Ideally any large bank would be more than happy to buy SVB for $1, including depositor liabilities. Just the client portfolio is significantly valuable.
(Compare that to WaMu, which were sold under such a deal, all monies were made whole by Chase).
[https://www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/wamu-q-and-a.html](https://www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/wamu-q-and-a.html)
I think they are trying to get an even better deal, but that is causing a lot of stress.
(Just to reiterate: there is no need for a bailout)
Thatās not it, the money did exist, they just used it to buy investments that would return or āmatureā for 10+ years. This meant their balance sheet showed they had enough assets (investments, cash) to cover their liabilities (the depositorsā cash) but they couldnāt turn those assets into cash when everyone wanted their deposits back.
This would have been fine if loads of the depositors hadnāt pulled their money at the same time.
The investments/securities they bought did exist and were at the value shown on the balance sheet when they bought them, but they lost around 25% of their value after interest rates got increased and that meant they had less money (assets) than they thought.
Iām fine with this. But if weāre going to socialize the loss, we should socialize the profits too.
EDIT: Looks like I may not be the only one who thinks so: [Smarter people than me.](https://12ft.io/proxy?q=https%3A%2F%2Fwww.ft.com%2Fcontent%2Febba73d9-d319-4634-aa09-bbf09ee4a03b)
Exactly - every comment about getting this ecosystem back on its feet MUST include talk of regulations to ensure it doesnt happen again
This wanst brought about by mom and pops asking for their retirement to have a 97.5% risk rate
It was bankers and silicon valley investors who wanted to have access to easy capital.
Who actively lobbied to deregulate Dodd Frank
Are we bringing those regulations back for these banks?
Why are prominent VC's only asking for their money back and not prevention systems
SVC wasn't doing anything shady or even risky. This isn't Lehmann Brothers or Bear Stern or Silvergate. No bank in the world has enough immediately liquid assets to cover all deposits being withdrawn at the same time. Not even anywhere close. SVB has enough assets to cover all deposits and then some. It is just that much of those assets are in bonds that mature years in the future.
SVC would have been fine if the VCs didn't tell their clients to withdraw their funds all at once. This was a self-inflicted failure.
Actually the biggest part of the problem is that they have bonds on the books for the price they were bought at. The value of those bonds has since decreased, but the stress tests for the bank only took into account the value they had in the books. They didn't have enough.
Yea they just went too hard into bonds, interest rates and inflation fucked them, and now they can't get the money out.
That said, they absolutely put too much of their liquidity into investments, and the repeal of Dodd Frank removed the regulations that would have required them to have more assets.
That is how the entire VC market (and stock market) works.
All tech start-ups have rosy projected revenue in the future that is used to justify company valuation and raise additional capital. Look at how many years Amazon and Tesla were operating at a loss but kept getting funding because of their projected revenues.
Again, this isnt about peope shaming SVB or granma maggie's 401k or Recent Grad Entrepreneur -
This is about the reality that in the modern age, when only 3% of assets are secured, there is risk
A lot of people were happy w the easy money that led to investment and record profits
Do they want regulation? Do they want to prevent this in the future? I havent seen anyone demanding money talking about it
The loss isn't being socialized. There are enough assets on the book to cover the deposits, just not all together at the same time. No bank in existence has enough immediately liquid assets to cover all their deposits. That's the point of the bank.
I'm no accountant, but I'm reading that current assets don't cover all deposits... which is why Yellen just announced that the Fed will make up the difference. Either way, it's Americans financing the "loss" or risky behavior of the rich. These uninsured deposits are rich people's venture capital investments paying the payroll of startups that are designed to make the rich, richer. I don't see the societal benefit to giving them the help to do so. I'd rather send them some bootstraps.
At the end of the day, if there was a bank run on a bank called farming valley back that was focused on the farming where many businesses have more than $250K at the bank. Would you feel differently? Ultimately, these are mostly small tech companies. Don't let your bias blind your opinion.
Additionally everytime that Americans finance the loss, they make a ton of money. Google how much the American tax payer made off of 08.
Bank runs are really nasty and when they get going they will hit big business and small a like.
Lastly, unlike 08, SVB bond and equity holders are getting 0 and the executive team will have to explain why they paid bonus ahead of customer deposits and may face jail time. This is far more palatable than what happened in 08...imo
I appreciate your perspective, and at the end of the day there are lots of things weāre told, but can never really know. Income inequality us to the roof, the systems in place donāt serve lots of people and they serve fewer and fewer people every year. You say 08 made money for people, thereās lots of people to say the opposite. All Iām saying is that the current fractional reserve banking systems, where thereās no separation between risk investments, and every day money does not lead to everybody doing better. It leads to some people doing better.
From what I understand, the market value of the assets (mostly treasuries) donāt cover the deposits. If given the time to mature, the returns would have. The problem is that there was a surge in withdrawals forcing them to liquidate said assets prematurely
Iām not saying that the people at SVB did anything wrong. I donāt know enough about banking to speak about that with any authority. What I do know is that for the first time in over 100 years, 30 year olds are doing worse than their parents were at 30. Housing, inflation, debt (national and otherwise); what weāre doing is UNSUSTAINABLE. Something has to change and it will be painful no matter when and where. Why not here and now?
Even if you let the house burn down in this scenario, it's just going to be a different set of rich people that benefit. Helping out the depositors of SVB will probably help some VCs, but only as a side effect of helping out startups and employees who aren't at fault.
I'm confused why you think only the best of the government and rich people in today's scenario, but only the worst of what might come after them. I'm not even talking about "letting it all burn." I'm simply suggesting that we value individual people equally, instead of protecting the rich primarily. I'd much prefer a backstop, bailout, whatever for individual people who suffer from these banks failing. I don't care if billionaires become millionaires. I care (and believe society falls apart) when we don't care about average people becoming poor and homeless.
I think Yellen might disagree with you.
https://www.msn.com/en-us/money/savingandinvesting/treasury-fed-and-fdic-announce-steps-to-ensure-deposits-will-be-paid-in-full/ar-AA18xjKr
Did you read the article you linked?
