems to be well into 1%-er
| territory. I don't think that's going to do much for the
| alleged PR campaign conspiracy.
| rootusrootus wrote:
| Nah, especially among older folks, 100K+ in a bank
| account is fairly common. My mom does, my grandmother
| did, my stepmother does, and trust me none of these folks
| are 1%ers or even close.
| monocasa wrote:
| At essentially $250k per account (although like all things
| banking the specifics are far more complicated than that).
| antibasilisk wrote:
| [flagged]
| theGnuMe wrote:
| Themselves. They have magic money printing machines.
| boringg wrote:
| The population.
|
| The model is predicated that only a couple banks fail at
| the same time. I am sure there is a magic number that if it
| hit that many banks failing the insurance would also fail.
| The likelihood of that happening is incredibly low - and I
| can only think that would happen in a complete and utter
| economic collapse.
| mvial wrote:
| The main limitation is that liquidity risk regulation are not
| adequate. As recent example shows the reality is that risk is
| underestimated under the fake premise of accounting rules. Asset
| liability mismatch is the survival risk for a bank. Once you
| start creating an imbalance that forces to take action by seliing
| assets it is just creating a negative cycle. Also now people will
| ralize that treasury is not risk free.
| toss1 wrote:
| Seems like a good opportunity for Mercury.
|
| Been using Mercury for a couple of years, as a customer I can
| recommend their excellent support & services. That said, I know
| aprox zero of their balance sheet or those of their backing banks
| Choice Financial Group and Evolve Bank & Trust.
| helsontaveras18 wrote:
| Mercury is great! I bank with them.
|
| But I'm not worried about Mercury, I'm worried about their
| partner bank.
|
| Anyone know if Evolve is in a similar situation?
| willmadden wrote:
| Not to spread FUD, but a friend of mine shared this with me
| some time ago. It's a good article. I suggest reading it.
|
| https://fintechbusinessweekly.substack.com/p/evolves-
| problem...
| recursivedoubts wrote:
| Daily reminder that bank runs wouldn't be a thing if we did
| duration matching, forbidding banks from borrowing short and
| lending long.
|
| As always, the underlying problem in banking is that the banks
| are lying, telling two or more people they own the same dollar at
| the same point in time. If they locked deposits for a period of
| time they could safely (and morally) loan that money out without
| lying, and, in fact, there wouldn't need to be a reserve ratio at
| all.
|
| Demand deposits should cost a low service fee, since the money
| can't be safely lent.
|
| Yes, I'm a lot of fun at parties, why do you ask?
| mempko wrote:
| Banks don't loan deposits. You have it exactly backwards. Loans
| create deposits. Banks aren't intermediaries, but creators of
| money.
| villagevanguard wrote:
| > reminder that bank runs wouldn't be a thing if we did
| duration matching, forbidding banks from borrowing short and
| lending long
|
| What is the business then? In order for it to be a business, a
| bank needs to earn a higher interest rate on what they lend
| than on what they borrow.
|
| The bank has two choices to achieve this delta in interest
| rates. It can either 1. mismatch duration or 2. make loans that
| are riskier than their borrowings. By banning the first, you
| are implicitly claiming that the second is preferable. Is the
| second really preferable? Maybe. But not obviously.
|
| I have no special sympathies for Silicon Valley Bank, but the
| reason its customers still have deposits today is that the bank
| leaned more toward the duration mismatch than the risk
| mismatch. What happens if you achieve your interest rate delta
| by making super risky loans and all those loans turn to goose
| eggs? Bye bye customer deposits.
| nradov wrote:
| That's not a real problem as long as banks are adequately
| capitalized. Shareholders might get wiped out but that's fine,
| they know the risks.
| cm2187 wrote:
| You may be confusing solvability and liquidity. You may be
| well capitalised but if you run out of cash it's game over.
| Being well capitalised only protects you against losses (eg
| bad loans).
| throwaway742 wrote:
| There is no reserve ratio. We got rid of it in March 2020.
