This 60 minutes segment from the Great Recession is the closest thing I know of to that. <a href="https:&#x2F;&#x2F;www.youtube.com&#x2F;watch?v=TAE8i40A5uI">https:&#x2F;&#x2F;www.youtube.com&#x2F;watch?v=TAE8i40A5uI</a>

60 Minutes followed an FDIC takeover in 2009, including when the agents actually walked into the bank’s headquarters: <a href="https:&#x2F;&#x2F;youtu.be&#x2F;TAE8i40A5uI" rel="nofollow">https:&#x2F;&#x2F;youtu.be&#x2F;TAE8i40A5uI</a>

That&#x27;s fascinating. I&#x27;d love to watch a documentary about that.

I know a couple bank VPs who have been the representative of the take-over bank in absorbing failed banks.  They describe it in terms that most of us would recognize as taking over a failed project and re-architecting&#x2F;refractoring it so that it can succeed (or making the call to discard all work to date and start over with a workable solution).

&gt; Substantial risk of depositors not being made whole for a whileEmphasis on for a while. Stock and bond holders (man, did the latter miss the ball) will absorb losses.

All their money? I doubt it.SVB owned a bunch of mortgage backed securities and treasuries - both of which are down 30-50% from their peaks, which coincides with our last venture capital boom. SVB was buying at the top because they had so much capital to deploy.Maybe instead of cashing it out, depositors could be given a treasury worth 30% less than SVB paid for it, that pays out 1% a year in interest, redeemable at face value in just 20 short years.

It&#x27;s a little unique because it&#x27;s a top 20 bank failing. As far as I can tell, it&#x27;s not super unique in terms of % of fdic insured deposits.As a whole it&#x27;s like &lt;30% FDIC insured in the whole US banking industry.&gt; they’ll probably get all their money but it will still be badThey may not. Even for banks where most assets are FDIC insured, you&#x27;ll see that not 100% of deposits are returned. Selecting a random recent one:<a href="https:&#x2F;&#x2F;closedbanks.fdic.gov&#x2F;dividends&#x2F;bankfind&#x2F;Dividendindex?fin=10534" rel="nofollow">https:&#x2F;&#x2F;closedbanks.fdic.gov&#x2F;dividends&#x2F;bankfind&#x2F;Dividendinde...</a>~95%.

Have there been any cases in modern times, in the last 25 year or so where depositors lost money because they had more than the fdic covered ?

This case is unique because of the sheer volume of non-FDIC insured deposits. Substantial risk of depositors not being made whole for a while, they’ll probably get all their money but it will still be bad

Clawbacks are only poised to happen for big crypto failures (FTX) because the people who held money in those institutions aren&#x27;t technically &quot;depositors,&quot; and are considered a more generic type of creditor (which has a bankruptcy clawback).Bank deposits are special and there will be no clawback. However, depositors who lost money will be first in line at the bankruptcy court.

Are clawbacks a thing in this case for the people who did get [some] of their money out in time?

I wonder if the FDIC is just as efficient but this situation is different.

When the FDIC takes over a bank, they usually have some local cops around, to deal with crowd control and calm down upset depositors. See the 60 minutes video. There&#x27;s a police car parked in front of the bank, but the cops are not doing much.

From the looks of the news stories, it looks like the FDIC isn&#x27;t as efficient in taking over a bank as it used to be:<a href="https:&#x2F;&#x2F;nypost.com&#x2F;2023&#x2F;03&#x2F;10&#x2F;nypd-called-to-silicon-valley-bank-branch-as-depositors-attempt-to-pull-cash-report&#x2F;" rel="nofollow">https:&#x2F;&#x2F;nypost.com&#x2F;2023&#x2F;03&#x2F;10&#x2F;nypd-called-to-silicon-valley-...</a>

Pipe, Clearco, Founderpath, etc, are going to have a busy month.Likely many companies won’t be able to do mid-month payroll.Someone will setup a market for the FDIC warrant on uninsured deposits, but that will take time.

will companies with money in SVB even be able to make payroll? Seems like this could cause huge issues in the short term and long term

Oldie but goodie on what actually happens when a bank is taken over. <a href="https:&#x2F;&#x2F;www.npr.org&#x2F;2009&#x2F;03&#x2F;26&#x2F;102384657&#x2F;anatomy-of-a-bank-takeover" rel="nofollow">https:&#x2F;&#x2F;www.npr.org&#x2F;2009&#x2F;03&#x2F;26&#x2F;102384657&#x2F;anatomy-of-a-bank-t...</a>

When, though?If your company can&#x27;t access your money to access payroll for X months, you might as well as be dead.

