Anyway, I'm happy for all the depositors.
After March 2023, the message should be an unequivocal "no, not even a little bit."
Imagine a world without lending against liabilities: yes, some people will be able to buy a home, pay for college, buy a car without a loan, but the financial friction will keep a vast majority of people in poverty.
And then it's going to be someone's full-time job to manage those liabilities. Should they do it for free?
FRB isn’t creation of wealth, it’s plain old redistribution. In other words—welfare for those who can haul in the biggest loans, at the expense of those who earn, work and save up. What would those people do, if they got a chance? What are the compound effects of that over time?
What possible nefarious motive are you implying?
I'm guessing the mistake parent is implying to is that they put more than what was insured, knowing very well the risk that if the bank fail, they might only get back 250K USD, as it's only insured up to that.
Well, in theory at least. In practice it seems the insurance was actually a unspecified "unlimited" amount, as they'll get all their funds back now.
You put lots of cash into bank account, "what could go wrong?"
Bank implodes.
Federal government bails you out and goes to collect the money to do so from other banks who offered more reasonable rates and thus didn't get your business.
SVB clearly offered services that other banks couldn't or wouldn't provide - whether that be loans, credit cards, interest, or anything else.
They clearly fought to not be subject to specific regulations that bigger banks were subject to.
Was every depositor thinking about all this when choosing their banking decisions or were they just going with the bank their VC recommended? Probably the latter, but there's definitely some wiggle room here.
So yeah, not a better interest rate but the ability to get a venture debt line at all was predicated in banking at SVB.
Why else would anyone put all their money into a single account, and why would VCs even enforce doing so contractually?
When someone offers you something the market doesn't, you should understand that there's risk attached, especially when you're a company with millions or hundreds of millions in cash. When someone falls for some crypto "18% per year, no risk" scam, that's how we view it.
Why would anyone be happy for the workers of a bank that won't exist anymore in any form once the liquidation is sorted out?
[Edit: Nevermind, my dumbass didn't understand that those were the workers of the depositors, the clients of the depositors, etc.]
To be fair maybe some activities may still be sold to third parties - I have no idea.
What makes you say that SVB will continue operations?
SVB will cease to exist: it's being liquidated.
This isn't like when Best Buy went bankrupt, the banking operations will continue, the branches will still run. It will take a long time to absorb SVB's operations into a larger entity, the larger entity may choose to run them as a subsidiary. You are making assumptions about the operations and staff based on no information, if SVB is going to be open for services on Monday as the regulator has promised everybody will have to show up for work.
What do you think that the regulator has promised exactly?
The only promise I see is that people will be able to access all their money at the Deposit Insurance National Bank of Santa Clara (DINB).
They are running it under a new name. I understand how this can be confusing but they have to keep everything in place so that the systems will all still work and people can get their money, payroll systems, internal systems and processes all still work. And when a buyer for their operations is found it will keep on running and slowly be incorporated into the acquiring entity because it will in effect be a very large bank merger that will take time and effort.
Depositors might choose to run, but any business that runs their payroll though SVB is going to ask their CFO what to do and that guy is going to say, "We're full guaranteed, how much money to you want to spend to accomplish nothing?"
But yep, I'm happy with the ends, but honestly not that happy with the means.
to clarify, i'm happy for the employees, workers, etc that will remain employed while their company made poor decisions. My beef is that companies knowingly took risks. Would this even be an issue if all the VC companies didnt all try to pull their money out on Thur/Fri ?
To those with large amounts of fiat hanging around: please don’t fuck around again. Spend a few hours with your finance team to minimize risk. It is straightforward and well within the means of anyone with these cash or cash equivalents on hand (sweep accounts, short dated treasuries, etc). Build it into your runbook. Costs are minimal, consider them an insurance premium.
Edit: if you don’t have a finance team, you can get the same help from a contract finance professional. There is some responsibility that must be taken.
That's great for people who have a finance team, but a startup with over $250k in the bank can easily be just one or two people who raised money and have no particular finance expertise.
Personally I think we should bump the limits - it should be reasonable for a startup that just raised $10m to be able to put that money somewhere safe, and pay rent, payroll, and an AWS bill with it, without having to hire a "finance team".
Aren't VCs supposed to support their investments with expertise? This is eminently socializable expertise.
Nobody has made a real case substantiating why the entire economy does not need to insure upwards to protect startups that don't understand how to secure a giant sack with a dollar sign on it.
There should definitely be a place for a company to hold $10M without risk. Maybe $20M.
That doesn’t mean that it needs to be the same place for a company to dump $3B.
My point is that there is a lot of room between the (previous?) $250k “limit”, and the apparently new “infinity” limit.
There is. It's called a T-bill. I know how to buy them, and I am not a hotshot startup CEO. I think it's okay to expect some level of maturity out of somebody handed That Kind Of Money.
Seriously, you'd have to be stupid now to buy deposit insurance.
They are going to. The smuglord backpatting on social media has already begun.
But I admire your optimism.
https://www.cnbc.com/2023/03/12/silicon-valley-bank-signed-e...
That, in and of itself, ought to be a negative inducement to bank with them, and I think a good case could be made that such clauses should be prohibited by policy, as customer diversification across banks makes the financial system more resilient.
this is corrupt, the whole thing is corrupt.
edit: this is way out of my wheelhouse, so an actual answer would be educational.
[0] https://www.stearnsbank.com/personal/high-balance-deposit