tomato_123

I wish the e/acc guys would work on this instead of boring b2b productivity services lol

I heard it has a simp infestation

It’s a pretty good site!

Luckily, barely any startups actually have revenue.

Bailing out the depositors is bailing out the VCs who own the depositors.

All of these companies could have sold their uninsured deposits at a discount, made payroll, and let their equity holders take the loss. This is what equity holders are supposed to do. Instead they went on an embarrassing twitter begging campaign and unfortunately succeeded. The whole "workers missing mortgage payments" or "destroying a generation of innovation" is an insane, buck-passing take.

They went around begging for bailouts when they could have just had the companies sell the uninsured deposit claims at a discount, paid their workers, and, as equity, eaten the loss.

What innocent? They could have sold the uninsured deposits at a discount, made payroll, and let the equity eat the loss. Instead they went on an embarrassing bailout begging extravaganza and unfortunately succeeded. Nobody, ever, should take any of these people seriously again.

"If the bank collapses then many startups shut down."

No, the equity gets wiped out, and if it's a good idea/good business it persists and gets funding elsewhere.

"You say it's a bunch of rich people profiting. Who are these rich people you're talking about? Bank management? They went to zero overnight. Shareholders? zero. Who's left? Garry Tan? He has the same incentives as millions of Americans whose retirement savings are parked in VC funds."

The VCs and other equity holders of the SVB depositors. Financial markets work: they could have sold their uninsured deposits at a discount, made payroll, with equity eating the loss.

There was plenty of private capital ready to step in and buy these deposits, at a discount of course, making it possible to make payrolls. You and your ilk just didn't like that the equity holders would have to eat the loss. Stop pretending this is about anything else.

This is incorrect. Payroll pierces the corporate veil.

It's an impossible standard to hold founders to know that deposits are insured up to $250,000? This isn't exactly fine print. Just be minimally competent and not a clown.

"Equity is when you take risks, except for the risks you didn't anticipate"

Absurd take.

Empathy is completely irrelevant. You agreed to a particular financial contract, one that ended up being a mistake ex-post. Now you want to wind back the clock and pretend you agreed to a different contract, and leave other people on the hook for it.

"Well, if you want to see startups solving hard technical problems we need to have some real talk about how that has to be structured financially"

There are deep, functioning, financial markets. Private buyers were already making offers to buy uninsured deposits at a discount. The world wasn't going to implode. Equity holders and founders were going to take a haircut. That's fine, that's equity's job here. Don't try to get out of it when shit hits the fan.

There are a zillion ways to deal with this. Split up your cash. Buy private insurance. Whatever. They agreed to a particular contract---deposits insured up to $250,000, and then ex-post, when it turns out they should have done something different, they want special favors.

Not bailing out some VCs who hold equity in these depositor-companies would not fuck up the economy. Completely absurd and outrageous.

Calm down. No it won't. We have financial markets. Good startups/innovations will get funding elsewhere. This is already happening. The current equity holders will lose a bit. No big deal.

He is (likely self-interestedly) angling for a system-wide guarantee on uninsured deposits.

He's pretending something like this is true: SVB's failing will have a contagion effect on other banks (though some mechanism that he doesn't explain or have evidence for, although guys like him menacingly gesture towards MBS or something to remind us of 2008, even though it's completely different). By stopping the SVB run, we'll nip this contagion in the bud. There's some merit to this argument.

However, there's really no reason whatsoever to think that SVB's failing will have some causal impact on other banks' liquidity/solvency. To the extent that other banks are in trouble, it's because they have long duration assets that lost value when rates rose. Whether SVB survives or not has no impact on that. So the only mechanism through which an SVB bailout has any effect is through sending the implicit signal that the government will bail out all uninsured depositors.

Yes, thank you. I feel like people are throwing around "MBS" because it's vaguely menacing and reminds people of 2008. 2023 MBS are a completely different animal; any comparison to 2008 is a total red herring from people angling for free money from the taxpayers.

Long-duration fixed income assets go down in value when interest rates rise. This is true whether they're long-dated treasuries or agency MBS. Banks that finance with short term liabilities and own long-term assets are risky because of this: when rates rise the value of their assets declines while the value of their liabilities remains mostly the same.

