Pay them with Biden Bucks™️
“People are just shocked at how stupid the CEO is,” the Silicon Valley Bank insider said. “You’re in business for 40 years and you are telling me you can’t raise $2 billion privately? Get on a jet and fly to Kuwait like everyone else and give them control of one-third of the bank.”
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“There should be no mistaking that Silicon Valley Bank’s collapse was a direct result of the Fed’s persistent and excessive interest rate hikes,” they wrote.
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Last year, SVB terminated or let expire rate hedges on more than $14 billion of securities throughout the year, according to its year-end financial report. The bank reported virtually no interest-rate hedges on its massive bond portfolio at the end of 2022.
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I would suggest this is probably a symptom of the underlying problem than a cause. Hedges aren’t free. If you’re exposed to increasing interest rates, and everyone knows they are high or going up, you cant just hedge your way out of the problem.
They probably couldnt afford the hedges.
But. That does suggest they knew the problem months ago.
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Two of my favorites from this week
https://twitter.com/ChrisJBakke/status/1635310823857086466
https://twitter.com/benedictevans/status/1634748145279139845
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About SVB but this guy also goes in on VCs
To put it more plainly, for the past 10 years venture capitalists have had near-perfect laboratory conditions to create a lot of money and make the world a much better place. And yet, some of their proudest accomplishments that have attracted some of the most eye-watering sums have been: 1) chasing the dream of zeroing out labor costs while monopolizing a sector to charge the highest price possible (A.I. and the gig economy); 2) creating infrastructure for speculating on digital assets that will be used to commodify more and more of our daily lives (cryptocurrency and the metaverse); and 3) militarizing public space, or helping bolster police and military operations.
You would be hard-pressed to find another parasite that has so thoroughly wrecked the body and environment of its host, all while trying to convince the host that it is deserving of praise and further accommodation.
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It’s not obvious to me why venture capitalists should be so in control of what tech gets funded, who designs it, how it gets developed, why it gets deployed, and where the returns go. If it is simply a question of capital, we can and should explore alternatives to the privately run VC system prioritizing tech that degrades and commodifies more of our life, gambles on these developments with other people’s money, and in the blink of an eye causes regular panics that threaten to upend life for countless people. If it is a question of talent, we can and should recognize that these people are not any smarter or more talented than us—they just have more capital to throw at problems, better connections to ensure things work out their way, and less shame preventing them from pursuing what they want. If it is a question of politics, then we should ask whether a system that subsidizes a bunch of well-connected, wealthy libertarians as they enrich one another with lottery tickets is truly the only way we can and should develop technology. I hope not.
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Is the writer being facetious or do they really not know
I think the conversation drifts to larger banks because we learned in 2008 that if very large banks have balance sheet problems then it requires giant government intervention and it’s off putting to see the government leap into action to save banks while letting lack of health care, opioid epidemic, etc., crush poor people for years.
As bad as the SVB failure is, it was an unusual bank. When tech companies were doing really well from around 2019 to 2021, the deposits at SVB climbed a lot faster than deposits at other banks. Their deposit balances tripled over that period. With the benefit of hindsight, we can clearly see that their decision to back depositor liabilities with bonds purchases at their highest prices was setting themselves up to fail - and that shouldn’t be permitted.
I trained as a pension actuary and I’ve seen this mess before - when I started my career, a lot of pension plans had the opposite mismatch where their liabilities behaved like long dated bonds but their assets (often 60% public equity investments) very much did not. In the pension world the so called “perfect storm” when equities crashed and interest rates fell at the same time make a bunch of plans insolvent.
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Of course they couldn’t afford the hedges when interest rates started rising. But the problem is they didn’t buy the hedges when they bought the long bonds yielding 1.7% or whatever. Then the hedges were cheap, but they probably couldn’t hedge and then make money compared buying unhedged short term bonds.
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I think you are bang on. They prioritized profits over stability. There is always a tension there im banking, but if you go too far then, well, eventually you get a KABOOM.
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That bespoke note-taking app getting $3m really has me wondering how much of VC funding is just “Who cares what it does? We’ve got the connections. Worst case scenario we can always flip it to a greater fool for 10x down the line.”
Having a little experience with Sili Valley startup bros, I can confirm they are astoundingly clique-y. Way worse than high school. That’s the right conditions for getting so far up your own butt you can’t see daylight.
At least up until a year ago. The music seems to have come to an abrupt halt for the moment.
I heard there are some investors and private VC funds that just throw money at things at random knowing they will lose 95%+ of the time and hoping to make a 50 burger 5% of the time.
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VC bros are far worse than Finance Bros and even with Law Bros.
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