|
| https://www.federalreserve.gov/monetarypolicy/reservereq.htm
| mrosett wrote:
| > Daily reminder that bank runs wouldn't be a thing if we did
| duration matching, forbidding banks from borrowing short and
| lending long.
|
| If we really want to prevent bank runs, shouldn't we just
| forbid lending?
|
| Snark aside, transforming duration is a big part of the value
| that banks add. In general, there's a lot of demand for lending
| short and borrowing long. Banks add value (and risk) by taking
| the opposite side of those trades. I'd rather have banks that
| suffer occasional runs (which really aren't that common at this
| point) than banks that don't transform duration
| antibasilisk wrote:
| >If we really want to prevent bank runs, shouldn't we just
| forbid lending?
|
| This but unironically, interest-based lending is evil and
| should be banned.
| FormerBandmate wrote:
| This destroys the entire economy, making startups and
| corporations much harder to run to the point of
| impossibility. Even in countries run on Sharia law, they
| still find proxies for interest
| njarboe wrote:
| VCs generally fund startups by giving them funds in
| exchange for equity, not loans (complicated financial
| shenanigans aside).
| FormerBandmate wrote:
| They use discounted cash flows to model them, which are
| dependent on loans as a key component.
|
| VCs also use loans themselves from time to time, and
| their investors can use loans to invest in them.
| ticviking wrote:
| Those proxies tend to make the risk and liability much
| much clearer than usury does.
|
| And generally speaking you can't honestly use those
| proxies to build financial skyhooks
| darkerside wrote:
| [flagged]
| acchow wrote:
| I've flagged this. Please read the HN rules
|
| "Be kind. Don't be snarky. Converse curiously; don't
| cross-examine. Edit out swipes.
|
| Please don't fulminate. Please don't sneer, including at
| the rest of the community.
|
| Comments should get more thoughtful and substantive, not
| less, as a topic gets more divisive."
|
| https://news.ycombinator.com/newsguidelines.html
| darkerside wrote:
| The comment I responded to advocates for a world where
| this forum would never have existed. I could have been
| less snarky, but I am genuinely mystified how someone
| could have posted such a thoughtless and unsubstantiated
| comment and seemingly not even realized it.
| dwater wrote:
| Well, a lot of religions created before the modern era of
| banking say that lending with interest is a sin, and
| there are some people that still believe it.
| monocasa wrote:
| Also, most of the Muslim world works off of banking
| without usury.
| pseudo0 wrote:
| Most of the Muslim world just offers financial products
| that have "fees" coincidentally exactly equal to the
| interest a non-Muslim bank would charge.
| WJW wrote:
| Thing is, I want to start a business but need several
| hundred thousand USD in machinery. Lathes or bakery ovens
| are not free after all. I don't have that right now, and if
| I need to save up for several decades the opportunity will
| have passed. How do I convince people to lend me money
| without any interest?
|
| You can replace "want to start a business" with "want to
| buy a house" if you prefer.
| originalcopying wrote:
| that machinery being so expensive is part of a long
| tradition of 'developed countries' (powerful peoples)
| wielding power over other weaker countries by means of
| technological availability restrictions.
|
| The history of the textile industry is but an instance of
| this historical pattern of behavior.
|
| all I'm saying is that it's all part of the same 'power
| system' of government and order.
|
| in the end, interests is comparable to imposing a rent on
| upon time usage. i.e. interest forces us to pay with
| money for the time we live (or time we spent), regardless
| of whether we are working or doing whatever, regardless
| of where we are as long as we are under the influence of
| money created through loans with interest.
|
| that we must pay taxes on top of the interest exacted
| from all of us is just a cherry on top.
| skulk wrote:
| > that machinery being so expensive is part of a long
| tradition of 'developed countries' (powerful peoples)
| wielding power over other weaker countries by means of
| technological availability restrictions.
|
| I'm having real trouble unpacking what you mean here.
| Machinery is expensive because... there's a worldwide
| cartel keeping prices up to keep out new players? Could
| it also be that making machines is hard and requires a
| lot of research/labor/material?
