[HN Gopher] Etsy Delays Seller Payouts Due to Run on Silicon Val...
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Etsy Delays Seller Payouts Due to Run on Silicon Valley Bank
Author : O__________O
Score : 107 points
Date : 2023-03-11 19:06 UTC (3 hours ago)
(HTM) web link (www.ecommercebytes.com)
(TXT) w3m dump (www.ecommercebytes.com)
| Eumenes wrote:
| "run"
| wetpaws wrote:
| It absolutely was a bank run in the most classic sense of this
| term.
| kolbe wrote:
| I think the classic sense is when a too many people withdraw,
| and even though the bank has sufficient assets to cover their
| liabilities, they don't have necessary cash to honor the
| withdrawals. SVB doesn't have enough assets, and has been
| insufficiently capitalized based on proper valuation
| techniques for quite some time. It's not just a cash on hand
| issue.
|
| You could say they're both different forms of bank runs, but
| in SVB's case, they've been essentially legally defrauding
| their depositors by misrepresenting their capital base. And
| people got wise to it.
|
| I'm not disagreeing with you, but saying that if someone else
| wants to make the distinction, I wouldn't quibble.
| yuliyp wrote:
| Why the quotes? 25% of deposits being withdrawn within a day is
| pretty much the definition of a bank run, isn't it?
| taspeotis wrote:
| People took out so much money they were insolvent.
|
| https://dfpi.ca.gov/2023/03/10/california-financial-regulato...
|
| > SAN FRANCISCO - The California Department of Financial
| Protection and Innovation (DFPI) announced today that, pursuant
| to California Financial Code section 592, it has taken
| possession of Silicon Valley Bank, citing inadequate liquidity
| and insolvency. The DFPI appointed the Federal Deposit
| Insurance Corporation (FDIC) as receiver of Silicon Valley
| Bank.
| dahdum wrote:
| IIUC, they were technically insolvent and desperately trying
| for an equity raise first, then people took out their money.
| rnk wrote:
| And this is well explained in many places. SVB had
| deposits, many over 250k. They bought long term us govt
| bonds with rates available at the time. Then rates went up
| quite a bit over a short term. The old bonds lost value,
| because new bonds had higher rates, making the old bonds
| with lower rates worth less. These were effectively losses
| that were not yet recognized. The bank must have bought new
| bonds with new deposits as rates went up. But they still
| have loses on their old bonds, those more than a year old
| or so. That could have been a lot of money.
|
| Then when lots of people starting taking their money out,
| they had to sell some of those lower rate, lower valued
| (losses) bonds to pay those people out. This increased as
| more people started taking their money out, eventually the
| bank lost all its capital through these "old bond w lower
| rates losses". This is fascinating, but also impactful
| because probably lots of banks have the same problem in the
| us.
| sourcecodeplz wrote:
| Talk about ripple effects.
| tedivm wrote:
| Ripple actually got their payroll out late yesterday.
| mikekij wrote:
| The sentiment on Twitter seems to be "tough. You, Etsy seller,
| took a risk by selling on a platform that used a bank that made a
| bad investment. The tax payer shouldn't bail out a bunch of rich
| pottery artists."
|
| These sorts of effects (Etsy sellers not getting paid) are going
| to show up all through the ecosystem if 25% of venture backed
| companies can't make payroll next week.
|
| SVB equity holders should go to zero. But it's in our collective
| best interest to make sure that depositors have timely access to
| some meaningful portion of their deposits.
| UncleOxidant wrote:
| > if 25% of venture backed companies can't make payroll next
| week.
|
| That percentage seems really high. Is it likely that 25% of
| _all_ venture backed companies had all of their money in SVB?
| Of the ones that did, many of the smaller ones could still meet
| payroll next week and possibly for a few weeks based on $250K
| that they 'd still have access to.
|
| We found out that Roku, for example, had a large amount of
| money in SVB, but it was only about 25% of their cash meaning
| they had cash in other banks as well that are still liquid.
| Will Roku even lose all of that 25%? Probably not. They won't
| be able to access it for a while, but in the end they'll
| probably end up getting at least some of that back.
| mediasavvy wrote:
| Did I miss Etsy declaring bankruptcy?
| [deleted]
| bpicolo wrote:
| Etsy's statement makes it seem like this is just a payment
| rails issue, not a funds issue
| [deleted]
| tedivm wrote:
| Yeah same thing happened with Rippling- they had to push
| through some changes so they could handle payroll through
| another company, but ultimately got it all out.
|
| I remember Gusto having an issue a year or two ago, but since
| they already had code in place to use a backup they ended up
| making all payments on time.
| swatcoder wrote:
| You're mischaracterizing what's happening at Etsy and at most
| responsibly managed businesses that worked with SVB. There's an
| inevitable _operational_ issue when a bank fails and this
| causes delays in normal process as funds, accounts, data, and
| workflows need to be shuffled around. These organizations will
| get some, but probably not all, of their money back out and
| were prepared to weather this sort of event regardless.
|
| That's a different issue than companies thinking they didn't
| need to prepare for bank troubles. Some of those were naively
| managed by people who didn't understand the scale of wealth
| they were tasked to manage and its risks, nor understood that
| they needed to hire someone who could manage it for them
| safely. And some of those were managed or advised by people
| intentionally betting that the government would bail them out
| of the tail risk that they did know about.
|
| We need to be _extremely_ wary of encouraging that latter
| group, even if it comes at the expense of burning a few
| inexperienced startup founders.
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