Silicon Valley Techno-Utopianism

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.

"labor theory of value" --karl marx

the thing is that the SVB investments weren’t even that usurious or anything, they were just chasing better rates on stable bond investments afaict?

obviously like any business they’re chasing more money on top of the overhead of keeping the store open but it wasn’t like they were loan sharking

The prohibition on usury under sharia means paying *any* interest.

Islamic law considers money as a measuring tool for value and not an asset in itself. Therefore, it requires that one should not be able to receive income from money alone. Interest is deemed riba, and such practice is proscribed under Islamic law. It is haram, which means prohibited, as it is considered usurious and exploitative.

https://www.investopedia.com/articles/07/islamic_investing.asp

various christian groups have at times banned earning interest too tho never as wildly as in the muslim world

this thread is starting to get creepy idk

just because money is made up doesn't mean we shouldn't be trying to make it more fair, not less fair

even though historically that hasn't been like a huge success

that's all i have to say on this topic i know nothing about and find eye glazingly boring, you're all welcome

on this: what, if anything, is preventing a perfectly liquid bank that has some low-interest t-bills worth 80$ on a face of $100 now borrowing against those through this program, and putting that back into higher yield t-bills and just pocketing the difference? https://t.co/zBy7ad2jZh

— sclv (@sclv) March 13, 2023

that specific question is answered in today's levine.

I love my readers, and yesterday one of them more or less immediately emailed to ask, about the Fed’s Bank Term Funding Program: “Can I get in on this? Specifically, can I buy a controlling interest in a bank, and then buy a bunch of long dated treasury instruments at $80, and exchange them for $100 immediately?” Great question! The answer is no. Here is the termsheet for the BTFP:

paywalled for me, but it's basically being large enough that someone would let you negotiate reasonable terms over a long period, right?

just funny numbers here, but stay with me:
- I buy bonds that mature in ten years and pay 4%
- The interest rate pops up to 7% on bonds at some later date
- I take out a loan using my bonds as collateral at a 5% interest rate to buy the new 7% bonds

I'm pushing back my maturity date and have a lot more contractual things in play, and I've now basically spent my money plus I have to make an interest payment on the loan. I've dug myself into a hole for ten years

(I'm never going to get terms that good and nobody's going to loan me a ton of cash because I'm an individual investor, and for me, the amount of money I'm going to make would change only a small amount)

Levine’s bottom line here makes the whole wrapup here sound basically obvious:

But in the modern world — of more pervasive financial markets and more sophisticated accounting and faster-moving information — the banks and their customers were unable to ignore those losses. So the Fed stepped in and said: Look, we are best positioned to ignore those losses, so we will. The service that the Fed is providing to the banking system here is ignoring that rates went up when it values banks’ bonds. That service is incredibly valuable. Historically banks’ retail depositors provided it, but now only the Fed can.

It sounds like SVB's main problem was concentrating their depositor-base in the hands of a particularly skittish and herd-like group - the inbred world of VCs and tech startups.

https://t.co/cQQrueYpj0 pic.twitter.com/zQXNFnQlz1

— Abe (@LikeAndBlock) March 12, 2023

lol