Anyone following the bank failure

[1yeartogo]

www.cnn.com/2023/03/11/business/svb-collapse-roundup-takeaways/index.html

This is really big for the tech sector since a ton of startups use this bank. I actually have a personal tie in since the place my DH works heard about the run and was able to transfer all their capital hours before it failed. So I’m personally grateful he got wind so DH has a job and they can make payroll.

A lot of these smaller businesses won’t be able to wait years for those assets to get liquidated and will have to fold.

[rubytue]

Following it? No. But I did see something and read an article a day or so ago and I was all 😳😳 what the hell? Are we going there again?

I’m so glad your H’s company was able to make payroll.

[pinkplasticdoll]

My company had their finances with svb, we were not backed by them but they held our funds so my boss (the CEO ) was scrambling yesterday to intercept payments from customers and get a new bank

[mcsangel2]

I read it's the second largest bank failure ever after WaMu in 2008, and that only *2.7%* of their depositors had balances under $250,000...meaning the vast majority of account holders had balances that exceed the FDIC insurance coverage. A bunch of people on my local reddit board think we're in for another 2008 meltdown/recession.

[spinnaker5]

This article has some good background including some of the differences between the SVB situation and the 08-09 financial crisis:

wapo.st/3YEIEKk

[pixy0stix]

Mar 11, 2023 10:17:41 GMT -5 mcsangel2 said:

A bunch of people on my local reddit board think we're in for another 2008 meltdown/recession.

Most analysts think we have a strong economy, and while growth may be slow, it's still growth. www.reuters.com/world/us/us-job-growth-beats-expectations-february-wages-rise-moderately-2023-03-10/

I love reddit, but it's definitely the armpit of the internet.

[pixy0stix]

re: OP - I only heard about it yesterday because one of my friends posted that it's the bank Etsy uses, and she was worried about the money from her store (one of her main sources of income).

[gretchenindisguise]

I heard through H. His company had a tie with them, but also seems like they will be ok and are hopeful they will be able to recoup everything.

[mpm]

I’m following the hot takes on twitter and am just shocked at all the people acting like the $250,000 FDIC insurance limit is brand new information.

[sonrisa]

while I anticipated crypto crashing and burning from its inception, I was naive about how wide ranging the destruction would be.

Locally, this is causing a stir, and on the heels of other rough news since the fall.

[tacokick]

Maybe I am missing something but why don’t these millionaire business owners/businesses have the money diversified or whatever so it is insured? Something?

I opened an account (with 5k in grant money) recently and they told me of the limit and what it meant/ways to increase the cap (having someone else on the account etc). Why is a big company like Roku seemingly surprised by this? Has no one on staff ever even done personal banking before? Do they not have financial advisors? Wouldn’t preventing something like this be a large part of their job?

[sonrisa]

Mar 11, 2023 11:03:26 GMT -5 tacokick said:

Maybe I am missing something but why don’t these millionaire business owners/businesses have the money diversified or whatever so it is insured? Something?
[

are you asking why their clients didn’t split up their deposits into $250K chunks to keep it all FDIC insured?

[wanderingback]

Mar 11, 2023 11:03:26 GMT -5 tacokick said:

Maybe I am missing something but why don’t these millionaire business owners/businesses have the money diversified or whatever so it is insured? Something?

I opened an account (with 5k in grant money) recently and they told me of the limit and what it meant/ways to increase the cap (having someone else on the account etc). Why is a big company like Roku seemingly surprised by this? Has no one on staff ever even done personal banking before? Do they not have financial advisors?

I pretty much know nothing about business but do businesses and organizations really put their money in 6, 7, 8 plus banks so that they’re never over the $250,000 insured limit? It seems like that would be hard to do consistently especially if you’re paying people on payroll because the amounts could change a lot based on paying people and then making a profit, then paying people, etc.

[tacokick]

Mar 11, 2023 11:09:05 GMT -5 sonrisa said:

Mar 11, 2023 11:03:26 GMT -5 tacokick said:

Maybe I am missing something but why don’t these millionaire business owners/businesses have the money diversified or whatever so it is insured? Something?
[

are you asking why their clients didn’t split up their money into $250K chunks to keep it all FDIC insured?

I guess?

I don’t know why they all seem surprised and upset that the money is lost. If your money isn’t insured than that’s the risk. Isn’t part of running a billion dollar company avoiding losing all of your money?

[tacokick]

Mar 11, 2023 11:11:25 GMT -5 wanderingback said:

Mar 11, 2023 11:03:26 GMT -5 tacokick said:

Maybe I am missing something but why don’t these millionaire business owners/businesses have the money diversified or whatever so it is insured? Something?

