Ackman and others are trying to push through an FDIC guarantee before markets open Monday - and he's not wrong. I'm not sure if there will be a bank run on SIBs (I would think on non-SIBs to some degree), but any company has to re-evaluate their banking situation if they can only access $250k if a bank randomly fails due to a bad press release. They'll need to ensure they have accounts everywhere spread out - and all the companies who did have their money tied up there are going to have follow-on problems (not being able to make payroll, etc). It's going to be a total mess Monday morning without guarantees. I believe despite FDIC being only $250k, they've always managed to cover all depositors in full in all previous bank failures, so it would be game-changing if they don't here. Totally agree that Musk and Twitter should be kicked out of all the sites where they stopped pay rent but are still using.
Space Ghost is obsessed with trying to point out that I said Musk would never buy Twitter, even though I explained what I got wrong and why in that thread as I said I would when I originally posted. So he follows me around in random unrelated threads now trying to remind everyone of it, ignoring that he got literally everything wrong in real-time over months throughout that thread. So you'll continue to see these random references.
When Twitter fails under Musks leadership, you can do the ol Major "I told you so". Who even suggested Musk would turn Twitter into SpaceX/Tesla in 6 months? I really dont understand why you need to continue to post lengthy biased articles when you can simply read the original text. This is all he said. And yes, it is indeed that simple. Everything else is opinion.
The funniest thing about this is when right wingers are stupid enough into thinking trump is fighting the system or some bullshit . @Commodore these folks think trump is somehow fighting for them when in reality he's nothing but crook who does whatever he can to help protect the elite. Literally blows my fkin mind how trump has convinced so many folks that he's somehow the warrior agaisnt the system. Seriously, what the **** has trump ever done to help the average folk? @AroundTheWorld why are you folks so utterly brainwashed Absolutely blows my mind in what the **** do folks see in trump ?
bailouts are evil, but inevitable, so I welcome them as an accelerant to moving toward a bitcoin standard under which such bailouts are impossible
"safety nets" shift risk from banks to taxpayers, creating a clear moral hazard to engage in risky lending In this case, poor risk management by not hedging a long position in treasuries (aka risky lending to the government)
It's already happening, the borrowing/printing/spending keeps increasing, and the bitcoin price keeps rising.
VC community shot themselves in the foot. SVB had like 42 billion in reserves and need a few billion to cope with higher interest rates. So what did VC's do, tell the entire community to get their money out before there was a bank run. They created the very bank run they were scared of, resulting in every depositor withdrawing their money. This could spread to other startup banks and really kill the whole industry for a while.
SVB bank failing here wasn't due to risky investments. The risk is bad allocation by investing too much in one basket (long-term bonds in this case) and not having a large enough cash reserve. It's mostly due to bad timing and a bank that's more tailored to startups that have been facing financial crunch due to rising interest rates. That combination is a bit unique, so it doesn't look like it should "spread," and it definitely does not seem to be a fundamental financial issue. However, there is a real risk of startups failing, but it doesn't seem like this is a large enough market to have a serious broader impact on the economy. Perhaps it is more like a blip. PS - Clearly, if this bank had gone through stress-testing and had stressed this type of investment in this environment, this situation could have been avoided. Collapse of Silicon Valley Bank - Wikipedia The bank's deposits increased from $62 billion in March 2020 to $124 billion in March 2021, benefiting from the impact of the COVID-19 pandemic on science and technology. Most of these deposits were invested in long-term Treasury bonds as the bank sought a higher return on investment than were available on shorter-term bonds.[15] These long-term bonds fell in value as interest rates rose during the 2021-2023 inflation surge and they became less attractive as investments.[16] As of December 31, 2022, SVB had mark-to-market accounting unrealized losses in excess of $15 billion for securities held to maturity. At the same time, startup companies withdrew deposits from the bank to fund their operations as private financing became harder to come by. To raise needed cash to fund the withdrawals, the bank sold all of its available-for-sale securities, realizing a $1.8 billion loss.[17] The bank was criticized for timing its announcement shortly after Silvergate Bank, which catered to cryptocurrency users, started winding down its operations.[18] Some banking experts said that the bank would have managed its risks better had it not been for the Economic Growth, Regulatory Relief and Consumer Protection Act, enacted in 2018 and supported by SVB CEO Greg Becker, which reduced the frequency and number of scenarios of required stress testing implemented under the Dodd–Frank Wall Street Reform and Consumer Protection Act for banks with under $250 billion in assets.[19] Instability[edit] In the week before the collapse, Moody's Investors Service reportedly informed SVB Financial, the bank's holding company, that it was facing a potential downgrade of its credit rating because of its unrealized losses.[15] On March 8, 2023, SVB announced it had sold over $21 billion worth of its investments, borrowed $15 billion, and would hold an emergency sale of its stock to raise $2.25 billion.[15] Despite the steps taken by the bank, Moody's downgraded SVB on March 8.[15][20] Investors at several venture capital firms, including Peter Thiel's Founders Fund,[21] urged their portfolio companies to withdraw their deposits from the bank.[22] By March 9, customers withdrew $42 billion, leaving the bank with a negative cash balance of about $958 million.[23] According to CNBC, "Brex received billions of dollars in deposits from Silicon Valley Bank customers" on March 9, 2023. "JPMorgan Chase, Morgan Stanley and First Republic also saw heightened inflows".[24] Venture capital funds including "Founders Fund, Union Square Ventures and Coatue Management [...] advised companies in their portfolios to move their funds out of SVB to avoid the risk of being caught up in the potential failure of the bank."[25] According to Bloomberg, "Founders Fund withdrew all its funds from Silicon Valley Bank" by the morning of March 9th. Journalist Ryan Hogg with Business Insider noted "Thiel's Founders Fund is thought to have propped up several startups that banked with SVB".[26] The value of SVB's shares plummeted until a trading halt was implemented on the morning of March 10.[27][28][29][30][31] On February 27, SVB Financial Group CEO Greg Becker sold 12,451 shares of company stock, worth $3.6 million, through an executive trading plan that he filed with the SEC under Rule 10b5-1 on January 26. The rule has been criticized as a loophole allowing for insider trading. Beginning April 1, the SEC will require a minimum 90-day cooling period for most executive trading plans.[32]
The classic social behavior of a bank run, but in this case, it's mostly self-inflicted. I hope these startups spread their cash among multiple banks, as they will likely get all of their deposits back, but the lack of access is going to be an issue for some of them.