I wouldn&#x27;t be too sure about that. 93% of SVB deposits are uninsured.

Only 2.7% of SVB&#x27;s deposits will be covered by FDIC.

We don’t really know yet if they will be getting most of their money back.The only guaranteed amount is 250k.

&gt; The difference is that SVB&#x27;s depositors will see most of their money backDepositors will see all of their insured money back, uninsured deposits will be recovered based on available assets and&#x2F;or terms of any resale by the FDIC, but could be lost in whole or substantial part. Large depositors could potentially see substantial losses.

The difference is that SVB&#x27;s depositors will see most of their money back, which is the point of the FDIC taking over.

&quot;Denial isn&#x27;t just a river in Egypt.&quot;

Yesterday I read on here that &quot;xyz doesn&#x27;t mean SVB is going under like FTX did five minutes after doing that&quot;.

For now yes, you get a note on what’s owed that remains and in time you get some of your money back post bankruptcy.Keep your accounts lower than 250k

No because SVB has assets with value to sell. That&#x27;s the &quot;dividend&quot; the FDIC refers to in the press release.

SVB&#x27;s assets will be divided up and given back to creditors (including depositors). So remaining depositors likely will get something back eventually, but we don&#x27;t know how much yet (10%? 50%? 85%). There will also likely be a delay in getting those funds back as the process plays out, which is probably more dangerous to many companies than the haircut (assuming the hair-cut isn&#x27;t too severe).

Does this mean that SVB customers are going to lose deposits over the FDIC limit (250k?)

That amount of confidence on the fact that the music would never stop is... I dunno, I don&#x27;t get any good adjectives. I can&#x27;t understand it.It&#x27;s not even the case that they did it for the returns, because the returns were negative. Is it a regulation thing that forced banks to overinvest in long-term bounds?

Many people will not come out of this stronger.

You&#x27;re getting downvoted because people are upset, but this is a real problem that could have been avoided. We&#x27;ll come out of it stronger, but its going to hurt.

Oh dear. It guess this is how the VC pyramid scheme collapses. $151BN uninsured deposits in the bank. [0]Now all those unprofitable startups will be falling like dominoes as now the money is tied up in the bank with withdrawals disabled.[0] <a href="https:&#x2F;&#x2F;twitter.com&#x2F;FedGuy12&#x2F;status&#x2F;1634038788468113408" rel="nofollow">https:&#x2F;&#x2F;twitter.com&#x2F;FedGuy12&#x2F;status&#x2F;1634038788468113408</a>

<a href="https:&#x2F;&#x2F;twitter.com&#x2F;GRDecter&#x2F;status&#x2F;1634208652595699713" rel="nofollow">https:&#x2F;&#x2F;twitter.com&#x2F;GRDecter&#x2F;status&#x2F;1634208652595699713</a>

Likely number is bigger than 3%, as they had a giant outflow over the last couple days.

Where&#x27;d you get the 3% figure? The only thing I saw in the article was that it was not determined.&gt; At the time of closing, the amount of deposits in excess of the insurance limits was undetermined. The amount of uninsured deposits will be determined once the FDIC obtains additional information from the bank and customers.Is the 3% figure from SVB or an estimate from another source?

Because most of their depositors were business that kept &gt;$250K (the insurance limit) in the bank.

Because the insurance is for $250k and most depositors had much more than that.

&gt; Only 3% of deposits in the bank are FDIC insuredwhy is that?!

I can&#x27;t see that happening in today&#x27;s political climate.  Imagine the stories juxtaposing coddled tech workers against the cost of the bailout.

Could the Fed do this in a back door way? Buy the devalued bonds at above-market rates?

