Silicon Valley losing some of its luster?

[Omega Man]

This is kind of fascinating.

Here’s how the second-biggest bank collapse in U.S. history happened in just 48 hours

https://www.cnbc.com/2023/03/10/silicon-valley-bank-collapse-how-it-happened.html

It seems that the "tentacles" actually spread out even to the "special" or "private" banks out here in MA.

As this "unwinds" I think that a rather large "Boss Tweed" circle will become visible.

Hopefully the "Little People" won't suffer. Can always hope.

OM

 

[The_Veg]

Hopefully the "Little People" won't suffer. Can always hope.

"Little People" won't suffer if rich people can get richer as a result of this suffering being prevented.

I wouldn't hold my breath.

 

[pglaves]

Well, Roku had $487 million deposited in that bank, with $250,000 insured by the FDIC. That is simply one example of Silicon Valley enterprises heavily deposited. Poof! I wonder where all the $$$ that have disappeared went? This will take months if not years to sort out. Oh well. Deposits in excess of $250,000 per account is not a problem I have.

 

[akbeemer]

And this is why I keep all my millions stuffed in my mattress.

 

[Omega Man]

Well, Roku had $148 million deposited in that bank, with $250,000 insured by the FDIC. That is simply one example of Silicon Valley enterprises heavily deposited. Poof! I wonder where all the $$$ that have disappeared went? This will take months if not years to sort out. Oh well. Deposits in excess of $250,000 per account is not a problem I have.

They refer to the money going to “money heaven”. There are implications that some of the “Big Cheeses” in the operation saw this coming a bit earlier and filled a “notification of intended sale” about a month ahead of this mess…….. Apparently when asked the response was “What”?

This mess and how it is handled will be worth watching, hopefully from the sidelines.

OM

 

[pauls1150]

Side note but relevant: I don't know if this is a Federal law (I believe it could be), but I know of at least two banks that, if you name somebody (anybody) as a potential inheritor of your account, you're insured up to $500,000.


AK - no wonder you're so comfy!

 

[adamchandler]

“Silicon Valley losing some of its luster?”

This was a failure of management who didn’t read the tea leaves. SVB, like many companies during COVID did very well and instead of investing in something with a higher yield, they acted as if interest rates weren’t going to explode causing them to lose billions.

there is the story of startups burning through cash and not raising more money and I think we should all be concerned about that. Are companies spending much more than they’re making right now? That’s not a Silicon Valley issue.

For the record, the SVB collapse hurt companies in India and China as well and it also hurts amazon, salesforce, google and apple who sell services to these tech companies. the next 6 months will have ripples even if it’s small time.

 

[rangerreece]

I’m sure the decision will be made to “allow” my tax dollars to bail them out. Sounds like they are “too big to fail” and we’ve heard that song and dance back in 2008.

 

[Omega Man]

I’m sure the decision will be made to “allow” my tax dollars to bail them out. Sounds like they are “too big to fail” and we’ve heard that song and dance back in 2008.

Bingo!
Not sure why the taxpayers need to be on the hook for mismanagement?
Silicon Valley has always (for me) been described as the land of the “beautiful people” where the living is great, the wages are excellent, sleep-pods are comfy and the coffee is lattes.

Have people forgotten that even at the “best” parties, they eventually end and it’s good to leave before someone throws up on you.

I really feel for those that have been trapped in this mess. Not so much for those that ignored the fact that the light at the tunnel was really a train. After all, CA has enough trouble currently.

OM

 

[pglaves]

I’m sure the decision will be made to “allow” my tax dollars to bail them out. Sounds like they are “too big to fail” and we’ve heard that song and dance back in 2008.

The decision has already been made. The bank has "failed". It is now in receivership by the FDIC. Insured deposits will be paid, probably tomorrow. That is what FDIC insurance is for. At the moment of the run on the bank it had billions in assets. Those will be disbursed by the receivers to reimburse uninsured deposits. That will take some time as existing loans are sold. The stock holders will lose their shirts and underpants but depositors will most likely be made whole or almost whole. It would take a 2/3 vote of the Federal Reserve, a 2/3 vote of the FDIC Directors, and the approval of the Secretary of the Treasury to jump in with tax dollars. That is not expected to happen. But ... it is theoretically possible.

And the whole mess was depositors panic, not something the bank did wrong except buy too many bonds at too low interest rates. If depositors didn't panic the bank would have lost some money but would still be open.