| njarboe wrote:
| If 30 year housing loans were not available, housing
| would be a lot cheaper.
| chollida1 wrote:
| I assume you are trolling, but in case you are not.
|
| How would you provide loans to help get businesses started?
|
| How would you provide loans to people to buy their first
| homes?
|
| How would you provide loans so people can afford to go to
| school?
|
| How would you provide loans to buy a vehicle so people can
| get to/from their job before they get a paycheck?
|
| How would farmers afford to buy land, equipment and plant
| crops before they got paid for selling them?
|
| Like it or not, credit has allowed a large portion of
| people to get lifted out of poverty.
| [deleted]
| oa335 wrote:
| Sell equity stakes or form a joint partnership. This is
| exactly how most startups get funding.
|
| Also, it's not clear to me that credit has lifted people
| out of poverty; I'd argue that interest based lending has
| kept people in poverty, transferring wealth to those who
| already have it.
| ticviking wrote:
| Savings. Frugality.
|
| Only consuming what we can actually afford.
|
| Investment with real skin in the game. If you have to
| take on much higher risk to get returns we will find
| ourselves being more careful about those returns actually
| happening.
| jdminhbg wrote:
| > Savings.
|
| Those savings are gonna grow at a pretty slow rate if you
| can't lend with interest.
| volkk wrote:
| so...it would take actual generations for people to get
| out of being utterly broke since in your world, you'd
| have to save up as a poor person to actually open up a
| business or do anything worthwhile. sounds so fun, sign
| me up. i want my family to be poor for 250 years until we
| finally have 2 million that we need to start that farm my
| great great great grandfather wanted to.
|
| some people on this website literally live on a different
| planet or don't actually have any understanding
| of...anything and just say things because it sounds smart
| MrMan wrote:
| making a loan is an investment with real skin in the game
| mason55 wrote:
| > _Daily reminder that bank runs wouldn 't be a thing if we did
| duration matching, forbidding banks from borrowing short and
| lending long._
|
| Yes but this is a valuable service for the economy and so
| society has decided that it's worth the cost of insuring the
| risk of a bank run in exchange for the economic benefit of
| banks doing this.
| JustLurking2022 wrote:
| That's insanely unrealistic in the near zero interest rate era
| of the past decade and merely a really terrible idea with more
| normal rates.
|
| Banks have some set of relatively fixed cost, in terms of
| systems and staff. In a low rate environment, there's virtually
| no margin to be made on short term lending. Stretching the
| duration for higher yield is the only way to get margin to
| cover expenses.
|
| Even in a high rate environment, most of a bank's reserves tend
| to be short term - savings accounts, 1 year CDs, etc. The
| things people want to borrow for (e.g. houses, cars) tend to
| have a longer time horizon to pay off. So if you want banks to
| actually make those kinds of loans, duration matching doesn't
| work.
| PragmaticPulp wrote:
| This is kind of like saying we can eliminate most automobile
| fatalities by imposing strict limits of 5mph on every vehicle.
|
| Yes, it would solve one type of problem. But nobody wants your
| solution because it's an unreasonable trade off for everyone to
| solve an extremely rare edge case.
|
| > Daily reminder that bank runs wouldn't be a thing if we did
| duration matching, forbidding banks from borrowing short and
| lending long.
|
| In other words, no liquid deposits allowed. Banks charge
| customers to hold their liquid cash because they can't do
| anything reasonable with it.
|
| So yes, you could make one type of extremely rare problem go
| away by removing a desirable feature used by hundreds of
| millions every day. I don't think people would actually choose
| this, though.
|
| > As always, the underlying problem in banking is that the
| banks are lying, telling two or more people they own the same
| dollar at the same point in time
|
| Either you don't understand how banking works, or you're trying
| to project a crude misunderstanding onto the general public.
|
| The concepts of assets and liabilities are well understood in
| the business world. Banks aren't "lying" and fractional reserve
| banking does not mean that banks are creating fake dollars.
| Liabilities have always been part of the equation.