I opened an account (with 5k in grant money) recently and they told me of the limit and what it meant/ways to increase the cap (having someone else on the account etc). Why is a big company like Roku seemingly surprised by this? Has no one on staff ever even done personal banking before? Do they not have financial advisors?

I pretty much know nothing about business but do businesses and organizations really put their money in 6, 7, 8 plus banks so that they’re never over the $250,000 insured limit? It seems like that would be hard to do consistently especially if you’re paying people on payroll because the amounts could change a lot based on paying people and then making a profit, then paying people, etc.

When I worked for a small company that’s what they did. If you don’t then you risk everything going under if something happens to the bank. They paid financial people to handle the accounts, payroll and cash flow just like they paid any other staff. There are also ways to have more than 250k insured at each bank.

I’d think a lot of business is “hard to do” but that’s why you hire experts to handle it. These aren’t tiny one person operations. You’d think they’d value literally being able to conduct business at the end of the day over pretty much anything else. But I guess not? That’s what makes it puzzling.

[imimahoney]

Mar 11, 2023 11:12:08 GMT -5 tacokick said:

Mar 11, 2023 11:09:05 GMT -5 sonrisa said:

are you asking why their clients didn’t split up their money into $250K chunks to keep it all FDIC insured?

I guess?

I don’t know why they all seem surprised and upset that the money is lost. If your money isn’t insured than that’s the risk. Isn’t part of running a billion dollar company avoiding losing all of your money?

I agree. Plus I'm assuming these uber wealthy people have someone to help them set up accounts, etc. How does a bank employee not tell them that anything over 250k isn't insured?

[acuore]

Mar 11, 2023 11:03:26 GMT -5 tacokick said:

Maybe I am missing something but why don’t these millionaire business owners/businesses have the money diversified or whatever so it is insured? Something?

I opened an account (with 5k in grant money) recently and they told me of the limit and what it meant/ways to increase the cap (having someone else on the account etc). Why is a big company like Roku seemingly surprised by this? Has no one on staff ever even done personal banking before? Do they not have financial advisors? Wouldn’t preventing something like this be a large part of their job?

SVB held deposits primarily for start ups, not mom-and-pop small businesses or individual clients. $250,000 is a drop in the bucket for these companies. If they have 10,000,000 in funds (or 100,000,000) it’s really not feasible to split it into 40 (or 400) different accounts. At any rate, I’m not too concerned about wider contagion - SVP made some very poor decisions (especially considering the slowdown in tech has been coming for a good while). They should have known they would have significantly higher withdrawals of deposits in this environment than over the last couple or years, and prepared accordingly. 

[tacokick]

Mar 11, 2023 11:37:19 GMT -5 acuore said:

Mar 11, 2023 11:03:26 GMT -5 tacokick said:

Maybe I am missing something but why don’t these millionaire business owners/businesses have the money diversified or whatever so it is insured? Something?

I opened an account (with 5k in grant money) recently and they told me of the limit and what it meant/ways to increase the cap (having someone else on the account etc). Why is a big company like Roku seemingly surprised by this? Has no one on staff ever even done personal banking before? Do they not have financial advisors? Wouldn’t preventing something like this be a large part of their job?

SVB held deposits primarily for start ups, not mom-and-pop small businesses or individual clients. $250,000 is a drop in the bucket for these companies. If they have 10,000,000 in funds (or 100,000,000) it’s really not feasible to split it into 40 (or 400) different accounts. At any rate, I’m not too concerned about wider contagion - SVP made some very poor decisions (especially considering the slowdown in tech has been coming for a good while). They should have known they would have significantly higher withdrawals of deposits in this environment than over the last couple or years, and prepared accordingly. 

It does sound like a pain but isn’t it better than what many of these companies seem to be facing? It’s seems weird to just decide it’s too hard to manage a lot of money and instead choose the “hope for the best” route when your goal is to make a lot of money.

At the very least you’d think you’d diversify enough that you could easily lose whatever is over the limit without it impacting the day to day. Some of these places seem to have had basically every last cent in this bank.

[Bad Dingo]

I definitely haven't followed this very closely but my gut reaction is the government shouldn't be bailing out venture capitalists.

[acuore]

Mar 11, 2023 11:51:19 GMT -5 tacokick said:

Mar 11, 2023 11:37:19 GMT -5 acuore said:

SVB held deposits primarily for start ups, not mom-and-pop small businesses or individual clients. $250,000 is a drop in the bucket for these companies. If they have 10,000,000 in funds (or 100,000,000) it’s really not feasible to split it into 40 (or 400) different accounts. At any rate, I’m not too concerned about wider contagion - SVP made some very poor decisions (especially considering the slowdown in tech has been coming for a good while). They should have known they would have significantly higher withdrawals of deposits in this environment than over the last couple or years, and prepared accordingly. 