 

[52184]

As Paul noted, covering depositors up to their $250k limit is exactly what premiums to FDIC are intended to cover. Above that, I suspect the only funds open for discussion wrt reimbursements or bailouts would be the spread between depositor assets/deposits on the bank’s books vs whatever price the FDIC gets in selling the bank to another, preferably larger, bank or consortium of banks. FDIC is soliciting bids this weekend, and I’d suspect that if/when a deal is done the depositors may be clamoring to have their spread covered but investors will be on their own. That’s one of the risk elements in all investing. I’m surprised that so many were willing to invest or deposit so much in a bank that required many of the startups it worked with to deposit ALL of their funding and transactions in SVB, which guaranteed they could never be adequately insured. That would have been a giant red flag for me.

Best,
DeVern

 

[powwow]

Janet Yellen seems to be making it very clear that while SVB was bailed out in 2008, that will not be happening again. She intends to make depositors whole, but investors in SVB will likely lose everything.

I hope she's able to hold that position as the well moneyed investors begin drawing in their political favors.

 

[adamchandler]

Janet Yellen seems to be making it very clear that while SVB was bailed out in 2008, that will not be happening again. She intends to make depositors whole, but investors in SVB will likely lose everything.

I hope she's able to hold that position as the well moneyed investors begin drawing in their political favors.

I agree with that. I will say though that startups are high-risk. Venture capitalists (and I know a few personally) have made billions upon billions in the business. They measure success in decades not quarters. If Michael (one of my friends at Y Combinator) has 50 of his personally invested companies go under over this, sorry dude but you’ve been making money since 2008 at this when you sold your company to Amazon for 1.5 billion then invested in 100 companies, 25 of which all had a successful exit. Just because your current Series A/B startups are dead due to SVB’s collapse, you can chose to invest more in them at a lower valuation or cut your loses. End of the day, you’re still insanely wealthy.

VCs who have been in this game for a decade or more are still rich. A government bailout is BS because it’s doing nothing but enriching people who were already insanely wealthy to begin with. They won’t go hungry over this. Now, some startup founders will. They won’t make pay roll and have to lay people off. These are companies who have no revenue and are early / young startups. It sucks but they’ll just have to start over. S**t happens.

 

[easy]

And this is why I keep all my millions stuffed in my mattress.

I keep my vast fortune under a gold colored rock in the back yard, and the second key to the RT with my matches near the tank.

E.

 

[The_Veg]

End of the day, you’re still insanely wealthy...A government bailout is BS because it’s doing nothing but enriching people who were already insanely wealthy to begin with.

Enriching the already-wealthy is The 'Murican Way!

 

[easy]

Janet Yellen seems to be making it very clear that while SVB was bailed out in 2008, that will not be happening again. She intends to make depositors whole, but investors in SVB will likely lose everything.

I hope she's able to hold that position as the well moneyed investors begin drawing in their political favors.

The only "investors" that concern me are the ones that lost their retirement funds.

Elon, and Peter Thiel, aren't concerned about their retirement. Elon has a new plant to open in Mexico.

Peter Thiel is the billionaire who is believed to be the person who spread rumors that caused the run on Silicon Valley Bank.

E.

 

[Omega Man]

Peter Thiel is the billionaire who is believed to be the person who spread rumors that caused the run on Silicon Valley Bank.

E.

There was a speculation that the speed that information travels (Twitter etc) is part of the reason that the "run" on the bank made it insolvent in a couple of days. It is also speculated that there are funds but the funds won't be accessible for in the 10 year range.
Tomorrow should be interesting.

OM

 

[powwow]

I agree with that. I will say though that startups are high-risk. Venture capitalists (and I know a few personally) have made billions upon billions in the business. They measure success in decades not quarters. If Michael (one of my friends at Y Combinator) has 50 of his personally invested companies go under over this, sorry dude but you’ve been making money since 2008 at this when you sold your company to Amazon for 1.5 billion then invested in 100 companies, 25 of which all had a successful exit. Just because your current Series A/B startups are dead due to SVB’s collapse, you can chose to invest more in them at a lower valuation or cut your loses. End of the day, you’re still insanely wealthy.

VCs who have been in this game for a decade or more are still rich. A government bailout is BS because it’s doing nothing but enriching people who were already insanely wealthy to begin with. They won’t go hungry over this. Now, some startup founders will. They won’t make pay roll and have to lay people off. These are companies who have no revenue and are early / young startups. It sucks but they’ll just have to start over. S**t happens.

Well stated.

 

[powwow]

I read today that SVB bank executives were paid their bonuses days before the collapse.

We can only hope the FDIC has the intestinal fortitude to claw those funds back. You don't get a bonus when your decisions caused the collapse of the business.

 

[52184]

The FDIC auction of SVB reportedly closed at 2pm EDT, so quite possible this evening’s news will announce a buyer. And word is that depositors will have access to their funds tomorrow. Next question is, what will happen with Signature Bank?

Best,
DeVern