This is a very different phenomenon than what happened in 2008. In 2008, banks owned a different kind of MBS that was poorly-underwritten, poorly documented, and truanched in a way that made their value extremely sensitive to various model assumptions. This made them extremely illiquid, meaning that if you tried to sell them in volume you would have to sell at a large discount relative to the value of the expected discounted cashflow of the security. (This is not true of 2023 MBS. These MBS are a totally different species. In 2023 rates rose, the value decreased, but we can be extremely certain of the value and they are extremely easy to sell at little discount to this value).

Contagion happened in 2008 because when there was a run on bank A, bank A had to sell its illiquid MBS at a large discount. This reduced/made uncertain the value of bank B's similar MBS, which triggers a run at bank B. In that sense, the bank A run causes the bank B run. There's no spillover mechanism in this 2023 scenario: SVB's selling its treasury or MBS portfolio doesn't meaningfully impair some unrelated bank's assets. To the extent that some unrelated bank is in trouble, it's because they face correlated macro shocks, not because there's a causal spillover.

This is not a contagion event, this is a "lots of banks were exposed to the same macro economic risk" event. It'll play out how it plays out, but a bailout of SVB's depositors (what he and others are explicitly arguing for with hysterics like this) will not have any effect. SVB's collapse is correlated, not causal.

If the securities can be easily liquidated then there's really no economic loss for these guys going under. The real economic cost of a bank run is the early liquidation of good firms. If all these small and medium banks just have to sell their liquid treasuries or MBS portfolios then no big deal. Whatever working capital they're providing is pretty straightforward for some other financial institution to provide. The rest is just transfers from one party to another, no need to intervene.

"Small business depositors at Silicon Valley Bank should be made whole."

Don't beat around the bush. You are asking for these depositors to be bailed out. "Depositors" is a weaselly way to say "companies that my friends and I have major equity positions in."

If these are great businesses, they'll find financing. Current equity holders will suffer a loss. That's how it's supposed to work. Eat your lumps and don't go begging for a bailout for your foolish risk taking and lack of due diligence.

Understandably you're trying to maximize the value of the equity that you and your friends own. But it's a bad look to pretend this is about workers paying their mortgages. If that's what you cared about you'd be signing a petition for mortgage forbearance or some other direct-to-worker bailout.

Stop lying. It's transparent and pathetic.

Totally absurd justification for a bailout coming from the people who will most benefit. When airlines go bankrupt they don't burn the planes. Someone else finances them at a discount. Same thing here: if you have a good idea, a good business model, good people, someone will fund you. Sure, the startup's legal entity may dissolve and the equity holder wiped out, but everything else survives.

The guys at the helm here are making every apocalyptic argument they can think of. No more innovation. China will win. Think of the workers' mortgages. It's all so that they, careless VCs, can get a taxpayer bailout.

Also, "We are not asking for a bank bailout." No, you are asking for a direct bailout to you. If you really think some rank and file programmer is going to suffer for an extended period of time (he/she won't, but just for the sake of argument), then let the Federal Government cut them an unemployment check directly. But any investor, in anything, who loses due to this: suck it up, it's your job to hold the bag.

> If you banked at SVB, you should not be punished, you in good faith put $300,000 of your companies revenues into your account (IT SHOULD BE SAFE) and that will let you pay your employees and bills for the next few months, the bank fails, you should not fail.

$250,000 is safe. Ya'll are apparently intelligent people. You can read the most basic fine print.

Apocalyptic nonsense aside (good ideas, good people, and good innovations will continue even if the current equity holders of a startup are wiped out), if the argument is "we need to make sure people can make their mortgage payments," then let's have the federal government send the affected workers checks for their mortgage payments. None of this indirect bailouts for careless VCs nonsense.

> Small business depositors at Silicon Valley Bank should be made whole. Regulators need to conduct a backstop of depositors. We are not asking for a bank bailout.

Put another way: "We are asking for a VC bailout."

Totally absurd justification for a bailout coming from the people who will most benefit. When airlines go bankrupt they don't burn the planes. Someone else finances them at a discount. Same thing here: if you have a good idea, a good business model, good people, someone will fund you. Sure, the startup's legal entity may dissolve and the equity holder wiped out, but everything else survives.

The guys at the helm here are making every apocalyptic argument they can think of. No more innovation. China will win. Think of the workers' mortgages. It's all so that they, careless VCs, can get a taxpayer bailout.

If you really think some rank and file programmer is going to suffer for an extended period of time (he/she won't, but just for the sake of argument), then let the Federal Government cut them an unemployment check directly. But any investor, in anything, who loses due to this: suck it up, it's your job to hold the bag.