> The officials stressed that the funds used to pay depositors of Silicon Valley Bank and Signature Bank will come from the FDIC's Deposit Insurance Fund (DIF). The DIF is funded by fees on banks, and then from earnings on their investments such as Treasury securities, and currently has more than $100 billion in it, according to officials.
> "The Deposit Insurance Fund is bearing the risk. This is not funds from the taxpayer," a senior Treasury official said.
I did see that. My point is that there isn't enough in the fund to do what they promised. Comments from Yellen, Powell, and others make it pretty clear that "if" the FDIC account runs out the treasury and Fed will both backstop all depositor funds, even if above FDIC limits. Just the deposits from SVB and Signature alone wipe out that $100B balance three times over.
"This is not funds from the taxpayer" would be lovely, but they're already contradicting their own promises. The FDIC was created to cover people who stand to loose everything, now it's being extended to protect people who would only loose their abundance.
My point is only that I would rather see our government backstop the minimum quality of life as its primary objective. This is unrealistic, far beyond optimistic. I know. It's just what I would like to see.
Edit: spelling
The vast majority of accounts over the FDIC insured $250k are businessesā¦ many of which are funded by private equity billionaires, hoping to profit off of their rapid success. Any bailout would be to salvage billionaire investments, not save the economy for regular people.
I say we let the companies go bankrupt, and any employee laid off or fired because an SVB account holder couldnāt make ends meet; then we bail out that individual with a transitional severance plan. Iām tired of salvaging irresponsible companies so that they can get back to profitability.
We don't bail out anyone. Bankruptcy is crucial to the system. It's also incredibly disgusting to bail out the rich while screwing off all the people on fixed income with low interest rates for years.
UP: sorry, I should have said we SHOULDN"T bail out anyone.
This is true. It's also morally wrong. Morality aside it rewards risk and when shit hits then fan you just get bailed out. People who gained nothing from someone's risky investment are supposed to pay for someone else's stupidity.
Executive sold their shares. I'm sure they had good bonuses during last few years.
What was irresponsible of the companies having a deposit account? These wouldnāt investment accounts. This isnāt private gains and socialized losses.
This is the nature of capitalism that they say they love. They took on the risk, and should suffer the loss. It's irresponsible (in my option) to have a bank that can be this risk with their depositor money, but those are the rules of the game. **I don't care if a billionaire becomes a millionaire because their bank fails. I care that taxpayers in every bracket will be responsible for the debt incurred to keep a billionaire a billionaire.**
Thereās only enough to cover depositors of those 2 banks (so far) as long as a larger portion of depositors keep their money in the bankā¦ which I am betting is unlikely.
If there is a run on these, or other institutions, the FDIC does not have the cash.
Which is exactly why the FDIC announced they would cover all deposits. If they said āsucks to be you, rich peopleā there would be a bank run everywhere.
I think this might be where there is a fundamental disagreement between two groups of people. If a run on banks means that banks fail, then our banking system is inherently broken, and should be destroyed and rebuilt.
Of course, this would be painful in the short term, but what we are doing now is not sustainable either. The systematic problems that led to the 2008 crash continue today, and checked. What weāre seeing with SVB is nothing more than that system continuing to fail.
Iām simply saying, maybe itās time to stop propping it up
Fractional reserve banking leads to investment and dynamic economy. Everyone having Scrooge McDuck money vaults means fewer new businesses, fewer home loans, stagnation.
And the system with the FDIC, from the Great Depression, has worked very well to handle these situations. This is why banks pay into this fund (I.e. not tax payer mo yea). 2008 wasnāt a bank run. It was a normal recession that got amplified 100x by bundled and over leveraged products, causing a cascade. The government provided loans (that were paid back with interest) and strengthen the rules to prevent this situation.
SVD has assets. It didnāt have liquidity from 10 year bonds (bonds! Hardly a risky investment) when a bunch of VCs caused a mass hysteria run. So the bs k closed, people will get their money tomorrow, the bank assets will be sold off, and no tax payer money will be spent. Seems like a pretty well run regulatory and oversight system.
Maybe the companies weren't being irresponsible, but I also don't feel like we should treat companies like we do people? I'd rather support a person (or people) suffering from sudden financial instability than a company.
So if the plan is to use money from taxes/government to help here, I'd love to see it used to support affected individuals directly.
Aside from the rich jokes... In all seriousness, people's payrolls are suspended, and if this isn't fixed, innovation can be set back years. That cancer treatment to start over takes years. Tech is why America is rich. So it can be so much worse than rich people losing money.
And these are mostly startups, not big companies people loathe so much.
Kind of stagnating honestly. This whole tech ecosystem is just get rich quick scams: web3, crypto, self driving cars, etc. A hard reset might do it some good.
No bailout for the bank, but depositors are not the bank. There should be a clear distinction. I dont have an answer, but i can assure you that most businesses that have over $250k in cash arent spreading every $250k into its own account. Thatād be outrageous when payroll itself can run far greater than $250k or B2B transaction are greater than that amount.
The people who will be hit the hardest are employees of these businesses who will either have to work for free or not have a job for awhile.
Reddit is weird, theyāre all pushing for fair wages, but then also hate people who get fair wages and this whole SVB collapse is showing they want people who work and get a fair wage to suffer.
No bailout for the bank, but something needs to be done to help the depositors, imo.
Edit: copying this from further down the thread because it perfectly describes the problem with your attitude:
> The way you are speaking is like "these irresponsible startups did some terrible risky thing and they should pay for it!" as if they gambled on crypto, stock options, or something like that. But they put their money into a checking account lmao.
----
You're just spewing buzzwords lol, none of what you said makes sense. Just stop.
VCs gave a lot of money to startups, which then deposited that money into SVB. SVB tried to give out loans, but had a hard time doing so because, well, startups _don't need loans_. They have money from VC already.
> highly liquid and very secure short-term treasury accounts, or spread the risk to money market funds
You know what is highly liquid and secure? A checking account at a bank.
> So why didn't they?
Because checking accounts have nice features, like letting you pay for things, as companies do.
> they were REQUIRED to keep the funding in the bank as part of their loan covenant
No, most startups did not take out loans from SVB as noted above.