| JohnFen wrote:
| > telling two or more people they own the same dollar at the
| same point in time.
|
| I don't remember a bank ever telling me this. I was taught how
| banks work way back in grade school. Surely everyone knows that
| banks don't literally hold the money you deposit in a vault
| somewhere.
|
| I honestly don't see where banks are lying about this.
| s1artibartfast wrote:
| My understanding is that the problem was that the dollars they
| owned were in US treasuries, as required by law, and the value
| of those assets tanked.
| frellus wrote:
| > telling two or more people they own the same dollar
|
| This is the main issue, and it's called a "reserve
| requirement", which is a percentage of the deposits that the
| bank must keep on hand to mitigate risk of issues like this.
|
| https://en.wikipedia.org/wiki/Reserve_requirement#United_Sta...
|
| In March 2020 the US Federal Reserve lowered it from 8% to 0%,
| which is where it is today. Just to give you an idea of how the
| economy works then, let's say you put $100 into your account at
| Bank A. Company X takes a loan from the bank for $100. Where do
| they put their money from the loan? Well, they spend most of it
| but part of it ends up in, let's say, Bank B. Bank B then takes
| that money and loans it out 100% to Company Y, who spends some
| of it and also puts some reserve into their bank account in
| Bank A. Which lends it out 100%.
|
| So this is an over-simplified example but just to give a visual
| that this is where inflation is coming from. The "government"
| isn't printing money -- the banks are. It's a deck of cards
| with no safety net.
|
| Watch the movie "The Big Short" and tell me how this isn't the
| same situation.
|
| source: I am also a lot of fun at parties
| 88913527 wrote:
| It's surprising that QT is occurring, yet there was no change
| in reserve requirements. It seems like a policy tool that
| would be part of the monetary tightening toolbelt.
| boringg wrote:
| I mean if they locked deposits for a time period - why wouldn't
| you just got buy a bond? The service is the liquidity.
|
| You are trying to solve a relatively non-existent problem.
| jsemrau wrote:
| We used to call that concept matched-funding where I used to
| work and it was quite an important part of Asset/Liability
| management within the Risk Management function.
| ianferrel wrote:
| Does that provide a better outcome for society than something
| like FDIC deposit insurance and the occasional run?
|
| Seems like for the vast majority of people it does not. Most
| banks make enough money to pay their FDIC premiums and some
| interest on demand accounts and profit for their shareholders,
| and the few that don't are covered by insurance. That seems way
| better than having to pay a monthly fee to keep my money safe
| and liquid.
|
| >there wouldn't need to be a reserve ratio at all.
|
| Wouldn't there? The bank could still end up with bad loans in
| excess of their models and require some capital to take the
| loss before depositors. Or are you suggesting that banks are
| simply a market maker between depositors and those with loans?
| That seems even less optimal, societally.
| recursivedoubts wrote:
| Yes, it does.
|
| Lying is wrong[1]. Therefore, it is bad to base your banking
| system on it. It's the typical thing where the costs to the
| system accrete over time and then cause a crisis: the elites
| are bailed out, the taxpayers eat it.
|
| There wouldn't need to be a reserve ratio. A dollar could, in
| theory, be lent out an infinite number of times, so long as
| that dollar were lent (and saved) at increasingly shorter
| durations. At any given point of time, a single person "owns"
| that dollar. Of course, the market would signal what dollars
| were available when. And, also, loan losses would need to be
| covered out of other profits by banks (who would need to
| charge service fees for, well, the services they provide,
| rather than hiding behind long/short duration arbitrage)
|
| (I'm also in favor of a citizens dividend for controlling
| money growth, and a modern debt jubilee per Steve Keen. So,
| yes, you can safely ignore anything I say as implausible,
| almost certainly wrong, and unlikely to ever be realistically
| considered by the powers that be. This has one advantage,
| however: I will never be proven wrong :)
|
| [1] - see all moral traditions across all cultures, or ask
| mom
| JohnFen wrote:
| > Lying is wrong[1]. Therefore, it is bad to base your
| banking system on it.
