Mark Cuban Had Millions at Silicon Valley Bank | Hacker News Reader

Mark Cuban Had Millions at Silicon Valley Bank

thestreet.com

27 pointsCPLX13 comments

Also Mark Cuban:

“The tragedy of SVB is that its not the wealthy taking the hit. It's the thousands of companies who borrowed from SVB and were required to keep their cash in SVB. Those entrepreneurs and their employees and vendors are feeling the pain. And they are who the Fed should protect”

https://twitter.com/mcuban/status/1634427092824629251?s=20

I'm not sure those "thousands of companies" described will take a loss.

The situation Mark Cuban talks about works like this: most small/medium companies finance themselves with a bank loan (and equity). The bank loan is reviewed periodically (e.g. annually), and renewed appropriately. The loan is used to pay employees, suppliers, and for other expenses. The amount of the loan, is held at the same bank. It doesn't need to be strictly speaking, but a bank does not like to advance you a loan, so you can take it, cash it and deposit it at a different bank.

Ok, so now a company has a loan (asset for the bank, liability for the company) and a deposit (liability for the bank, asset for the company). The amounts don't match perfectly, due to ongoing payments and receipts.

Now, there's something called "netting agreement". The Fed has a short intro on that [1]. I don't know if every single company has one set up, but going forward they should think hard if they decide to not set it up.

If you have such a netting agreement and the bank fails to pay you on the deposit, then the amount you owe them on the loan decreases dollar for dollar. Of course, it's still inconvenient for you in terms of day to day operations, but in the end you should not lose money. You should not have any issues to start banking with a different bank, if you can show them the netting agreement.

[1] https://www.newyorkfed.org/medialibrary/microsites/fmlg/file...

Great explanation. Username definitely checks out.

That is around 0.2% of his estimated net worth. I'm not sure he can recover from this.

He might have to get the normal sized swimming pool instead of the olympic one.

So more Shark Tank episodes? lol

If I run a company that has a payroll of millions, where do I keep that cash until I can issue all the checks? It's not like I'm going to sell a bunch of bonds every two weeks to meet payroll. I'll never have to worry about this, but with the tiny bit I've learned in the few days... now I'm curious to understand how large amounts of cash are kept on hand for situations like this.

Off the top of my head:

MaxSafe - https://www.wintrust.com/business-solutions/mid-market/banki...

A cash management account - https://www.forbes.com/advisor/banking/what-is-a-cash-manage...

Many banks participate in IntraFi

https://www.intrafinetworkdeposits.com/how-it-works/

Why is this even newsworthy?

Agree, this does not matter to Mark Cuban and certainly not us. Mark is gonna be fine even in the absolute worst case where the money is locked up for years, and he takes a 20% haircut on his modest deposit. This crisis is for businesses that need access to their money now to pay wages and bills.

Because he’s been forcefully arguing for a bailout and not saying a word about it, instead talking about the common people.

He had been all over Twitter begging for a bailout of SVB.

It's important for everyone to know that our tax dollars will be used and/or the value of our meager assets will be inflated away in order to soften the loss for people like Mark Cuban.

I'll sleep better tonight.

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