Hundreds of startups will become illiquid as a result of SVB's collapse, and there will be major layoffs here in the next 90 days as founders realize that they lost their funds and cannot raise in the current VC environment.
Margin Call is such a timeless, great movie!
I’m here for one reason alone. To guess what the music might do a week, a month, a year from now. And standing here tonight I’m afraid that I. Don’t. Hear. A. Thing.
Just… silence.
"And there are a lot of smart people in Silicon Valley. It's a hell of a lot easier to be first."
You may not lose money. The money isn’t gone yet. The restructuring may save the money. There’s a playbook for this sort of thing.
Separately, this is going to cause a lot of finance vultures to look at other banks who also have MBS portfolios on their books. The show's only beginning.
Edit: this is actually a serious question, if someone knows the actual answer.
I understand that ideally the government wouldn't want to hold onto the bonds, but is there any statutory (or other real) reason why they would _have_ to sell them at less than face value? If you could guarantee 100% of deposits could be returned by just holding onto the bonds until maturity, that seems like a worthwhile trade.
If there were fewer assets then deposits, then yes the 250k+ accounts are probably out of luck.
Whatever bank/organization that wants to have SVB's customers, probably. If an even bigger bank comes in, one which can take on those lukewarm assets for a decade without risk, then they can immediately position themselves as the "new SVB" and get a bunch of VCs and startups as customers. I assume that they could stand to profit some from such an arrangement, but I'm not a banker, so maybe not?
The government, to protect the economy
If I'm the FDIC and I have the opportunity to return 100% of the funds to depositors at the cost of just holding on to a bond for a few more years than I otherwise would, that seems like a tradeoff I'd make to stabilize a lot of companies. (I'm of course biased here)
Someone will buy SVB, and they will put capital in as part of the purchase.
Not all mortgage backed securities are subprime CDO squareds.
i suspect the real number will be closer to 40% than 1%
What we do know for sure though, is that this process will take months, maybe years, to play out and many startups will run out of money long before this is resolved.
Slowly, then all at once.
Events like these are similar to Enron and Theranos. No, I'm not excited to see "the energy industry" or "the medical industry fail", but that's not really what it was, was it?
People knew free money was dangerous, planned for a return to sanity (QT) in 2018-2019, and were financially punished for acting responsibly by believing the Fed would follow its roadmap.
They may get their day in the sun now and I cant blame them for being happy at the first signs of a temporary return to reality.
I know SVB was like a "high tech bank" that partnered with things like Stripe Atlas, but is there any reason that startups were using it for their regular operating funds? Other than the name, was there something that actually made this bank particularly suitable for them?
I had to explain to chase large wire transfers after banking with them for years. I had small amounts of money held in AML lock for months with BofA and Chase.
But it works better at a criminal bank. Particularly one that might open a bunch of extra accounts for you when you aren't looking. Obviously that means opening the first account won't be the problem either.
Get a big criminal bank and they won't freeze your account for dumb reasons. Or smart reasons.
So just follow the settlements with the federal government, its advertising.
Do they get the investments from the banks or do they park the investment money in this bank?
And why this bank, when there are many more risk averse institutions out there?
Edit. I just realized, in the us, if there is no bidder, the fdic can close down the bank or run it itself.
Unfortunately, harder now for startups, mind that all those startup dreams from laid off FANG staff just got their rug pulled.
No. It sounds like they bought a bunch of safe, long-term load-backed assets. When interest rates went up, the value of the assets went down. This isn't a problem if no one withdraws before the loans are due, but if they do, they have to sell the assets that declined in value.
Many startups aren't particularly sophisticated financially and just kept their capital in cash in the bank.
John Ray?
Everyone I know pulled yesterday.