|
| Where is the lie, though?
| avianlyric wrote:
| > Lying is wrong
|
| What explicitly is the lie?
| recursivedoubts wrote:
| See my sibling comment.
| ianferrel wrote:
| >And, also, loan losses would need to be covered out of
| other profits by banks
|
| But, like, what if they aren't? Who holds the bag when
| losses exceed profits? That is of course exactly the case
| where deposit insurance comes in handy. So I'm pretty sure
| you still need it.
|
| Your model protects specifically against losses due to time
| mismatch between deposits and loans, but there are other
| ways that loans can go bad!
| ffggffggj wrote:
| If you think fractional reserve banking is "lying" how are
| you okay with fiat money at all? If you were consistent
| you'd be a true goldbug.
| ticviking wrote:
| It is a fact that the IRS requires me to pay taxes in
| federal reserve notes.
|
| That makes them real enough.
| recursivedoubts wrote:
| Nope. I was a gold bug once, but I don't think it's a
| good way to manage the total money supply: it can't grow
| as fast as the economy (labor productivity) does. I view
| money is a public social tool, and so it should be owned
| by all of us. Hence I am in favor of a citizens dividend
| for growing the money supply.
|
| I do think you should be able to trade fiat into gold and
| vice versa tax free, so gold can be used for savings,
| which it is very good at.
|
| In fairness, nobody agrees with me on this stuff,
| including myself at times!
| chollida1 wrote:
| Who is lying in this case?
|
| Banks are one, if not the most, regulated companies in the
| US.
|
| What are banks lying about and who are they lying to?
|
| I'd assume the government would come down on them pretty
| hard if it turns out that all banks are lying to their
| customers as federal and state regulations on banks are
| pretty heavy handed to make sure that the vast majority of
| banks are healthy at any given time.
| recursivedoubts wrote:
| The bank is telling two or more people they own (or, at
| least, have access to) the same dollar at the same point
| in time.
|
| With duration matching you can have loans, but it is
| clear that depositor A can't get dollar X back until time
| point T, and that borrower B can have the dollar until
| then.
| JohnFen wrote:
| > The bank is telling two or more people they own (or, at
| least, have access to) the same dollar at the same point
| in time
|
| But they don't do that. Or, I've literally never seen
| them do that.
|
| What the bank tells me is what my current deposit is.
| That's the truth. They aren't representing that the
| amount they're listing is a specific dollar somewhere,
| they're telling me how much money I've given to them.
| [deleted]
| [deleted]
| [deleted]
| phkahler wrote:
| If you loan out deposits you are already set for a bank run.
| All it takes is the depositors to ask for their money back.
|
| One deposit. One loan. One withdrawal request.
| recursivedoubts wrote:
| Not if the deposit and loan are duration matched.
|
| "I want my money back."
|
| "Sure, you can have it in two years."
| PragmaticPulp wrote:
| "I want to make a deposit and earn interest"
|
| "Sorry we have to wait for someone else to want a loan"
|
| If you're trying to solve one extremely rare problem (bank
| runs) by completely dismantling a much demanded and
| commonly used banking feature (interest bearing accounts
| with liquidity) then sure, this would do it.
|
| But nobody actually wants that.
| twblalock wrote:
| Who would deposit their money in a bank that wouldn't let
| them get it back for years?
| Scoundreller wrote:
| CDs?
| twblalock wrote:
| CDs are definitely not the same as checking and savings
| accounts though. Most people don't even have any CDs, and
| the people who do have them _also_ have accounts where
| they can withdraw money immediately.
|
| I've never seen a bank that only offers CDs. That's
| probably because such a bank wouldn't survive.
| recursivedoubts wrote:
| You are touching on the difference between demand
| deposits and duration deposits.
|
| If you were charged a small nominal fee for your demand
| deposits, you would likely say "OK, I'll keep a certain
| amount in my demand deposit account, and then put the
| stuff I don't need into longer duration deposits, so I
| can get some interest."