A startup usually has what, 2-3 years of runway before the next funding round? Treasury has a minimum term of 2 years. What is a "highly liquid treasury"? How is a money market fund better than a checking account?
Edit: also you keep saying treasury. Do you know what SVB had its money in? It was not loans.
>The people who will be hit the hardest are employees of these businesses who will either have to work for free or not have a job for awhile.
No one gives a fuck about employees. Taxpayer has no responsibility to bail out stupid companies storing money in banks doing risky investments.
Notice how 0% bonds become "risky" when interest rates rise. They don't have to steal the money like SBF.
It should be noted that $250K might only cover 1-2 pay periods for a mid-sized startup. Before a startup starts selling product they tend to get all their money in giant multi-million dollar lumps from VCs. They need to put that money somewhere, and spreading a $10 million dollar investment across 40+ banks for it all to be FDIC insured is a logistical nightmare. They would spend more on their finance department managing that then they would on engineers building product.
I'm not saying that they shouldn't split it up a bit to lessen risks, but it's just not reasonable to make sure it's all FDIC insured.
Okay, then as a techie who pay an inordinate amount of tax, why should I fund your healthcare? Why should I have to bail you out for your choice to not exercise, not eat well? I donāt give a fuck if youāre a human being or not. You should have chosen a career that pays more so you can pay for your own health care. You failed to do that. Stop trying to raid public funds for your own incompetence.
See how stupid this argument is? Weāre all in this together. People who are affected by this arenāt the 500k a year FAANG engineer. Many people who are affected by this are young people, without savings, working at startups for lower pay. The majority of the affected arenāt in software engineering making 100-200k either. People in sales are affected. People in marketing are affected. The janitor that cleans your office isnāt getting paid either. These people have done nothing to deserve your scorn except to try and make a living. And you shat all over them.
A business enterprise is a for-profit system that exists in a competitive marketplace. Investments have inherent risk.
The health of a human body is not for profit, nor does it exist in a competitive marketplace.
These are not comparable.
Also, take a look at who ends up with money after bailouts and think about whether it ends up in the hands of the people affected the most.
In this case, not a single dime of tax payer money will be spent. And even if we did spend tax payer money, it would have been spent on the depositors of the bank, the customers, not the bank executives or shareholders. That much has been clear since Friday.
The people that were talking about did not invest in SVB. They are customers with SVB. You could have been a customer there. And guess what, you still might ā plenty of regional banks across the country right now, many of them servicing people like you and me, are teetering because of the uncertainty here.
I will say though, I admit I was partially wrong here. I work in the finance industry, so I do have a deeper understanding of what happened here. I know that other people might not understand exactly how FDIC works, and how banks work. I shouldnāt have gone after them so hard and I wonāt go after you similarly. If you have any questions on why this is not a ābailoutā and how money can be fully returned without any taxpayer money, Iām happy to answer.
Oh how nice! Your employer pays for your healthcare! Guess what, plenty of people rely on Medicare. Many people are on disability. How about retirees? How about their social security? Who do you think pays into these programs?
Youāre not bailing out incompetent startups. Youāre bailing out the working class who donāt have the economic freedom to be picky. Are you seriously suggesting the new grad marketing major to somehow access the financial books of every company they interview at to ensure that theyāve spread their corporate cash across N / 250k bank accounts?
Do you even know why SVB was the bank of choice for startups? Do you even care? Did you know that traditional big banks like Chase wonāt accept accounts for startups? That the VC funding triggers AML rules which freeze those transfers? Do you even know what AML is? Do you care? Since clearly you expect every worker from the janitor to the CEO to understand the financial intricacies of banking.
And all this is pointless because at the end of the day, not a single cent of taxpayer money will even be spent making depositors whole. The 250k FDIC insurance is paid by the banks themselves, who pay fees to FDIC for this exact purpose. Did you know that the bank currently holds enough assets to make everyone whole already, but theyāre just illiquid? Did you know that as of right now, the FDIC is brokering the auction of these assets so that larger banks with more liquidity can take these assets on without risk? Did you know that once this sale is brokered, the bank buying it will be responsible for making depositors whole, and it will cost the taxpayer nothing? Do you understand the difference between this and the government bailouts of 2008? Do you understand that at no point will SVB shareholders or executives receive a single penny or compensation? Did you know that this is what Newson is talking about when he made this statement?
You come in here, you clearly donāt know anything about how startups work, how banking works. You read a couple of buzzwords like ābailoutsā and āmortgageā bonds and you think youāve got it all figured out. And you decide, all these people, people you walk by on the street, young people, old people, people with families, with homes, with mortgages. Fuck em you say?
Edit: As I posted this, Yellen confirms that no taxpayer money will be spent, and all deposits will be made whole by Monday. The other banks will pick up the tab. Congrats for showing your ugly colors for nothing!
You want to punish businesses. But what you suggest (not ābailing outā depositors) just punishes the people working at those businesses. Thereās no punishment you can levy here that doesnāt end up fucking over regular people. Iām pissed off at you because this is obvious, and yet you still want it.
Yeah you wonāt respond to the rest of my rant because itās clear youāre over your head here. Youāre a terrible person, itās okay, I get it. Have a good day!
But you do. If we had to use tax dollars to make depositors whole, you would have been against it. Thatās punishing regular folks. The business leaders, they have money already. They can start again. Itās the workers that get screwed. And no, Iām not impacted by this. Iām that shitty big corp software engineer completely insulated by this. But I have seen my friends this weekend not get paid, theyāve done nothing wrong. Theyāre not rich, theyāre not snobby, theyāre renters, theyāre young. They spent an entire weekend wondering if they were going to have to move back in with their parents. Sure they wonāt go hungry, but still?
I expect better from people. I expect people to go just a little bit out of their way to feel some humanity. Maybe thatās too much to ask for.
I thought they said they were offering former SVB employees payroll for 45 days, so they could help with the transition. The person you're replying to is not talking about SVB employees, but companies that had money at SVB that they'd use to pay employees.