It does sound like a pain but isn’t it better than what many of these companies seem to be facing? It’s seems weird to just decide it’s too hard to manage a lot of money and instead choose the “hope for the best” route when your goal is to make a lot of money.

At the very least you’d think you’d diversify enough that you could easily lose whatever is over the limit without it impacting the day to day. Some of these places seem to have had basically every last cent in this bank.

I totally agree that any sensible business would at the very least have split their operating funds among at least 2 or 3 banks, purely to spread the risk should a (rare) event like this happen. 

[acuore]

Mar 11, 2023 11:51:43 GMT -5 Bad Dingo said:

I definitely haven't followed this very closely but my gut reaction is the government shouldn't be bailing out venture capitalists.

I agree, but it’s not the VCs that are really getting hammered here, but the start-ups in which they invested. The VCs will of course lose money when the companies they have invested in go out of business, but they won’t fold. The start-ups that needed the cash they had in SVB will. That said, running a start up is an inherently very risky proposition, and my immediate reaction is that the taxpayer should not be bailing them out, regardless of the reason they went bust. These are supposedly relatively sophisticated operators with a very high risk tolerance. 

[msmerymac]

Mar 11, 2023 11:03:26 GMT -5 tacokick said:

Maybe I am missing something but why don’t these millionaire business owners/businesses have the money diversified or whatever so it is insured? Something?

I opened an account (with 5k in grant money) recently and they told me of the limit and what it meant/ways to increase the cap (having someone else on the account etc). Why is a big company like Roku seemingly surprised by this? Has no one on staff ever even done personal banking before? Do they not have financial advisors? Wouldn’t preventing something like this be a large part of their job?

The only thing I can think of is that they may have to just move around so much money so often that $250k is not nearly enough for their needs. 

[wanderingback]

Mar 11, 2023 11:20:11 GMT -5 tacokick said:

Mar 11, 2023 11:11:25 GMT -5 wanderingback said:

I pretty much know nothing about business but do businesses and organizations really put their money in 6, 7, 8 plus banks so that they’re never over the $250,000 insured limit? It seems like that would be hard to do consistently especially if you’re paying people on payroll because the amounts could change a lot based on paying people and then making a profit, then paying people, etc.

When I worked for a small company that’s what they did. If you don’t then you risk everything going under if something happens to the bank. They paid financial people to handle the accounts, payroll and cash flow just like they paid any other staff. There are also ways to have more than 250k insured at each bank.

I’d think a lot of business is “hard to do” but that’s why you hire experts to handle it. These aren’t tiny one person operations. You’d think they’d value literally being able to conduct business at the end of the day over pretty much anything else. But I guess not? That’s what makes it puzzling.

Got it, good to know. I didn’t know that multi-million and billion dollar businesses did that! I wonder what the highest number of banks a business or organization has been with. 200? 500? 1000? Is that a guinness world record?!?

For some reason I always thought payroll would come from 1 place/bank, but that’s obviously not the case based on what you’re saying.

[steamboat185]

Mar 11, 2023 11:12:08 GMT -5 tacokick said:

Mar 11, 2023 11:09:05 GMT -5 sonrisa said:

are you asking why their clients didn’t split up their money into $250K chunks to keep it all FDIC insured?

I guess?

I don’t know why they all seem surprised and upset that the money is lost. If your money isn’t insured than that’s the risk. Isn’t part of running a billion dollar company avoiding losing all of your money?

Roku is a company that lost money. They are a billion dollar company and probably have a massive payroll. Setting payroll to come from that many banks (20 plus) would be a nightmare. They would wipe the funds out and have to replace them weekly. What if some teams had more overtime than expected? The company would constantly be having to change which people get paid from each bank and the chance at making mistakes would increase with the complexity of the arrangement.

It just isn’t practical for large scale operations.

[wanderingback]

Mar 11, 2023 12:03:16 GMT -5 acuore said:

Mar 11, 2023 11:51:19 GMT -5 tacokick said:

It does sound like a pain but isn’t it better than what many of these companies seem to be facing? It’s seems weird to just decide it’s too hard to manage a lot of money and instead choose the “hope for the best” route when your goal is to make a lot of money.

At the very least you’d think you’d diversify enough that you could easily lose whatever is over the limit without it impacting the day to day. Some of these places seem to have had basically every last cent in this bank.

I totally agree that any sensible business would at the very least have split their operating funds among at least 2 or 3 banks, purely to spread the risk should a (rare) event like this happen. 

Yes 2 or 3 I get, but I meant like large businesses/organizations that are paying millions in payroll, let alone other purchasing/operations monthly. I honestly didn’t realize they would split all their money among dozens to hundreds of banks so they’re never over $250,000. But now I learned something new!

