Silicon Valley Techno-Utopianism

Most people are smart about some things and really stupid about other things, but it’s impossible to know which is which, which is why you should never post

Breaking: PNC is out. According to a source familiar, PNC sent an initial notice of interest to the FDIC to help with SVB. PNC held brief & preliminary discussions w/ FDIC. But after conducting initial due diligence, PNC informed FDIC yesterday that it decided not to move forward

— Sara Eisen (@SaraEisen) March 12, 2023

https://www.federalreserve.gov/newsevents/pressreleases/monetary20230312b.htm

crisis over folks, time to go home

whats this are people thinking the bank run was done on purpose cause they didnt like svb

Syndicate Of Wealthy Industrialists Orchestrate Bank-Run To Depose Regional Powerbroker

this is a Julian Fellowes side-plot. A modern reboot of Vanity Fair (ok, kinda stretching it). Looking forward to this being in the next season of Gilded Age.

— 3.9% symmetrical objective proponent (@NewRiverInvest) March 11, 2023

That person has not read Vanity Fair.

well thiel did shout fire in a crowded theater xp

deliberately causing a bank run on the bank where all your companies have their money seems like a bad idea but obvs we dont know everything atm

i thought he started the run by pulling his money out?

in any case he absolutely seems like the kind of guy who's willing to take a loss if it completely fucks over someone he dislikes

it started with him encouraging his companies to pull their money out but theres no guarantee they all get it out its a pretty chaotic sitch to eff with

also if all he and a lot or basically all vcs require their companies to bank there they must like it, because of something like this i guess

trying to work out exactly what the moral hazard with SVB is, despite "just making depositors whole": VCs liked it because the bank trusted their valuations when making loans to them, in turn we get startups being told by VCs to use SVB, leading to massive uninsured deposits

— joolsd (@joolsd) March 13, 2023

Good summary for me.

https://blog.danieldavies.com/2023/03/it-what-it-is-it-is-understandable-that.html?m=1

hilarious that people insist, in any context, that bailouts won't "cost" taxpayers. Taxpayers are already paying for exactly this kind of government action and it has been great ROI for the country.

As I noted upthread, some of my clients were clients at SVB and yes, those clients absolutely came to SVB at the advice of investors. One of the main reasons is that SVB is very comfortable dealing with startups (most banks are not) and yes, relationships play a big part in that.

this guy is always a good read

https://stratechery.com/2023/the-death-of-silicon-valley-bank

Good summary for me.

https://blog.danieldavies.com/2023/03/it-what-it-is-it-is-understandable-that.html?m=1

― xyzzzz__, Monday, March 13, 2023 9:37 AM (fifteen minutes ago) bookmarkflaglink

Because the Fed and FDIC will always find a way to stabilise the system, populist yahoos and libertarians can rail against “bailouts” and pass legislation to “protect the taxpayers”, all on the understanding that it is purely playtime; that when things get serious, someone will find a way to bail them out.

This is no way to run a financial system, particularly since there is the constant risk that one day the anti-bailout loudmouths will accidentally succeed. The Fed needs to say, loud and clear, that “Yes, this is a bailout, and that is good. A bailout is often the best and cheapest way to prevent a catastrophe. The people benefiting from it may be quite comically unattractive and undeserving, but finance is not a morality play. Take your bailout and try to be less silly next time”.

you gotta kick the plebs while youre talking about these things so people will know youre serious

As I noted upthread, some of my clients were clients at SVB and yes, those clients absolutely came to SVB at the advice of investors. One of the main reasons is that SVB is very comfortable dealing with startups (most banks are not) and yes, relationships play a big part in that.

― Ira Einhorn (dandydonweiner), Monday, March 13, 2023 9:50 AM (seventeen minutes ago) bookmarkflaglink

the idea that entire huge industry was banking at one place because of relationships stretches credulity they had to have been doing actual things that the industry liked, havent heard anyone explain what that was yet, someone floated a theory that they accepted startups fanciful valuations without question which i guess would allow them to do what borrow money doesnt really make sense since these are venture funded companies they have tons of money its in the bank lol thats the problem, maybe it was as simple as they just made it very easy for the vcs to get whatever services they wanted since they were funneling so much money in there via their portfolio companies, i guess that could be described as relationships, could also be called a kickback if youre feeling crabby

I thought he was talking about the VC bros in that last graf

xpost

one through line im noting in these pro bailout explainers is theyre keeping the focus very tight on just the bailout of svb account holders which tbh is prob a good idea, but thats not all the gov did they also extended credit to other struggling banks so while svb failed and it was its account holders that god bailed out these other banks are getting saved altogether, of course the bigger picture is thee banks lobby the hell out of washington to get the rules loosened so that they can do shit that will one day require a bailout etc etc, which is the sort of immorality that gets people so fired up

I thought he was talking about the VC bros in that last graf

xpost

― Tracer Hand, Monday, March 13, 2023 10:16 AM (seven minutes ago) bookmarkflaglink

oh yeah prob, my bad, tho tbf the next paragraph is a lil more generally dismissive

wonder if we'll hear any more about this SV founder/VC group chat where some chicken littles started the panic

the tweet about the bank holding enough assets at fair prices seems pretty reasonable, it'd just be a matter of finding someone else to buy the less-liquid assets in the near term to get customers their money in a more timely manner, right?

of all the people hollering, calacanis still comes off as an exceptionally thin-skinned twerp. that shtick about how a hundred thousand people are going to run to their banks today seems like he's trying to make it into an outbreak of bank runs. shouting fire in a theater and everyone yelling at him to stfu and watch the movie

businesses of all stripes do business with each other because of relationships. It's not what you know, it's who you know. But you knew that already. To think banking is exempt from the human condition is willfully ignorant.

