We did it everyone.Submitted by TendiesForTheBoys t3_1271eyx in wallstreetbets
BlackSky2129 t1_jeclok4 wrote
Reply to comment by mattenthehat in We did it everyone. by TendiesForTheBoys
The bank failures that led to their insolvency was management and the rates. But the VCs, who alongside their founders own like 90% of the bank’s deposits, panicked and screamed fire started the run that led to the illiquidity rush.
In short, yes all of those regards are to blame for SVB specifically
mattenthehat t1_jecocin wrote
Everybody saying this, but nobody offering a realistic alternative for what you should do when you learn your company's bank might not let you write payroll checks.
BlackSky2129 t1_jecs3bk wrote
They were short like $4 billion out of the total $200 billion in deposit and in the process of raising funds. Again, their long term treasuries were being held to maturity so the only way they don’t have enough money is if every depositor wants ALL the money NOW at the same time, which is what happened when the VC group chats literally screamed fire
mattenthehat t1_jecvrc1 wrote
Still not offering an alternative for what they should have done. You dance around and imply it, but you don't have the balls to actually come out and directly say, "yes, you should keep your cash at a bank that is having to raise funds for liquidity." Because you shouldn't. That's dumb as hell, especially if you might need access to your money soon.
DYTTIGAF t1_jed01ll wrote
Agreed. They saw what was happening on their balance sheet, but decided to "play chicken" with the Federal Reserve.
The gambled. They hesitated to make decisions. In their view no way would the Fed raise rates 8 times within a year.
They got caught with their pants down. Consequently, they pushed these bad decisions on the shoulders of third parties with the CEO jetting out to Hawaii (washing his hands of this collapse).
BlackSky2129 t1_jed2yrh wrote
The Feds, in mid 2021, said they had NO INTENTIONS of raising rates and inflation for transitory. Then over the next 12 months, they go 180 and raise rates from 0 to 450bps (unprecedented and much more than Volker’s 2x increase in rates).
So do you really blame them for not listening to what the Feds say
DYTTIGAF t1_jed4ckg wrote
I sat looking at my computer screen in November 2021. Just as Powell said the Federal Reseve was going to be raising rates and pivot from their "transitory" viewpoint on inflation.
I have been locked in for the last 14 months. Each day watching this policy change in action. It's not brain surgery. It's simple stuff.
Please don't be an apologist for a bunch of twits in Silicon Valley who failed to make the most basic attempts at hedging a multibillion bond position.
Why? When they saw they needed money they approached Goldman Sachs as the savior to buy the long bond position (at market valuations) as well as to float a share issue (to make up for the lost principle value on their balance sheet).
A bunch of VC's got wind of the deal and jumped on Twitter...and the game was over.
This was 3rd grade mis-management by the bank who was more concerned about social governance nonsense than being good stewards of other people's money.
BlackSky2129 t1_jed6mbd wrote
> November 2021
You literally proved my point. The Feds went from no raise in the foreseeable future in AUGUST ‘21 to yeah everything I said was false 2 MONTHS LATER.
DYTTIGAF t1_jed90wj wrote
How old do you think these executives were 12 years old?
Seriously are you trying to argue these morons spent 14 months looking at screens wondering what to do about a billion dollar wealth destruction....and they didnt have the competency to do anything about it?
Spins13 t1_jef48hw wrote
Yes the risk manager was a token girl who was doing woke conferences… instead of you know managing risk
BlackSky2129 t1_jecwglx wrote
The solution is understand the 250k FDIC limit for one, It’s only been around a few decades
mattenthehat t1_jededl6 wrote
My dude. You just got done saying these are VC accounts. We're talking 9 or 10 digits. The FDIC insurance is not relevant in any way.
GSamsa1977 t1_jegm4s8 wrote
Once the run is ignited, no one can stop it. The only advice is to diversify in different banks and/or hold assets outside banks’ balance sheet
spartanburt t1_jecvjft wrote
Literally?
BlackSky2129 t1_jecwa7s wrote
>he’s not in the VC group chats, it was a bunch of fire GIFs
spartanburt t1_jecwq36 wrote
Ah
GSamsa1977 t1_jeglov5 wrote
No bank in the world would survive to that
BlackSky2129 t1_jegrk9p wrote
Exactly, that’s how fractional reserves work. No bank can survive a run like the VCs pulled on SVB
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