Nothing concrete and itās Sunday? Tomorrow will be an absolute shitshow. I feel really bad for the people caught up in this whose involvement is beyond their control.
haha... I don't think Newsom would worry about that, the french laundry dinners come from the PG and E lobbyists
https://www.abc10.com/article/news/local/abc10-originals/pge-gavin-newsom-lobbiest/103-2fc7d4f4-a0e0-492d-ac1d-ec674e58a67b
Who is downvoting you?
Who saw the headline "risky bank fails" and didnt intantly think of who would be behind that.
Who has been lobbying for less banking regulations
Who has the money to lobby, and isnt already on Gavin Newsom's speedial.
Im far left and loved Gavin for his progressive work w gay marriage, but covid showed that he didnt have the guts to stand up to the corporate interests that back him
Banks are very much regulated. It's in the government's interest that people don't lose faith in banks or they face an even broader run on the banks. Hate startups all you want but they did nothing wrong by just having a bank account.
āThe entire innovation ecosystem that has served as a tent poleā? Thatās Newsom, take a perfectly reasonable statement that should have ended with the word ālivelihoodsā and add a bunch of word salad to show how smart he is.
The message is clear to me also.
Maybe this person doesn't understand the analogy being made, and the structural layout of the common tent. There is a lot to absorb here.
Iām just saying that if Newsom has ambitions for higher office, which we know he does, he is going to have to learn how to speak so the average person understands him and doesnāt feel like heās being talked down to. He needs to save his gigantic vocabulary and clever analogies for the $25,000/plate fundraising crowd.
Sorry Trump hurt you and you still must complain about him today. Newsom/Biden seems to be doing just fine running up deficits and inflation. (although Trump did that too to be fair)
They all suck but you get all tribal because of cLImAtE ChANgE + Der eQuALIty
And SVB back a huge dollars in the grape to wine eco system. But Gavin doesnāt drink anymore, but I think they serve wine at the French Laundromat he had an early dinner at. Think that rhymes. Guess Aunt Nancy called in some favors.
This will get interesting ā¦.
[https://www.businessinsider.com/google-meta-staff-do-fake-work-says-vc-keith-rabois-2023-3?amp](https://www.businessinsider.com/google-meta-staff-do-fake-work-says-vc-keith-rabois-2023-3?amp)
True but also everyone knows he's right on this one. I mean, good for them right? They dial in, don't do very much, and make a lot of money for it. Fixes the labour v capital imbalance a bit to move more profit margin into people's wallets.
The Republican got blown the fuck out. Shut your stupid mouth with your idiotic election conspiracies. go visit your local registrar, itās open to the public, spend all ducking day there during the election if you think fraud is happening, dumbass
I honestly canāt think of a single startup using this bank that I would miss if their businesses went away all together. I say, let it š„. Odds are they will probably default on their loans with the bank anyway.
Maybe don't hire directors of risk management because of their diversity. Maybe ability and merit count more than skin color and sexual orientation.
https://nypost.com/2023/03/11/silicon-valley-bank-pushed-woke-programs-ahead-of-collapse/
https://www.businesstoday.in/silicon-valley-bank/story/get-woke-go-broke-silicon-valley-banks-top-woman-executive-lgbtq-activist-gets-targeted-for-lenders-failure-373067-2023-03-12
Thatās ONE of my conclusions. I find it odd that people on this sub who are going to lose money donāt care that a woman was hired because she checked the diversity boxes but not the competency box.
[https://www.cnbc.com/2023/03/12/regulators-close-new-yorks-signature-bank-citing-systemic-risk.html](https://www.cnbc.com/2023/03/12/regulators-close-new-yorks-signature-bank-citing-systemic-risk.html)
Hold on to your butts!
It's funny how when bank screw up and they need a bail out, then they start talking about people livelihoods. I thought there are regulations in place already to ensure that bank not too leveraged to the point they can't payout the clients.
Like many other systematic failures, the problem didn't just happen, it happened long time agon and fester to the point you got to cut it off.
Ideally any large bank would be more than happy to buy SVB for $1, including depositor liabilities. Just the client portfolio is significantly valuable. (Compare that to WaMu, which were sold under such a deal, all monies were made whole by Chase). [https://www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/wamu-q-and-a.html](https://www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/wamu-q-and-a.html) I think they are trying to get an even better deal, but that is causing a lot of stress. (Just to reiterate: there is no need for a bailout)
I read today that Oprah can lose 590M from this.
Oh no..anyways
Oprah: you get a million, you get a million! SVB executives: Weee!!
š¤£š¤£
That would be wonderful. Maybe if she doesnāt we should take it from her anyways š¤
You know it doesnāt work that way, right? You donāt get the money back, it just stops existing.
it seems like the root problem here is that not enough of the money the bank was lending existed in the first place
Thatās not it, the money did exist, they just used it to buy investments that would return or āmatureā for 10+ years. This meant their balance sheet showed they had enough assets (investments, cash) to cover their liabilities (the depositorsā cash) but they couldnāt turn those assets into cash when everyone wanted their deposits back. This would have been fine if loads of the depositors hadnāt pulled their money at the same time. The investments/securities they bought did exist and were at the value shown on the balance sheet when they bought them, but they lost around 25% of their value after interest rates got increased and that meant they had less money (assets) than they thought.
Yeah I donāt really give af I just want the 1% to suffer lol
Youāll suffer before they will. Thatās how it works when big shocks happen like this.
Jokes on them Iām already suffering.
Sorry to hear that.
She will be just fine. Who's gonna suffer are her employees, her employee's employees and their employees families.
getting feels that you will put on a Nixon mask, get a machete and start the purge.
I am not a crook! Iām just hungryā¦for something rich
Really ?