Bill Ackman and Wall Street calling for a government bailout for all depositors:<a href="https:&#x2F;&#x2F;twitter.com&#x2F;BillAckman&#x2F;status&#x2F;1634032841687285761" rel="nofollow">https:&#x2F;&#x2F;twitter.com&#x2F;BillAckman&#x2F;status&#x2F;1634032841687285761</a>

This isn&#x27;t true.  The bank is in receivership and which is a different form of bankruptcy.  The FDIC will liquidate assets or find a buyer relatively quickly.  Depositors will end up getting most or all of their money back.

The FDIC will pay uninsured depositors an advance dividend within the next week.

Only 3% of accounts were under 250k. An account of $251k isn&#x27;t part of the 3% figure, but is almost totally insured.

Only 3% of deposits in the bank are FDIC insured; other depositors will need to wait for the receivership process to run to get access to (what remains) of their deposits.edit: replace &quot;bankruptcy&quot; with &quot;receivership&quot; as the latter is usually a faster process than the former.

are you quoting something from a couple of days ago?

« literally no one saw this coming a couple of [hours] ago. »

There&#x27;s a strong correlation here to people who have deposits in SVB. This was all but certain yesterday.

Read the other threads. <a href="https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=35088919" rel="nofollow">https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=35088919</a>&quot;SVB is our bank, I got in touch with a member of the senior team there and got the following message to share. (My own interpretation is I&#x27;m comfortable and I&#x27;m not planning to pursue it further at the moment)&quot;

What are you talking about?  Pretty much everyone I&#x27;ve seen has called this a bank run and said to get your money out since SVB announced they were trying to raise money.  Techcrunch called the announcement shooting yourself in the foot.

It&#x27;s kind of amazing how much optimism there was just an hour ago regarding SVB&#x27;s position.

Deposits &gt; $250k per depositor per bank are uninsured.<a href="https:&#x2F;&#x2F;www.fdic.gov&#x2F;resources&#x2F;deposit-insurance&#x2F;faq&#x2F;" rel="nofollow">https:&#x2F;&#x2F;www.fdic.gov&#x2F;resources&#x2F;deposit-insurance&#x2F;faq&#x2F;</a>

Up to 250k is insured, amounts beyond that are not.

Not a dumb question at all. AFAIK it is the amount, in the USA it&#x27;s $250K. Other countries have similar situations, most of the EU is 100K €.

Investment products are not FDIC insured;  Accounts over 250k are not FDIC insured;  In this case, that&#x27;s probably the bulk of &#x27;uninsured&#x27; - large accounts, or creatively sold investment products.

* Amount less than $250k
* &quot;Deposit Account&quot; =&gt; not a &quot;fancy investment interest account&quot;Details: <a href="https:&#x2F;&#x2F;www.fdic.gov&#x2F;resources&#x2F;deposit-insurance&#x2F;" rel="nofollow">https:&#x2F;&#x2F;www.fdic.gov&#x2F;resources&#x2F;deposit-insurance&#x2F;</a>Not Covered: <a href="https:&#x2F;&#x2F;www.fdic.gov&#x2F;resources&#x2F;deposit-insurance&#x2F;financial-products-not-insured&#x2F;" rel="nofollow">https:&#x2F;&#x2F;www.fdic.gov&#x2F;resources&#x2F;deposit-insurance&#x2F;financial-p...</a>

I&#x27;m not sure if this helps answer your question, but coverage is automatic if you have your funds in an FDIC insurance bank (most all of them) and if it&#x27;s in a normal savings type account and then any amount 250k or less.

Probably a dumb question, but what determines if a deposit is insured or not at an FDIC insured bank?

Turns out Twitter making bank failure a meme didn’t really help anything at all. It’ll be very interesting to see what happens to uninsured depositors

The FDIC also maintains a &quot;failed bank list&quot; that is kind of interesting to browse (goes back to 2000): <a href="https:&#x2F;&#x2F;www.fdic.gov&#x2F;resources&#x2F;resolutions&#x2F;bank-failures&#x2F;failed-bank-list&#x2F;" rel="nofollow">https:&#x2F;&#x2F;www.fdic.gov&#x2F;resources&#x2F;resolutions&#x2F;bank-failures&#x2F;fai...</a>

strong &quot;days since last fatal accident&quot; vibes from that sentence

| The last FDIC-insured institution to close was Almena State Bank, Almena, Kansas, on October 23, 2020.From the release.

