> The SVB owners lost the bank. There's no happy result for them.
Some of them did get bonuses that day - of course then they lost their jobs. I'm not sure if there's a mechanism to claw back excess bonuses, but if SVB goes through bankruptcy after this it should be possible.
> SVB shares are worth $0 because there was a run on the bank and the US Government did not step in to save the bank, only the depositors.
And there was a bank run because the investors panicked and caused the share price to plummet. Depositors saw stock plummeting, got nervous and pulled out. If this type of thing spreads to other banks we'll have a bad time.
> What would you do if you were a board member of multiple companies and you found out their bank was financially unsound and couldn't do normal bank stuff?
Was there any evidence that they couldn't do "normal bank stuff"? AFAIK SVB still had ample avenues to raise liquidity before the bank run Thiel orchestrated. SVB's stock would have suffered immensely, but their operations and deposits would have been fine as far as I can tell.
> SVB had $45B withdrawals on their $175B deposit base. That is not a small amount of withdrawals.
Almost all of those withdrawals happened after the bank was insolvent.
SVB had to sell all of their available securities to cover day-to-day customer withdrawals (The problem with being the bank of choice for startups is that they aren't making any money, aren't getting any new investments, but are still spending money.)
The bank run started after SVB started dipping into its underwater long-term securities, and borrowing money, and doing emergency fundraising.
A more diversified bank (Like any of the big four) would avoid this problem, because their regular day-to-day activity would be a ~net-zero balance of withdrawals and deposits. SVB was uniquely vulnerable because of its undiversified customer base, where normal customer activity pushed it towards insolvency.
> On March 9, SVB lost over $40 billion in deposits, and SVBFG management expected to lose over $100 billion more on March 10.
March 9th and 10th were the Thursday and Friday before SVB collapsed.
On March 8th, Goldman Sachs advised SVB to go public with non-binding stock commitments [1][2]. The stock dropped, the commitments vanished, and then it plummeted. Because SVB was pretending its 70¢ bonds were worth $1, it had clearly lost the faith of big investors, and it couldn't go to the Fed; it was illiquid and insolvent.
I mean, that's worse. The depositors at SVB are being made whole, the shareholders are getting wiped out.
EDIT: I think a lot of people misunderstood me. Wiping out the shareholders was absolutely the correct thing to do; I just meant worse from the perspective of people whose value is in the equity.
> the bank run is what made SVB insolvent. Prior to that, all they had was a liquidity problem.
The bank run exposed the insolvency. But it was already there. That’s why SVB couldn’t solve their problems at the Fed’s discount window.
SVB lobbied for exemption from the Fed’s stress tests and Basel III that would have prevented this problem. The policy treatment is rolling back those changes so regional banks are covered.
"A sale by SVB of $20bn of securities to mitigate a steep drop in deposits had focused investors’ attention on vulnerabilities in its balance sheet. They dumped its stock, wiping $10bn off its shares and crashing the market value of the bank — worth $44bn just 18 months earlier — to below $7bn.
"“The prisoner’s dilemma was basically: I’m fine if they don’t draw their money, and they’re fine if I don’t draw mine,” said one of the CFOs, whose company had banked around $200mn with SVB."
...
"One hedge fund short seller who detailed the bank’s risks last year warned that SVB had almost unwittingly built the foundation for what could become “the first large US bank collapse in 15 years”.
"“They went for an extra [0.4 percentage points] of yield and blew up the bank,” said the person, whose fund held a bet against SVB. “It is really sad.”"
I'm unclear how SVB management "made out like bandits". I assume they had a couple good years of nice salaries and bonuses, but now their equity is zero'd and they're out of a job. I presume they would have preferred to continue managing the bank as a going concern.
SVB was a bank that mostly served corporate operations accounts for tehc nad healthcare startups and small businesses. People were not banking there for high returns. This is not at all about risky investments (ffs the bank liquidity crunch came from long term bonds being too illiquid -- not exactly exotic asset management). The accounts impacted are mostly payroll, daily operating accounts (for expenses/manufacturing expenses/real estate lease payments etc).
The bank managers and investors are not being bailed out -- they have already lost everything.
You seem to be attaching some kind of anger for some ill conceived and non existant "happy go lucky risk wall street bet" type of activity, when this is about buisnesses losing their operating accounts who did nothing wrong except for have accounts at this bank instead of the next bank over.
> The board was asleep at the switch. They are now unemployable.
That's not really how this works. The CAO of the bank was CFO of Lehman. People in these positions just get credit for the fact that they had a front row seat for this sort of financial implosion, so they can (theoretically) help whoever else's board they join avoid that sort of thing.
> But those players within the venture capital community who were singularly responsible for triggering and then exacerbating this run will not escape accountability.
The people in the VC community who triggered the bank run did the right thing by their startups. They don't have a responsibility to SVB. If they saw a run on the bank starting, it was in their best interests and the best interests of the startups in which they invested for those startups to get their money out as quickly as possible.
Right after they cashed out significant amounts of SVB stocks.
reply