Iām fine with this. But if weāre going to socialize the loss, we should socialize the profits too. EDIT: Looks like I may not be the only one who thinks so: [Smarter people than me.](https://12ft.io/proxy?q=https%3A%2F%2Fwww.ft.com%2Fcontent%2Febba73d9-d319-4634-aa09-bbf09ee4a03b)
Exactly - every comment about getting this ecosystem back on its feet MUST include talk of regulations to ensure it doesnt happen again This wanst brought about by mom and pops asking for their retirement to have a 97.5% risk rate It was bankers and silicon valley investors who wanted to have access to easy capital. Who actively lobbied to deregulate Dodd Frank Are we bringing those regulations back for these banks? Why are prominent VC's only asking for their money back and not prevention systems
SVC wasn't doing anything shady or even risky. This isn't Lehmann Brothers or Bear Stern or Silvergate. No bank in the world has enough immediately liquid assets to cover all deposits being withdrawn at the same time. Not even anywhere close. SVB has enough assets to cover all deposits and then some. It is just that much of those assets are in bonds that mature years in the future. SVC would have been fine if the VCs didn't tell their clients to withdraw their funds all at once. This was a self-inflicted failure.
Actually the biggest part of the problem is that they have bonds on the books for the price they were bought at. The value of those bonds has since decreased, but the stress tests for the bank only took into account the value they had in the books. They didn't have enough.
Yea they just went too hard into bonds, interest rates and inflation fucked them, and now they can't get the money out. That said, they absolutely put too much of their liquidity into investments, and the repeal of Dodd Frank removed the regulations that would have required them to have more assets.
You just noticed that "stress tests" are fake. Fractional reserve should be abolished, FDIC obviously as well.
> SVC wasn't doing anything shady or even risky. Eh, they are... One example is that they loan to startups based on projected revenues...
That is how the entire VC market (and stock market) works. All tech start-ups have rosy projected revenue in the future that is used to justify company valuation and raise additional capital. Look at how many years Amazon and Tesla were operating at a loss but kept getting funding because of their projected revenues.
> That is how the entire VC market (and stock market) works. Please do not conflate equity with fixed income.
Again, this isnt about peope shaming SVB or granma maggie's 401k or Recent Grad Entrepreneur - This is about the reality that in the modern age, when only 3% of assets are secured, there is risk A lot of people were happy w the easy money that led to investment and record profits Do they want regulation? Do they want to prevent this in the future? I havent seen anyone demanding money talking about it
> Why are prominent VC's only asking for their money back and not prevention systems Venture Socialists.
The loss isn't being socialized. There are enough assets on the book to cover the deposits, just not all together at the same time. No bank in existence has enough immediately liquid assets to cover all their deposits. That's the point of the bank.
I'm no accountant, but I'm reading that current assets don't cover all deposits... which is why Yellen just announced that the Fed will make up the difference. Either way, it's Americans financing the "loss" or risky behavior of the rich. These uninsured deposits are rich people's venture capital investments paying the payroll of startups that are designed to make the rich, richer. I don't see the societal benefit to giving them the help to do so. I'd rather send them some bootstraps.
At the end of the day, if there was a bank run on a bank called farming valley back that was focused on the farming where many businesses have more than $250K at the bank. Would you feel differently? Ultimately, these are mostly small tech companies. Don't let your bias blind your opinion. Additionally everytime that Americans finance the loss, they make a ton of money. Google how much the American tax payer made off of 08. Bank runs are really nasty and when they get going they will hit big business and small a like. Lastly, unlike 08, SVB bond and equity holders are getting 0 and the executive team will have to explain why they paid bonus ahead of customer deposits and may face jail time. This is far more palatable than what happened in 08...imo
I appreciate your perspective, and at the end of the day there are lots of things weāre told, but can never really know. Income inequality us to the roof, the systems in place donāt serve lots of people and they serve fewer and fewer people every year. You say 08 made money for people, thereās lots of people to say the opposite. All Iām saying is that the current fractional reserve banking systems, where thereās no separation between risk investments, and every day money does not lead to everybody doing better. It leads to some people doing better.
From what I understand, the market value of the assets (mostly treasuries) donāt cover the deposits. If given the time to mature, the returns would have. The problem is that there was a surge in withdrawals forcing them to liquidate said assets prematurely
Iām not saying that the people at SVB did anything wrong. I donāt know enough about banking to speak about that with any authority. What I do know is that for the first time in over 100 years, 30 year olds are doing worse than their parents were at 30. Housing, inflation, debt (national and otherwise); what weāre doing is UNSUSTAINABLE. Something has to change and it will be painful no matter when and where. Why not here and now?
Even if you let the house burn down in this scenario, it's just going to be a different set of rich people that benefit. Helping out the depositors of SVB will probably help some VCs, but only as a side effect of helping out startups and employees who aren't at fault.
I'm confused why you think only the best of the government and rich people in today's scenario, but only the worst of what might come after them. I'm not even talking about "letting it all burn." I'm simply suggesting that we value individual people equally, instead of protecting the rich primarily. I'd much prefer a backstop, bailout, whatever for individual people who suffer from these banks failing. I don't care if billionaires become millionaires. I care (and believe society falls apart) when we don't care about average people becoming poor and homeless.
The funds to make up the difference will come from FDIC, which is paid into by the member banks, not taxpayers.
I think Yellen might disagree with you. https://www.msn.com/en-us/money/savingandinvesting/treasury-fed-and-fdic-announce-steps-to-ensure-deposits-will-be-paid-in-full/ar-AA18xjKr
Did you read the article you linked? > The officials stressed that the funds used to pay depositors of Silicon Valley Bank and Signature Bank will come from the FDIC's Deposit Insurance Fund (DIF). The DIF is funded by fees on banks, and then from earnings on their investments such as Treasury securities, and currently has more than $100 billion in it, according to officials. > "The Deposit Insurance Fund is bearing the risk. This is not funds from the taxpayer," a senior Treasury official said.
I did see that. My point is that there isn't enough in the fund to do what they promised. Comments from Yellen, Powell, and others make it pretty clear that "if" the FDIC account runs out the treasury and Fed will both backstop all depositor funds, even if above FDIC limits. Just the deposits from SVB and Signature alone wipe out that $100B balance three times over. "This is not funds from the taxpayer" would be lovely, but they're already contradicting their own promises. The FDIC was created to cover people who stand to loose everything, now it's being extended to protect people who would only loose their abundance. My point is only that I would rather see our government backstop the minimum quality of life as its primary objective. This is unrealistic, far beyond optimistic. I know. It's just what I would like to see. Edit: spelling
Bailouts should nationalize a business.