For comparison, alamena had 68m in deposits compared to SVB’s 175b<a href="https:&#x2F;&#x2F;www.fdic.gov&#x2F;news&#x2F;press-releases&#x2F;2020&#x2F;pr20119.html" rel="nofollow">https:&#x2F;&#x2F;www.fdic.gov&#x2F;news&#x2F;press-releases&#x2F;2020&#x2F;pr20119.html</a>

yes but if you look at the decade before that, it was pretty common about 3-10 or so bank takeovers per year, from the link below.

First actual FDIC takeover since 2020, I think.

&gt; It’s not interesting because of its name, it’s the 18th largest bank in the US.Given how much media attention silicon valley gets, for better or worse, the name of the bank would have some affect.Tech and fintwit are both blowing up on SVB, there are like 4 SVB related posts on HN front page, I even some reddit posts.This will be big in the media, and therefore the public conscience.

&quot;Since 2020&quot; is not a great metric, since a lot happened in 2020.Here is a chart that shows the number of bank failures over the past decade [0]. As you can see, having a year with 0 failures is actually the outlier. The average annual bank failure over the past 20 years is roughly 20 per year and the median number is 8 per year.[0] <a href="https:&#x2F;&#x2F;www.fdic.gov&#x2F;bank&#x2F;historical&#x2F;bank&#x2F;" rel="nofollow">https:&#x2F;&#x2F;www.fdic.gov&#x2F;bank&#x2F;historical&#x2F;bank&#x2F;</a>

It’s also the second largest U.S. bank failure. WaMu was considerably larger when adjusted for inflation - $300B in 2008 dollars (&gt; $400B in 2023) vs SVB at $200B in 2023 dollars.

I think big question really is has any other banks &quot;invested&quot; their deposits in similar manner. So could there be others that will go down if bank run is encouraged?

I know very little about this, but the wikipedia page says it&#x27;s the second largest bank failure in the history of the US, so maybe you&#x27;re underselling it a bit?<a href="https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Silicon_Valley_Bank" rel="nofollow">https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Silicon_Valley_Bank</a>

It’s not interesting because of its name, it’s the 18th largest bank in the US. A domino that big usually doesn’t fall alone. Also, FDIC hasn’t taken over a bank since 2020. This isn’t exactly a common occurrence.

Good luck to any companies with over 100 employees trying to make payroll and other obligations on $250k.

I mean, potentially.The reality is they try to protect as much of the assets as they can and even those over 250k will probably not lose as much as they would have without the FDIC

Bear Stearns was the first shoe to drop. Intervening would have spooked the market. Later implosions were addressed because there was no alternative.Unless you experienced that time, it really hard to understand the pervasive denial of what was obviously happening.You&#x27;ll see the same thing happen this time around, and will have an equally hard time conveying just how strong the denial was.

great callback. revenge on Jimmy Cayne for when genius failed.Dont forget it was Lehman that failed first, Bear got special treatment amongst the Citi, AIG, et al bailouts.

They did intervene with Bear.  The JPM acquisition came with all sorts of backstops and guarantees from the Fed.  Lehman was the one where they didn&#x27;t intervene, which is why there was no acquisition.

Re Bear Sterns, there were lots of political reasons it was allowed to fail while others were protected. If I remember right something about them not helping with the Long Term Capital Management collapse for example. There will have been people who had the opportunity to help SVB and collectively decided it was better to let it fail. It will be interesting to understand the decisions that were made when the dust settles

My finance-foo is quite weak, what does advance dividend mean in this context?

And they&#x27;ll probably get 90%+ back eventually. The bank&#x27;s money isn&#x27;t gone it just isn&#x27;t liquid.

&gt; And any accounts over $250K, poof.That&#x27;s not quite true; the FDIC will pay uninsured depositors an advance dividend within the next week.

Almost all of those are during The Great Recession or the aftermath of it, so I think it&#x27;s not that crazy of a claim to make.Also means we may be about to start seeing a lot more of them again, assuming we&#x27;re getting closer to the next big recession.