SVB was very familiar with the startup ecosystem and that made it a logical choice for startups. In a sense it was designed for this kind of business activity which made it efficient and easy to deal with. It's only on the backend that things were fucked--one of the articles I posted posited that (of course) SVB was playing banking like VCs play the startup world: as a homerun derby where some unicorn comes along and is able to bail out all the horribly shitty business ideas.

Ironically in the last hour two of my clients who had money at SVB texted me in a panic wondering how to get their money.

relationships, ecosystem, efficiencies, you forgot synergies

breaking the norms of traditional institutions is all well and good until that institution is your bank, apparently

it's not like SVB was doing FTX shit, they were just investing with the intent of maximizing their profits as opposed to hedging against this exact situation. if all the dweebs who had large amounts of money there had faith in the institution instead of doing a bank run, nothing would have happened!

relationship banking is definitely useful and imo all the guys who did the bank run violated the social norms of banking, whatever those may be

like you can throw as many algorithms as you want at things, but having a guy you can call every few months because your construction business needs to make payroll and everything's waiting on the outstanding bills in accounts receivable works. the bank just floats you enough to make payroll for a couple cycles, they're paid back when the bills get paid, it's good business. having a guy you call to just do that? that's banking

they were in a tough spot before the bank run, and they successfully lobbied congress to reduce regulations in a way that helped them get in the tough spot

yeah i mean a business relationship is someone who will do a business thing for you so what were they doing that caused the entire industry to bank with them

its a weird situation usually a whole industry isnt at one bank

yeah

can you being the bank administration, all these "move fast, break things" just shuttling large amounts of money in and out, day after day, and you're inspired but hampered by these pesky financial regulations as a stodgy banker type? almost have to feel for them

yeah id be talking to my vc pals trying to move over to their side

tbf vc is baby stuff anyway what you really want is private equity thats where you can really do crimes

i’m just sort of imagining when 22 year old recent stanford grad Alex A. Founder gets his $10 million seed round from sequioa he gets a little orientation folder that says congrats on becoming a founder! for office space, think about dogpatch. you’ll need somewhere to put this $10 million - call my guy so and so at svb, he’ll hook you up.
don’t forget to have a nice celebratory dinner - try house of prime rib. if you need a reservation, just call my concierge who will set you up. congrats and welcome to the big leagues!

https://www.youtube.com/watch?v=MBXrU3WzKJg

you’ll need somewhere to put this $10 million - call my guy so and so at svb, he’ll hook you up.

― 龜, Monday, March 13, 2023 11:36 AM (three minutes ago) bookmarkflaglink

people on twitter are saying that some venture funds required their portfolio companies to bank there

i just dont think this kind of concentration at one bank would just sort of happen

none of these people are very smart

Twitter right now:

A bunch of people who have been given the world’s friendliest regulatory, tax, and interest rate environment and used it to “innovate” apps of indentured servitude telling people they openly view as their inferiors that they need to bail them out. https://t.co/90zaylVvgb

— Ben Miller (@benwritesthings) March 13, 2023

re fdic risk management one of the mysteries of this situation is why these companies didnt have the normal insurance for their deposits above 250k

apparently Y Combinator recommended SVB to their investment portfolio companies so uhhh

https://www.ycombinator.com/blog/urgent-sign-the-petition-now-thousands-of-startups-and-hundreds-of-thousands-of-startup-jobs-are-at-risk/

looking at the nytimes front page rn and it’s got big “my t-shirt that says the US banking system is safe is raising a lot of questions already answered by my t-shirt” energy

it's almost as if making more money out of existing money without an additional exchange of goods and services is maybe something we should think more deeply on

uh oh charles schwab

jfc

From the Wall Street Journal's explanation of why Silicon Valley Bank failed:https://t.co/zEImEu6Bmp pic.twitter.com/Xbr86bEepf

— Brian Merchant (@bcmerchant) March 13, 2023

"i'm not saying..." what people who are saying say when they're about to say something.

i knew it was gay and black people's fault thank you dow jones

when 12 non veteran white guys meet four times a year they can really concentrate on stopping this sort of stuff

“ in the most vibrant sector of innovation in our economy.” - citation needed

i just dont think this kind of concentration at one bank would just sort of happen

― lag∞n, Monday, March 13, 2023 8:43 AM (two hours ago)

it isn't that much of a problem that all these tech startups were at SVB, it's that apparently SVB's customers were mostly tech startups. Like, if you ran a restaurant and almost all your customers worked at the same company, because "relationships," and then that company moved its office 50 miles away. ... sucks for your restaurant.

it's almost as if making more money out of existing money without an additional exchange of goods and services is maybe something we should think more deeply on

Teddy Roosevelt, 1910: "No man should receive a dollar unless that dollar has been fairly earned. Every dollar received should represent a dollar’s worth of service rendered — not gambling in stocks, but service rendered."

i'm up for a little speculation and loans and such

My understanding of the existence of Islamic finance is that it is designed to comply with sharia prohibitions on usury (ie. paying interest). It would be interesting to compare banking stability under such regimes with the interest-based model more common outside the Muslim world.