|
| This would be the right thing, and that money could be
| safely loaned out at durations shorter than you
| deposited. You would then be signalling to the market
| exactly what the demand is for money over time, and it
| could respond appropriately.
|
| To an extent you do this today: you don't keep all your
| money in demand deposits, you instead put a lot in the
| market or whatever. Back in the day, you might have even
| bought a CD, which is almost exactly what I'm describing,
| sans the requirement that banks not loan funds they can't
| guarantee are available for the duration of the loan.
|
| So it's not as crazy as it sounds. It's still crazy, but
| not as crazy as it sounds.
| s1artibartfast wrote:
| People do it all the time already, but it is a minor part
| of banking sector.
| acchow wrote:
| Minor part of consumer banking.
|
| For the financial sector at large, treasuries and bonds
| make up the vast majority of the market
| acchow wrote:
| This is how bond issues work.
| ticviking wrote:
| I own a few CDs. They're not an unusual financial
| product.
| twblalock wrote:
| Yeah but I assume you also have money in an account that
| lets you withdraw it in less than two years?
|
| A bank that only offers CDs or other long-duration
| deposits would be pretty weird.
| greenyoda wrote:
| But the longest maturity for CDs is around 5-10 years,
| while banks loan out money for 15-30 years for mortgages.
|
| And most banks probably have much more money deposited in
| checking and savings accounts than in CDs.
| thesimon wrote:
| > If they locked deposits for a period of time they could
| safely (and morally) loan that money out without lying
|
| Are fixed deposits not common in the US?
| paulgb wrote:
| There is a product called a Certificate of Deposit[1], but I
| don't hear much about them. They seem like quite a bit of
| hassle for not much more interest.
|
| [1] https://en.wikipedia.org/wiki/Certificate_of_deposit
| sethhochberg wrote:
| Not very common. Most consumer checking and savings accounts
| are demand deposit accounts here.
|
| The default path for slightly higher interest on a fixed term
| in the US tends to be certificates of deposit. They're
| similar but functionally more like a bond you purchase than
| an account you can deposit into regularly.
| majormajor wrote:
| > If they locked deposits for a period of time they could
| safely (and morally) loan that money out without lying, and, in
| fact, there wouldn't need to be a reserve ratio at all.
|
| Until the borrower doesn't (or can't) pay back the loan...
|
| "Safe" and "moral" seem like inherently relevant words here and
| I'm unconvinced that you're proposal would be overall
| beneficial compared to the increased circulation we enable
| today.
| WJW wrote:
| While that would obviously solve the (relatively minor, all
| things considered) problem of bank runs, the demand for long
| term loans is not nearly as large as the supply of long term
| money. Maturity transformation provides real value to the
| economy by consolidating short term deposits into things like
| mortgages and long term business loans.
|
| Imagine if you could only get 3-year mortgages, after which the
| entire cost of the house had to be repaid. That would make home
| ownership unattainable for the vast majority of the population.
| Alternatively, if you could not access your savings for 10-30
| years after depositing I bet a lot of people would not bother
| at all.
| KirillPanov wrote:
| > the demand for long term loans is not nearly as large as
| the supply of long term money.
|
| It is when the loans are priced correctly.
|
| This is a clear and obvious sign that the price of long term
| loans is wrong.
| WJW wrote:
| Perhaps in a pure market sense, but that's not the world we
| live in. The government (doesn't really matter where you
| live) has a vested interest in the status quo and wants
| people to make long term investments. That is good for both
| societal stability and for longer term economic growth.
| Therefore, such a government will support financial
| institutions in providing long term loans even if that
| sometimes leads to bank runs. Things like FDIC and related
| systems in other countries make sure the risk gets smoothed
| out over all participants in the economy.
|
| My point is that when you take the view from the wider
| society, the price of long term loans should be (nearly)
| independent from the chance of bank runs. Those are only a
| problem for the shareholders of the bank itself, but not to
| the society it resides in.