And this chart paints an even different picture:<a href="https:&#x2F;&#x2F;twitter.com&#x2F;alistairmbarr&#x2F;status&#x2F;1634275645235793920" rel="nofollow">https:&#x2F;&#x2F;twitter.com&#x2F;alistairmbarr&#x2F;status&#x2F;1634275645235793920</a>

Edit - this has been the first fdic takeover since 2020, so no, it does not happen often.This chart of historic bank failures paints a different picture:<a href="https:&#x2F;&#x2F;www.fdic.gov&#x2F;bank&#x2F;historical&#x2F;bank&#x2F;" rel="nofollow">https:&#x2F;&#x2F;www.fdic.gov&#x2F;bank&#x2F;historical&#x2F;bank&#x2F;</a>

2008 bear sterns vibes.The fed&#x27;s move in interests rates was bound to break something. This is the first big name and, while banks are taken over by the FDIC often and it never makes the news, this one will be especially interesting bc it is Silicon Valley Bank. Naturally, people and the media will associate with the rest of silicon valley, bringing extra scrutiny to every brand name tech company, especially the ones that are still barely profitable.And any accounts over $250K, poof.Edit - this has been the first fdic takeover since 2020, so no, it does not happen often.

I mean, you could argue that relatively speaking you&#x27;re better off, since you&#x27;re probably not suddenly trying to satisfy champagne tastes on a malt liquor budget.

lol so the fact that we didn’t have $250k of runway ends up being a good thing?

Technically yes, but the FDIC is also working to release as much uninsured funds as possible as an &quot;advance dividend&quot;.

Does this mean that depositors have lost access to their funds until the bankruptcy process, with the exception of $250k which will be available on Monday?

&gt; At the time of closing, the amount of deposits in excess of the insurance limits was undetermined.What are the insurance limits for companies? Same as individuals? I get the sense that most of SVB&#x27;s deposits were from startups and small companies. And I also get the sense that $250K is not much room for a startup trying to make payroll to employees with Silicon Valley wages.

Bank runs are always caused by memes -- the change is bank runs powered by image macros, but memetic spread of the idea &quot;this bank may fail&quot; is always what causes a run.

A bank run powered by memes.We truly live in a world.

In my whole life, I have never seen a bank run from start to finish, but here we are. Interesting times!

I&#x27;m not sure how true this is. I worked at a startup that took in over $100m in investment, and I was curious so I asked the cofounder how they protected that. According to him the money was divided up into chunks smaller than $249k, pushed off to a custom entity made just for the purpose, and then invested in bonds or CDs on a rotating basis.I&#x27;m sure a lot of startups will be in trouble, but those that are working with decent investors probably had help protecting the assets.

40% of startups just had their bank accounts cut down to $250k, so... a lot.

Holy cow, O&#x27;Reilly in the top ten. That doth not bode well.

Something to note: This list is not exhaustive. There was about 3.8k companies with svb as their servicer. That also doesn&#x27;t mean all of their money was in SVB.

Potential contagion: <a href="https:&#x2F;&#x2F;imgur.com&#x2F;a&#x2F;Xh6Kudp" rel="nofollow">https:&#x2F;&#x2F;imgur.com&#x2F;a&#x2F;Xh6Kudp</a>These are companies, sorted by PPP loan size who had SVB as their servicer.

Chipper Cash raised $150m from FTX and $100m from SVB. Ouch

Yikes. Does anyone have an idea of which orgs have significant exposure (like Molly White&#x27;s FTX contagion graph[0])?[0] <a href="https:&#x2F;&#x2F;www.mollywhite.net&#x2F;etc&#x2F;ftx-contagion" rel="nofollow">https:&#x2F;&#x2F;www.mollywhite.net&#x2F;etc&#x2F;ftx-contagion</a>

When someone opens a bank account and makes a cash deposit, he&#x2F;she surrenders the legal title to the cash, and it becomes an asset of the bank.