[goldengirlz]

Mar 11, 2023 11:33:26 GMT -5 imimahoney said:

Mar 11, 2023 11:12:08 GMT -5 tacokick said:

I guess?

I don’t know why they all seem surprised and upset that the money is lost. If your money isn’t insured then that’s the risk. Isn’t part of running a billion dollar company avoiding losing all of your money?

I agree. Plus I'm assuming these uber wealthy people have someone to help them set up accounts, etc. How does a bank employee not tell them that anything over 250k isn't insured?

Just to clarify, these aren’t necessarily uber-wealthy people in the sense you’re thinking. These are startup founders who’ve raised VC money. SVB primarily served businesses (ETA: although I guess where was some private banking and lending).

I also think there’s some naivety in this thread about how companies move large sums of money around. Do you think every one of your employers keeps its payroll in hundreds (or thousands?) of FDIC-insured accounts?

We should all know already that the entire banking system is a house of cards that does not care about protecting the average worker’s paycheck.

[tealblue]

I worked in the treasury department for a regional company. We had a few banks but our payroll was millions each payroll run and our income was billions annually.
Banks charge for all the checks cleared, ach and wires in and out. So we tried to keep our money in just a few banks to have leverage and economy of scale for our fees. We had line of credit where we would borrow or invest in so we could keep our account balances low enough but have funds to make any urgent payments or unknown things that would clear. We needed to do business with the banks that were part of our credit funding team but not too much to dilute that business.

That was my job for years, managing how much funding each company needed for that days ins and outs. But we would get random payments in that we weren’t forecasting for, so we could end up in a situation of losing that money if the bank would have crashed that day.

[neverfstop]

I follow a ton of crypto stuff and it seems like this was a bank that didn't have a diversified portfolio of clients...
They were actually decently well positioned with their assets/book-keeping (minus losses when interest rates went up). However, once a few people started saying to pull your money, everybody pulled their money and created a bank run.
Basically, if somebody started a rumor tomorrow that Chase was in a bad financial position & everybody should get their money out ASAP, it the same thing would happen.
All banks are collateralized and this would likely happen to other banks if all the media online (trolls, politicians, shit stirrers, etc.) all started putting out there that the bank was about to collapse, they could basically star the collapse.
podcasts.apple.com/us/podcast/the-2nd-biggest-bank-failure-in-american-history/id1438693620?i=1000603673784 

Also, Peter Thiel, the guy who sued gawker into oblivion, was a big part of pushing the fear narrative for everybody to grab their money....it was almost a self-perpetuating cycle. We have to have faith in the banking system and as soon as somebody brakes that trust, then the system collapses.


From Axios.
Silicon Valley Bank's customers withdrew $42 billion from their accounts on Thursday. That's $4.2 billion an hour, or more than $1 million per second for ten hours straight.

Why it matters: To put that in context, the previous largest bank run in modern U.S. history took place at Washington Mutual bank in 2008, and totaled $16.7 billion over the course of 10 days. That's a mere trickle in comparison to what was seen at SVB, Axios' Felix Salmon writes.

[wanderingback]

Mar 11, 2023 12:20:19 GMT -5 goldengirlz said:

Mar 11, 2023 11:33:26 GMT -5 imimahoney said:

I agree. Plus I'm assuming these uber wealthy people have someone to help them set up accounts, etc. How does a bank employee not tell them that anything over 250k isn't insured?

Just to clarify, these aren’t necessarily uber-wealthy people in the sense you’re thinking. These are startup founders who’ve raised VC money. SVB primarily served businesses, not individuals.

I also think there’s some naivety in this thread about how companies move large sums of money around. Do you think every one of your employers keeps its payroll in hundreds (or thousands?) of FDIC-insured accounts?

We should all know already that the entire banking system is a house of cards that does not care about protecting the average worker’s paycheck.

Ok so large companies and businesses do not typically separate their funds in to hundreds of banks to stay under the $250,000 insured limit? That’s what I would’ve thought but then some people in this thread are saying otherwise!

[acuore]

Mar 11, 2023 12:17:22 GMT -5 wanderingback said:

Mar 11, 2023 12:03:16 GMT -5 acuore said:

I totally agree that any sensible business would at the very least have split their operating funds among at least 2 or 3 banks, purely to spread the risk should a (rare) event like this happen. 

Yes 2 or 3 I get, but I meant like large businesses/organizations that are paying millions in payroll, let alone other purchasing/operations monthly. I honestly didn’t realize they would split all their money among dozens to hundreds of banks so they’re never over $250,000. But now I learned something new!

No, they don’t do that. The logistics would be impossible, except for a very small business. One of the other posters above who has direct experience with payroll etc for a large company gave a good explanation why.