| toast0 wrote:
| > Imagine if you could only get 3-year mortgages, after which
| the entire cost of the house had to be repaid. That would
| make home ownership unattainable for the vast majority of the
| population. Alternatively, if you could not access your
| savings for 10-30 years after depositing I bet a lot of
| people would not bother at all.
|
| Adding on...
|
| Balloon mortgages exist, although they're usually not very
| convenient though, because transaction costs are real and the
| risk of being unable to find acceptable finance terms when
| the balloon payment is due is also real.
|
| Similarly, lots of people participate in retirement accounts
| with substantial fees for early access. I guess you could do
| mortgage lending from retirement funds, but the interest
| rates aren't compelling (they might be if that was the only
| source of long term lending though).
| ericpauley wrote:
| I'm really curious why banks like this are popular in the first
| place. I get why startups would want to lend _from_ them, but
| what is the advantage of parking cash in a "startup-focused"
| bank? The rest of the business is exciting/risky enough, wouldn't
| you want your banking to be as boring as possible?
| ttobbaybbob wrote:
| they provide services/incentivies specifically catered to
| startups and their needs (eg free checking, aws credits,
| payment processing APIs/etc)
|
| and not unlike aws/stripe/etc they want to be the bank for
| small companies that grow into huge companies. startups are a
| good segment to target (eg like vc) because they might also
| turn into a large company with much more cash and more banking
| needs
| boringg wrote:
| Gives you access to the upside of the start up at a lower risk
| cost compared to VC. I assume you are talking about people who
| are supplying the capital for the bank.
| paxys wrote:
| People care about convenience of locations, ATMs, online
| experience, customer service, savings rate, (lack of) fees,
| rewards. The bank's underlying risk profile is irrelevant for
| the vast majority of customers. If you have <$250K in your
| account the money is safe either way.
| helsontaveras18 wrote:
| Banks don't understand startups. Startups have no history and
| just appear out of thin air with millions of dollars in their
| bank account. And then they proceed to burn tens if not
| hundreds of thousands of dollars month on month until they die,
| or get flooded with more millions.
|
| That's some weird stuff!!
|
| A bank that understands this, knows it's not fraudulent, and
| makes it easy to withdraw, deposit, get credit cards, give
| loans/venture debt, has a competitive advantage in this niche
| but highly lucrative sector--given they can operate with the
| right risk controls.
| jeron wrote:
| SVB has been a great bank for startups, they're no rookie at
| this stuff considering they've been around for 4 decades.
| However it seems like their investor communications and PR
| has been lacking
| necubi wrote:
| Well, just as an example SVB gave my company a bank account and
| a no personal recourse credit card days after we'd formed the
| coporation. They understand the startup ecosystem in a way that
| big banks don't. Now there's some competition from startup-
| focused banks like Brex and Mercury, but a five years ago SVB
| was the only game in town.
| [deleted]
| newaccount2021 wrote:
| [dead]
| mmastrac wrote:
| SVB was historically such a weird bank - it was the most "famous"
| tech bank, perhaps solely because of its name - but yet it was so
| utterly behind in the technology it used for _years_.
| bink wrote:
| Behind other banks or behind tech companies? Every bank I've
| ever used is about 10 years behind when it comes to tech.
| TMWNN wrote:
| >SVB was historically such a weird bank - it was the most
| "famous" tech bank
|
| What would you name as its peers? I've heard First Republic.
| What about Bank of the West?
|
| >perhaps solely because of its name
|
| It _is_ a killer name, after all. I bet the First Republics of
| the world wish that when they were started however many decades
| ago, their founders had the foresight to name them "High-Tech
| Bank" or "Sand Hill Bank" or somesuch.
| CKMo wrote:
| Is this related to fractional reserve banking?
| shishy wrote:
| https://twitter.com/ragingventures/status/161582608803847373...
| dgrin91 wrote:
| First silvergate, now SVB. Is this going to be a wave across the
| banks?
| krasin wrote:
| Today, Credit Suisse delayed its 2022 report after the last
| minute call from SEC: https://www.cnbc.com/2023/03/09/credit-
| suisse-to-delay-its-2...