Clearer to read it in the article:&gt; As of December 31, 2022, Silicon Valley Bank had approximately $209.0 billion in total assets and about $175.4 billion in total deposits. At the time of closing, the amount of deposits in excess of the insurance limits was undetermined. The amount of uninsured deposits will be determined once the FDIC obtains additional information from the bank and customers.

When Alice deposits $100 into a bank, the bank gains a $100 liability (owes Alice $100), and then a $100 asset (the cash). The asset is likely traded for a bond of some kind, in this case a US 10Y treasury.The 10Y treasury was worth $100 in 2021, but today is only worth $80. The bank still owes Alice $100 (a $100 liability), but the asset&#x27;s value has declined. This has caused... issues... culminating in the past week of events.

&gt;Keep in mind 93% of SVB&#x27;s assest were not FDIC insured.&gt;&gt; Silicon Valley Bank Had About $209.0B in AssetsI&#x27;m not an expert, but aren&#x27;t deposits in a bank liabilities? Assets are things like treasury bills and loans held by the bank.

Well a defense might be to increase their liquidity by selling those treasury bills, which would drive their price even lower, making other banks also be illiquid on paper.So yeah I imagine all the banks nervously looking at eachother. Who is going to pussy out the first and cause them all to tumble over.

Both would be my guess. I’m expecting more smaller banks to fall.

Yes, this may trigger many banks to sell off long term underwater assets which would further reduce their prices, incentivizing further sales. It can also trigger more bank runs that put time pressure on banks to do this. Bad situation overall

So, first off, I am not very literate when it comes to the comings and goings of banking procedures, so forgive me if this is a dumb question.Would an incident like this make other banks shore up their defenses about this sort of thing happening to them, or will more banks fall due to market conditions in general?

Silvergate is apparently doing a controlled liquidation of itself, this is an FDIC-forced liquidation.

&gt; Svb Is First FDIC-Insured Institution to Fail This YearWas Silvergate bank not FDIC-Insured?

some note i&#x27;ve been taking&gt; To protect insured depositors, the FDIC created a new entity called the Deposit Insurance National Bank of Santa Clara, or DINB. DINB will maintain Silicon Valley Bank’s normal business hours, with banking activities resuming no later than Monday, including online banking and other services, the FDIC said. Customers with accounts in excess of $250,000 are being told to contact FDIC direclty&gt; The company’s main office and all Silicon Valley Bank branches will reopen on Monday,&gt; Uninsured depositors will get a receivership certificate for the remaining amount of their uninsured funds, the FDIC saidKeep in mind 93% of SVB&#x27;s assest were not FDIC insured.&gt; Silicon Valley Bank Had About $209.0B in Assets&gt; Svb Is First FDIC-Insured Institution to Fail This YearTheir recent attempt to raise money via shares and debt sales failed,

A pitty FTX went under before, just imagine SBF announcing he is bailing out SVB!

Bonus points if they mention effective altruism, and how great it is, but how also it can be bad sometimes.

Not entirely correct.  There is still a &quot;bad bank&quot; which is the SVB entity (and will be wound up in bankruptcy), and the &quot;new bank&quot; which has all of the insured deposits.

That&#x27;s not really possible. SVB as an entity no longer exists once the FDIC steps in.

Kinda seems like it should be a 503 Money Unavailable.

South Park nailed this <a href="https:&#x2F;&#x2F;www.youtube.com&#x2F;watch?v=-DT7bX-B1Mg">https:&#x2F;&#x2F;www.youtube.com&#x2F;watch?v=-DT7bX-B1Mg</a>

Or a cute 404 page when you login to your account:&quot;Oops, looks like Santa misplaced his bag with all your money! Don&#x27;t worry, his elves are busy looking for it all over the North Pole.&quot;

&quot;This was a learning experience that will provide velocity in our continued disruption of the finance space for startups. We look forward to continuing to maintain a growth mindset as we ~cash your checks~ earn your trust.&quot;

Here&#x27;s why a bank collapse is a good thing.

&gt; Bill Biggerstaff.He lived truly to his name! Founded a bank that processed bills with a big number of staff.