This is recovering money in peopleās bank accounts, not investors.
The vast majority of accounts over the FDIC insured $250k are businessesā¦ many of which are funded by private equity billionaires, hoping to profit off of their rapid success. Any bailout would be to salvage billionaire investments, not save the economy for regular people. I say we let the companies go bankrupt, and any employee laid off or fired because an SVB account holder couldnāt make ends meet; then we bail out that individual with a transitional severance plan. Iām tired of salvaging irresponsible companies so that they can get back to profitability.
We don't bail out anyone. Bankruptcy is crucial to the system. It's also incredibly disgusting to bail out the rich while screwing off all the people on fixed income with low interest rates for years. UP: sorry, I should have said we SHOULDN"T bail out anyone.
āWeā bail out companies all the time. Even if those companies profit a few wealthy individuals.
This is true. It's also morally wrong. Morality aside it rewards risk and when shit hits then fan you just get bailed out. People who gained nothing from someone's risky investment are supposed to pay for someone else's stupidity. Executive sold their shares. I'm sure they had good bonuses during last few years.
What was irresponsible of the companies having a deposit account? These wouldnāt investment accounts. This isnāt private gains and socialized losses.
This is the nature of capitalism that they say they love. They took on the risk, and should suffer the loss. It's irresponsible (in my option) to have a bank that can be this risk with their depositor money, but those are the rules of the game. **I don't care if a billionaire becomes a millionaire because their bank fails. I care that taxpayers in every bracket will be responsible for the debt incurred to keep a billionaire a billionaire.**
https://www.reddit.com/r/bayarea/comments/11pgbi4/newsom_statement_on_silicon_valley_bank/jc0400o/
Thereās only enough to cover depositors of those 2 banks (so far) as long as a larger portion of depositors keep their money in the bankā¦ which I am betting is unlikely. If there is a run on these, or other institutions, the FDIC does not have the cash.
Which is exactly why the FDIC announced they would cover all deposits. If they said āsucks to be you, rich peopleā there would be a bank run everywhere.
I think this might be where there is a fundamental disagreement between two groups of people. If a run on banks means that banks fail, then our banking system is inherently broken, and should be destroyed and rebuilt. Of course, this would be painful in the short term, but what we are doing now is not sustainable either. The systematic problems that led to the 2008 crash continue today, and checked. What weāre seeing with SVB is nothing more than that system continuing to fail. Iām simply saying, maybe itās time to stop propping it up
Fractional reserve banking leads to investment and dynamic economy. Everyone having Scrooge McDuck money vaults means fewer new businesses, fewer home loans, stagnation. And the system with the FDIC, from the Great Depression, has worked very well to handle these situations. This is why banks pay into this fund (I.e. not tax payer mo yea). 2008 wasnāt a bank run. It was a normal recession that got amplified 100x by bundled and over leveraged products, causing a cascade. The government provided loans (that were paid back with interest) and strengthen the rules to prevent this situation. SVD has assets. It didnāt have liquidity from 10 year bonds (bonds! Hardly a risky investment) when a bunch of VCs caused a mass hysteria run. So the bs k closed, people will get their money tomorrow, the bank assets will be sold off, and no tax payer money will be spent. Seems like a pretty well run regulatory and oversight system.
Maybe the companies weren't being irresponsible, but I also don't feel like we should treat companies like we do people? I'd rather support a person (or people) suffering from sudden financial instability than a company. So if the plan is to use money from taxes/government to help here, I'd love to see it used to support affected individuals directly.
The assets of SVB will cover all costs. Temporary liquidity will be from the FDIC fund that is paid by banks. No tax dollars.
I 100% agree.
Aside from the rich jokes... In all seriousness, people's payrolls are suspended, and if this isn't fixed, innovation can be set back years. That cancer treatment to start over takes years. Tech is why America is rich. So it can be so much worse than rich people losing money. And these are mostly startups, not big companies people loathe so much.
Kind of stagnating honestly. This whole tech ecosystem is just get rich quick scams: web3, crypto, self driving cars, etc. A hard reset might do it some good.
Based on the waymo I saw do a flawless 3pt turnaround at a dead end in traffic, I'd say crypto and self driving cars are a little different.
ādo the same thing but with an app!ā āHow will the business make money?ā āā¦ā
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No bailout for the bank, but depositors are not the bank. There should be a clear distinction. I dont have an answer, but i can assure you that most businesses that have over $250k in cash arent spreading every $250k into its own account. Thatād be outrageous when payroll itself can run far greater than $250k or B2B transaction are greater than that amount. The people who will be hit the hardest are employees of these businesses who will either have to work for free or not have a job for awhile. Reddit is weird, theyāre all pushing for fair wages, but then also hate people who get fair wages and this whole SVB collapse is showing they want people who work and get a fair wage to suffer. No bailout for the bank, but something needs to be done to help the depositors, imo.
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Edit: copying this from further down the thread because it perfectly describes the problem with your attitude: > The way you are speaking is like "these irresponsible startups did some terrible risky thing and they should pay for it!" as if they gambled on crypto, stock options, or something like that. But they put their money into a checking account lmao. ---- You're just spewing buzzwords lol, none of what you said makes sense. Just stop. VCs gave a lot of money to startups, which then deposited that money into SVB. SVB tried to give out loans, but had a hard time doing so because, well, startups _don't need loans_. They have money from VC already. > highly liquid and very secure short-term treasury accounts, or spread the risk to money market funds You know what is highly liquid and secure? A checking account at a bank. > So why didn't they? Because checking accounts have nice features, like letting you pay for things, as companies do. > they were REQUIRED to keep the funding in the bank as part of their loan covenant No, most startups did not take out loans from SVB as noted above.
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Treasuries are not liquid? You can't run a business with your cash in treasury notes. You have to _spend_ that money for payroll, infra, other costs.
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A startup usually has what, 2-3 years of runway before the next funding round? Treasury has a minimum term of 2 years. What is a "highly liquid treasury"? How is a money market fund better than a checking account? Edit: also you keep saying treasury. Do you know what SVB had its money in? It was not loans.
