Silicon Valley Bank - 89 percent not covered by insurance

[Tetrachloride]

the wiki https://en.wikipedia.org/wiki/Collapse_of_Silicon_Valley_Bank

Quotes: On March 10, 2023, Silicon Valley Bank (SVB) closed after a bank run, causing the largest bank failure since the 2008 financial crisis and the second-largest in U.S. history.[1] Reuters reported that, as of the end of 2022, some 89 percent of its US$175 billion in deposit liabilities were not covered by federal deposit insurance.[2]

……

The collapse of SVB has caused a ripple effect across the tech sector.[17] In a Securities and Exchange Commission (SEC) filing, streaming media company Roku, Inc. revealed that around a quarter of the company's cash reserves—US$487 million—were held by SVB.[18] Other companies affected by the collapse include video game developer Roblox Corporation and video hosting service Vimeo.[19] Many startups were unable to retrieve money, resulting in companies taking out loans to make payroll.[20] Circle, the issuer of USD Coin (USDC), attested that SVB is one of the six banking partners used by the company to manage its cash reserves for USDC.[21] Vox Media, a media company uninvolved in the startup space, had a "substantial concentration of cash" at the bank.[20]

In the wake of the collapse, concerns have been raised about the stability of other banks, including First Republic Bank and Western Alliance Bancorporation.[22] Shares of both companies fell in the wake of the announcement of SVB's dissolution.[23] In addition, stock values of U.S. banks have lost a combined US$100 billion in two days, and European bank stocks lost US$50 billion.[2] Despite this, some banking experts believe the other banks are able to remain stable. SVB banked a risky sector of the economy, and financial regulations have strengthened since the 2008 recession.[24]

[Casady1]

1. This is really bad

This used to be our bank in a previous company and actually may be it today for a startup I am with. I work at a start up and this bank fuels creativity. I'm bummed.

[Blues Heron]

2. Bitcoin is looking remarkably stable by comparison

[3Hotdogs]

3. Yeah. With Bitty, we ain't lost

more than we already lost.

[Blues Heron]

4. I bailed on most of mine, just kept a crumb in case it goes to a million

no high hopes for it though either way.

[LonePirate]

5. We seriously need to lift the $250K FDIC cap. That won't cover monthly payroll for many businesses.

Large businesses going through $250K in a day or even less. The current $250K is unsustainable.

Most people and businesses who use commercial banks are not bad actors and fraudsters. There is no reason to risk their assets along with the livelihoods of thousands or hundreds of thousands of bad actors. We need more regulations and supervision. Perhaps we need government owned and operated banks. Whatever it is, we need something.

[Fiendish Thingy]

6. No we don't - $250k is more than enough for individual depositors

Taxpayers don’t need to bail out corporations.

Increase regulations, not taxpayer funded insurance.

[LonePirate]

7. Plenty of medium sized businesses with 100-200 employees are not owned by corporations.

Are you willing to bankrupt them and force all of those people to lose their jobs through no fault of the owner simply because of some bad bankers?

Individual depositors are not the only players in the commercial banking realm. There are enormous ramifications if they cannot maintain secure bank deposits.

[Fiendish Thingy]

10. This bank existed to raise venture capital funds for tech startups

SVB banked a risky sector of the economy, and financial regulations have strengthened since the 2008 recession.

This was true until 2018, when SVB aggressively lobbied congress to relax regulations (on the Dodd-Frank bill) on cash liquidity because the regulators were breathing down their neck.

50 Democrats supported the bill, which somehow escaped being filibustered in the senate (edit: it was because 17 Senate Democrats supported the bill ), and Trump signed it into law. The regulators disappeared.

Taxpayers should not be on the hook for losses above $250k - the small businesses should have to sue the bank in court, and there should be criminal investigations, although, with the relaxed regulations, what they did might have been perfectly legal.

I don’t know how many, if any, small businesses that weren’t tech start ups used SVB- do you?

[LonePirate]

11. Is it more important to assist the innocent or to punish the guilty?

You're arguing for the latter while I am emphasizing the former.

It's been 13 years since the last time the FDIC raised the insured cap. We've had 37% inflation since then. The current cap is far too low.

[Fiendish Thingy]

12. $250k plus 37% equals $342k

I’m fine with raising the FDIC cap to that amount for individual depositors, but I am adamantly opposed to bailing out companies for more- that’s what civil courts are for.

[LonePirate]

13. So you're OK with people losing jobs and homes through no fault of their employer?

We can distinguish the good actors from the bad actors, just like during a natural disaster. Ruining lives and destroying the public's confidence in the banking sector is not who we are. You're setting the stage for bank runs and people hoarding cash at home and in their business. That's a far worse scenario.

[Fiendish Thingy]

14. I'm for returning to stricter bank regulations

Again, SVB wasn’t a mom and pop bank serving middle class depositors. They existed to generate venture capital for risky tech start ups, and they gamed the system to allow them to raise the stakes to their investors without government oversight.

Without bailouts, maybe those libertarian tech gamblers will cry out for more regulations to proactively protect them, rather than taxpayer funded bailouts after the fact.

When a bank fails due to mismanagement or corruption, people will suffer. Individual depositors under $250k($342k) should always be protected, but the others must deal with the consequences of “small government”.

Edit- I grew up in Silicon Valley before it was known as that; in 90’s-early 2000’s, I had many friends, as well as clients’ families (I was a therapist) who were affected by the high stress, high risk culture of the tech world, especially after the dot com bust of 2000. Moving past that crash, the naïveté of most folks had worn off, and they knew what they were getting into by working for a startup.

The benefits could be huge- one of our closest friends worked at Yahoo in the (my dates may be off, going from memory)late 90’s/ early 2000’s as a facilities manager (making sure the job sites were clean and all the light bulbs got changed), but got laid off after, I think, the dot com crash. They had two kids, and struggled for a bit until he got a job as facilities manager at Home Depot. That struggle ended about a year or two after he was laid off, when his Yahoo stock options matured, and he cashed them in.

They became instant millionaires (not mega-multi-millionaires, but millionaires nonetheless) and quit their jobs not long after.

[Chainfire]

8. I just checked, and the money in my mattress is still all there. ;)

It takes some kind of magician to make billions of dollars just disappear into thin air, so it begs the question, "Who will profit from this failure?"

[CanonRay]

9. The Special Corporate Deposit Insurance Company

Coming soon to a legislature near you. As soon as these hedge funds go crying to Congress.

[bucolic_frolic]

15. The money-multiplier in reverse

House of cards.