ChatGPT is happy to oblige:Silicon Valley Bank, founded in 1983, has had a long and incredible journey leading up to its acquisition by the FDIC in 2023. As a bank that specializes in working with the technology and innovation industries, it has been at the forefront of many of the industry&#x27;s most significant developments.The bank started its journey as a small community bank in Santa Clara, California. At that time, it was known as the Santa Clara Valley Bank. The founders, Bill Biggerstaff, Ken Wilcox, and Bob Medearis, saw an opportunity to create a financial institution that focused on serving the unique needs of the technology and innovation industries.In the early years, the bank faced many challenges as it worked to establish itself as a leader in the industry. One of the biggest obstacles was convincing investors and regulators that the bank&#x27;s specialized approach to banking was viable. The founders knew that they needed to build a strong foundation and establish a reputation for being a reliable and trustworthy financial institution.Over the years, the bank grew and expanded its reach, opening offices across the United States and in key global markets. It also broadened its focus beyond just technology and innovation to include life sciences, healthcare, energy, and more. This diversification helped to insulate the bank from the ups and downs of any one industry and made it more resilient in the face of economic uncertainty.Throughout its journey, Silicon Valley Bank has remained committed to its core values of innovation, excellence, and customer focus. It has always been willing to take calculated risks and to push the boundaries of what is possible. This approach has paid off in many ways, as the bank has been recognized as one of the most innovative and respected financial institutions in the world.In 2023, Silicon Valley Bank achieved a major milestone when it was acquired by the FDIC. This acquisition was a testament to the bank&#x27;s success and the strength of its business model. It also signaled a new era of growth and opportunity for the bank, as it now has the backing of one of the most respected regulatory bodies in the world.Looking ahead, Silicon Valley Bank is poised to continue its incredible journey and to make an even greater impact on the world. As the technology and innovation industries continue to evolve and grow, the bank is well-positioned to help fuel that growth and to support the entrepreneurs and visionaries who are driving it forward. With its deep expertise, strong relationships, and unwavering commitment to excellence, Silicon Valley Bank is poised to remain a leader in the financial services industry for many years to come.

Don&#x27;t forget the cutesy nickname for its employees and users.&quot;Dear Sveebles and Sveeblettes...&quot;

Now we just need an &quot;incredible journey&quot; blog post from SVB spinning this acquisition as a great win for both customers and investors.

That makes it even funnier, though. At least to the rest of us.

Isn&#x27;t the investor justification for taking a huge chunk of profits &quot;we take risk&quot;? I fail to see how this is unfunny just because the risk you took played out in the bad way.

Tons of VCs had their assets there too. It could lead to serious ramifications, anyone with substantially more than $250k in that bank is out a lot and only time will tell how much they’ll be able to recoup. It’s not an FTX situation, the assets are somewhat there, but the losses in securities look extreme and unwinding them at a fair price may take months, if not years

They’ll most likely be made whole or close to whole. It’ll just take time, so as long as that startup doesn’t have a huge burn already, should be fine. Anyway you bought % in their company which you still own, the cash was gone when you wired it.

Its so funny until you realize your seed-round investment in a friends company used SVB.Gonna be quite a show, this.

That sounds terrible and I feel bad for them.

Imagine having a life changing amount of personal wealth deposited at a Crypto exchange, and before you can spend it - the exchange sets it on fire.

Thing is, it&#x27;s probably true for 1% of the cases, that things are slow for no good reason. Trick is how to identify that 1% of times when you can truly make something better. But 99% of the times, it&#x27;s all shit and ends up like this, or similarly.

But SVB wasn&#x27;t even doing anything sketchy or disruptive, right?

In fairness, it wasn&#x27;t the risk-taking that did them in... it was the fact that they went all-in on 10-yr bonds at low interest rates and didn&#x27;t adequately account for duration risk.

HN really is like a ChatGPT version of itself. SVB is a 40 year old bank, bro. They are the old stodgy bank. The Meows and Mercurys are all still around.Their problem was that their risk management didn&#x27;t keep up with the changing times (rapid interest rate changes).Please go on and tell us more HN tropey things like &quot;oh they shouldn&#x27;t have sold customer data!&quot; or more things that could be an autogenerated robot comment by ELIZA.