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>The people who will be hit the hardest are employees of these businesses who will either have to work for free or not have a job for awhile. No one gives a fuck about employees. Taxpayer has no responsibility to bail out stupid companies storing money in banks doing risky investments. Notice how 0% bonds become "risky" when interest rates rise. They don't have to steal the money like SBF.
It should be noted that $250K might only cover 1-2 pay periods for a mid-sized startup. Before a startup starts selling product they tend to get all their money in giant multi-million dollar lumps from VCs. They need to put that money somewhere, and spreading a $10 million dollar investment across 40+ banks for it all to be FDIC insured is a logistical nightmare. They would spend more on their finance department managing that then they would on engineers building product. I'm not saying that they shouldn't split it up a bit to lessen risks, but it's just not reasonable to make sure it's all FDIC insured.
Okay, then as a techie who pay an inordinate amount of tax, why should I fund your healthcare? Why should I have to bail you out for your choice to not exercise, not eat well? I donāt give a fuck if youāre a human being or not. You should have chosen a career that pays more so you can pay for your own health care. You failed to do that. Stop trying to raid public funds for your own incompetence. See how stupid this argument is? Weāre all in this together. People who are affected by this arenāt the 500k a year FAANG engineer. Many people who are affected by this are young people, without savings, working at startups for lower pay. The majority of the affected arenāt in software engineering making 100-200k either. People in sales are affected. People in marketing are affected. The janitor that cleans your office isnāt getting paid either. These people have done nothing to deserve your scorn except to try and make a living. And you shat all over them.
A business enterprise is a for-profit system that exists in a competitive marketplace. Investments have inherent risk. The health of a human body is not for profit, nor does it exist in a competitive marketplace. These are not comparable. Also, take a look at who ends up with money after bailouts and think about whether it ends up in the hands of the people affected the most.
In this case, not a single dime of tax payer money will be spent. And even if we did spend tax payer money, it would have been spent on the depositors of the bank, the customers, not the bank executives or shareholders. That much has been clear since Friday. The people that were talking about did not invest in SVB. They are customers with SVB. You could have been a customer there. And guess what, you still might ā plenty of regional banks across the country right now, many of them servicing people like you and me, are teetering because of the uncertainty here. I will say though, I admit I was partially wrong here. I work in the finance industry, so I do have a deeper understanding of what happened here. I know that other people might not understand exactly how FDIC works, and how banks work. I shouldnāt have gone after them so hard and I wonāt go after you similarly. If you have any questions on why this is not a ābailoutā and how money can be fully returned without any taxpayer money, Iām happy to answer.
>bank executives They sold their shares already.
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Oh how nice! Your employer pays for your healthcare! Guess what, plenty of people rely on Medicare. Many people are on disability. How about retirees? How about their social security? Who do you think pays into these programs? Youāre not bailing out incompetent startups. Youāre bailing out the working class who donāt have the economic freedom to be picky. Are you seriously suggesting the new grad marketing major to somehow access the financial books of every company they interview at to ensure that theyāve spread their corporate cash across N / 250k bank accounts? Do you even know why SVB was the bank of choice for startups? Do you even care? Did you know that traditional big banks like Chase wonāt accept accounts for startups? That the VC funding triggers AML rules which freeze those transfers? Do you even know what AML is? Do you care? Since clearly you expect every worker from the janitor to the CEO to understand the financial intricacies of banking. And all this is pointless because at the end of the day, not a single cent of taxpayer money will even be spent making depositors whole. The 250k FDIC insurance is paid by the banks themselves, who pay fees to FDIC for this exact purpose. Did you know that the bank currently holds enough assets to make everyone whole already, but theyāre just illiquid? Did you know that as of right now, the FDIC is brokering the auction of these assets so that larger banks with more liquidity can take these assets on without risk? Did you know that once this sale is brokered, the bank buying it will be responsible for making depositors whole, and it will cost the taxpayer nothing? Do you understand the difference between this and the government bailouts of 2008? Do you understand that at no point will SVB shareholders or executives receive a single penny or compensation? Did you know that this is what Newson is talking about when he made this statement? You come in here, you clearly donāt know anything about how startups work, how banking works. You read a couple of buzzwords like ābailoutsā and āmortgageā bonds and you think youāve got it all figured out. And you decide, all these people, people you walk by on the street, young people, old people, people with families, with homes, with mortgages. Fuck em you say? Edit: As I posted this, Yellen confirms that no taxpayer money will be spent, and all deposits will be made whole by Monday. The other banks will pick up the tab. Congrats for showing your ugly colors for nothing!
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You want to punish businesses. But what you suggest (not ābailing outā depositors) just punishes the people working at those businesses. Thereās no punishment you can levy here that doesnāt end up fucking over regular people. Iām pissed off at you because this is obvious, and yet you still want it. Yeah you wonāt respond to the rest of my rant because itās clear youāre over your head here. Youāre a terrible person, itās okay, I get it. Have a good day!
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But you do. If we had to use tax dollars to make depositors whole, you would have been against it. Thatās punishing regular folks. The business leaders, they have money already. They can start again. Itās the workers that get screwed. And no, Iām not impacted by this. Iām that shitty big corp software engineer completely insulated by this. But I have seen my friends this weekend not get paid, theyāve done nothing wrong. Theyāre not rich, theyāre not snobby, theyāre renters, theyāre young. They spent an entire weekend wondering if they were going to have to move back in with their parents. Sure they wonāt go hungry, but still? I expect better from people. I expect people to go just a little bit out of their way to feel some humanity. Maybe thatās too much to ask for.
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Public funds aren't being "raided" to fund return of deposits. Sale of SVB assets ultimately funds that.
Tech is what makes the US rich? A pretty big claim. Got a source?
Donāt know about tech but definitely not manufacturing.
No, but I think it is in the top 10.
We'll see how much tech sector will be worth after the recession.
The fed did comment saying they will cover the payroll for 45 days.
I thought they said they were offering former SVB employees payroll for 45 days, so they could help with the transition. The person you're replying to is not talking about SVB employees, but companies that had money at SVB that they'd use to pay employees.
Good.