|
| I don't know what to make of it.
| yelling_cat wrote:
| Credit Suisse is facing liquidity issues and tarnished
| credibility after a rash of scandals and screwups, see
| https://www.reuters.com/business/finance/spies-lies-
| chairman... for a summary. From your link it looks like their
| finance reporting in recent years is now under question as
| well. It doesn't look related to what happened at SVB or
| Silvergate.
| pclmulqdq wrote:
| It could be routine (no more news from banks that are in
| trouble please), but the SEC does have access to the numbers
| in the filing since it goes into EDGAR about a month before
| the announcement.
| thedangler wrote:
| It's probably no related to swaps that expired..... Better
| pick themselves up by their bootstraps and quit the avocado
| toast.
| HDThoreaun wrote:
| Anyone holding long term bonds they bought before the fed
| raised rates is in liquidity trouble. The question is if those
| institutions will have a run or not.
| carom wrote:
| Specific issues with SVB, not systemic. [1]
|
| 1. https://techcrunch.com/2023/03/09/silicon-valley-bank-
| firms-...
| yieldcrv wrote:
| Okay so every bank faces the same vulnerability, which is that
| their bond portfolio has suffered major losses
|
| The market was made aware of how deep the losses are, as this
| is not usually reported in investor disclosures and the bonds
| are usually held to maturity thereby not being subject to
| losses in their notional value
|
| ANY bank with volatility in customer deposits is vulnerable to
| these losses as they have to sell the bond at its current value
| at a big loss to cover the customer withdrawal
| adam_arthur wrote:
| It was specific at Silvergate too. Unfortunately there are far
| too many optimists out there managing money who chose not to
| play it safe. Thus, despite being idiosyncratic, it can still
| be a systemic problem
|
| Why these companies didn't issue shares at the
| outrageous/nosebleed valuations they were at a year ago? Truly
| a mystery
| [deleted]
| johnbellone wrote:
| All due respect, nah, nope.
|
| Today I learned that many startups park their money at one
| bank. I hope that isn't true. If it is I'd be moving my funds
| regardless right now.
| marcosdumay wrote:
| That's the second not systemic failure that makes the HN
| frontpage today.
| kyleblarson wrote:
| And with the amount of venture debt that SVB issues if more
| startups start blowing up this could just be the tip of the
| iceberg.
| boringg wrote:
| All they need to do is pause for 5 days and get past the
| whirlwind of activity right now and let saner heads prevail.
| grecy wrote:
| "All bank stocks are crashing right now"
|
| https://www.reddit.com/r/Superstonk/comments/11n1xtw/all_ban...
| grumple wrote:
| This is like the prisoner's dilemma in real life. Best case
| situation is for no-one to withdraw.
|
| Reporting suggests SVB has a lot of reserves, but them trying to
| raise money suggests otherwise. Weird.
| nickrubin wrote:
| Getting "Application is not available" now at
| https://connect.svb.com/
| yabones wrote:
| I guess that's what bank runs look like in the 21st century...
| Just 503 errors instead of lineups and riots.
| dgwight wrote:
| I just tried to login to svb.connect.com and it is giving me a
| popup to scan an QR code from the app. The app now gives me a
| popup requiring two factor auth (which it hadn't ever before)
| with a phone number that I don't have access to. I luckily don't
| have much money in this account. As a bootstrapped founder, what
| would I need to do to get my money if SVB goes under?
| Danieru wrote:
| NPR did a story fourteen years ago covering a real life
| example: https://www.npr.org/2009/03/26/102384657/anatomy-of-a-
| bank-t...
|
| This being a bit different, the most likely scenario will be
| SVB getting bought on the cheap by a bigger bank. The merger
| will be pushed by the regulator.
|
| Since SVB's root problem is lack of diversification in client
| basis, a larger bank beings the perfect solution. In such a
| scenario SVB will continue as a brand, and their website would
| start working again.
| rvz wrote:
| Perhaps it is the beginning of the end of the VC jenga pyramid
| scheme.
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