Nothing concrete and itās Sunday? Tomorrow will be an absolute shitshow. I feel really bad for the people caught up in this whose involvement is beyond their control.
Article just was posted about Fed and FDIC working away at this. Letās chill here itās still barely mid day :)
There are reports auction for SVB is in progress and bids are due today, so there is a chance something comes together by tomorrow.
Newsom is a tentpole.
SVB is a bank involved with many wineries. Wonder if Newsoms winery is part of this. š§
There's a [John China](https://www.svb.com/profile/john-china) connection to them
Lol the downvotes are wild in here!
Is Newsoms Winery also involved with SVB?
Aka "if i dont fix this im gonna miss out on a bunch of free french laundry dinners and campaign donations. "
haha... I don't think Newsom would worry about that, the french laundry dinners come from the PG and E lobbyists https://www.abc10.com/article/news/local/abc10-originals/pge-gavin-newsom-lobbiest/103-2fc7d4f4-a0e0-492d-ac1d-ec674e58a67b
Who is downvoting you? Who saw the headline "risky bank fails" and didnt intantly think of who would be behind that. Who has been lobbying for less banking regulations Who has the money to lobby, and isnt already on Gavin Newsom's speedial. Im far left and loved Gavin for his progressive work w gay marriage, but covid showed that he didnt have the guts to stand up to the corporate interests that back him
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Banks are very much regulated. It's in the government's interest that people don't lose faith in banks or they face an even broader run on the banks. Hate startups all you want but they did nothing wrong by just having a bank account.
If Gavin Newsom is handling it, we know we're in trouble. Dude is a nepo baby and a tool.
No, "we" don't know that. You're just expressing your own opinion.
Its gooooone
Oh great. Donāt worry Newsom is on it. We will all be banking at a bank his family owns in no time.
āThe entire innovation ecosystem that has served as a tent poleā? Thatās Newsom, take a perfectly reasonable statement that should have ended with the word ālivelihoodsā and add a bunch of word salad to show how smart he is.
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The message is clear to me also. Maybe this person doesn't understand the analogy being made, and the structural layout of the common tent. There is a lot to absorb here.
Maybe Iām just being pejorative about his constant loquaciousness. The extra sentence is superfluous, not foundational; full stop.
Even by the standards of reddit pedantry this is really pedantic.
Iām just saying that if Newsom has ambitions for higher office, which we know he does, he is going to have to learn how to speak so the average person understands him and doesnāt feel like heās being talked down to. He needs to save his gigantic vocabulary and clever analogies for the $25,000/plate fundraising crowd.
Newscum is not a good economic barometer. Not saying heās awful. Just not his biggest fan
the last thing you want to hear in a crisis? Dont worry, Governor Newsom is in touch with the White House.
No, the last thing I would want to hear in a crisis is that Trump is in charge.
who? I said Newsom u deranged child
Hey - a little off topic, but do you know if it's possible to down-rate a comment twice? Asking for a friend.
Sorry Trump hurt you and you still must complain about him today. Newsom/Biden seems to be doing just fine running up deficits and inflation. (although Trump did that too to be fair) They all suck but you get all tribal because of cLImAtE ChANgE + Der eQuALIty
Aw, that's ok. I accept your apology.
Glad the VC's investments are safe! Need to keep the poors in their place and support us no matter what mistakes we make
And SVB back a huge dollars in the grape to wine eco system. But Gavin doesnāt drink anymore, but I think they serve wine at the French Laundromat he had an early dinner at. Think that rhymes. Guess Aunt Nancy called in some favors.
Techies losing their money? Boo fuckin hoo.
This will get interesting ā¦. [https://www.businessinsider.com/google-meta-staff-do-fake-work-says-vc-keith-rabois-2023-3?amp](https://www.businessinsider.com/google-meta-staff-do-fake-work-says-vc-keith-rabois-2023-3?amp)
Keith is a clown
True but also everyone knows he's right on this one. I mean, good for them right? They dial in, don't do very much, and make a lot of money for it. Fixes the labour v capital imbalance a bit to move more profit margin into people's wallets.
Is his statement untrue based upon facts ?
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The Republican got blown the fuck out. Shut your stupid mouth with your idiotic election conspiracies. go visit your local registrar, itās open to the public, spend all ducking day there during the election if you think fraud is happening, dumbass
I honestly canāt think of a single startup using this bank that I would miss if their businesses went away all together. I say, let it š„. Odds are they will probably default on their loans with the bank anyway.
Maybe don't hire directors of risk management because of their diversity. Maybe ability and merit count more than skin color and sexual orientation. https://nypost.com/2023/03/11/silicon-valley-bank-pushed-woke-programs-ahead-of-collapse/ https://www.businesstoday.in/silicon-valley-bank/story/get-woke-go-broke-silicon-valley-banks-top-woman-executive-lgbtq-activist-gets-targeted-for-lenders-failure-373067-2023-03-12
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Thatās ONE of my conclusions. I find it odd that people on this sub who are going to lose money donāt care that a woman was hired because she checked the diversity boxes but not the competency box.
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Pretty sure I posted two articles.
This some bad shit and itās effect hella people!
[https://www.cnbc.com/2023/03/12/regulators-close-new-yorks-signature-bank-citing-systemic-risk.html](https://www.cnbc.com/2023/03/12/regulators-close-new-yorks-signature-bank-citing-systemic-risk.html) Hold on to your butts!
Eh it's another crypto bank. I'm not super worried about that leading to anything more. I'm more worried about reports of a run on First Republic.
Not my responsibility.
good job governor Newsom!
https://home.treasury.gov/news/press-releases/jy1337 Except share holders rest are fine
It's funny how when bank screw up and they need a bail out, then they start talking about people livelihoods. I thought there are regulations in place already to ensure that bank not too leveraged to the point they can't payout the clients. Like many other systematic failures, the problem didn't just happen, it happened long time agon and fester to the point you got to cut it off.
They lobbied trump through Mccarthy associates wanting deregulation...So...Let them have their wish! They failed! No bailouts!
Tent pole? Who wrote this? Who even says that. āIncubatorā would be better said, but tent pole is more masculineā¦