Yeah, the cool kids also say&#x2F;used to say only if they used blockchain this wouldn’t have happened…lol

&gt; Those old stodgy banks just slow us down with their old-fashioned risk-averse ways! The cool kids can do it better!SVB was an old stodgy banks that companies went to instead of the new kids like Mercury, specifically because of the trust. They have terrible UX and mobile app but at least they were solid and had a 40 year track record.

In all fairness, those stodgy old banks have been bailed out multiple times in the past.

If only banks were risk-averse x) Unfortunately they are risk-happy when they know bankruptcy means a taxpayer rescue.

Disrupt disrupt disrupt! Those old stodgy banks just slow us down with their old-fashioned risk-averse ways! The cool kids can do it better!If I had a nickel for every time I heard this from actual friends in the past couple decades, or for when I said it myself a few times... :)

Maybe it&#x27;s time to resurrect Fucked Company.<a href="https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Fucked_Company" rel="nofollow">https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Fucked_Company</a>

Full-reserve banking doesn&#x27;t eliminate risk, it pushes it elsewhere. The nice thing about fractional reserve (yes, there are nice things about it!) is that it allows people to have a savings without completely paralyzing the money supply. Money that is &quot;saved&quot; can still be used for productive purposes. Yes, this introduces risk (of the sort that the FDIC is intended to ameliorate), but the alternative is to either discourage savings entirely in favor of active investments (which are themselves mostly subject to the same sort of risks as savings accounts of today), or otherwise encourage savings but let the economy be strangled by a lack of funds (which becomes a vicious cycle).Certainly we can argue about the precise percentage of the fractional reserve, but keep in mind that &quot;100%&quot; is not a panacea.

Maybe it&#x27;s time to get rid of fractional reserve banking and change it to full reserve banking.We really don&#x27;t need a bunch of fake money flying around. It&#x27;s time to have every dollar in the wild be a real dollar.

Why does it seem the perception of the tech industry is that products are just useless devices (like what you mentioned) or scams, that its employees are lazy and entitled, and basically it&#x27;s all just a giant bubble of alof elites.The same traits are present with every industry. How many BS oil fields are funded but turn out to be over hyper. What about real estate scams?Right wing media has done a great job of changing the conversation from big oil to big tech and many people here are helping, maybe with geniue intention, but foxnews or whatever is attacking tech because it&#x27;s mostly liberals not because they are concerned with the industry&#x27;s practices

What a debacle.Some gallows humor from twitter: &quot;Imagine raising $100m for your AI enabled dog washing app - and your bank sets it on fire before you can&quot;.Original: <a href="https:&#x2F;&#x2F;twitter.com&#x2F;88888sAccount&#x2F;status&#x2F;1634028258500169731?s=20" rel="nofollow">https:&#x2F;&#x2F;twitter.com&#x2F;88888sAccount&#x2F;status&#x2F;1634028258500169731...</a>

Unrelated to their finances, but they have an exceptional engineering team over there that I had the privilege of speaking with.I’m sorry to see this happen.

&gt; a lot of VCs had significant money in that bankEveryone I know pulled yesterday.

VC firms don&#x27;t generally have tons of cash sitting around compared to their fund size.  When you raise a fund, an LP does&#x27;t just hand you $20 mil, then simply promise to send you up to $20 mil when you ask for it.

I bet a lot of VCs had significant money in that bank as well. Even if companies could raise money, there wouldn&#x27;t be as money available.

There are three ways to succeed in this business: Be first, be smarter or cheat. And I don&#x27;t cheat.Margin Call is such a timeless, great movie!

The same people that were saying that yesterday were removing their deposits. They just wanted to be there first.

Do you think it&#x27;s strange people are excited for the economy to fail?

A good lesson for everyone who forgot the last cycle.Slowly, then all at once.

You most definitely will. SVB already fire-sold 21Bn in MBS and took a 1.8Bn loss on that. Someone is eating that loss....Separately, this is going to cause a lot of finance vultures to look at other banks who also have MBS portfolios on their books. The show&#x27;s only beginning.

Well, and until everything is sorted all your deposits above 250k are illiquid now. So, I guess one way to not go under is to find a bank that gives you a generous credit line against whatever deposits there are at SVB. At huge risk margin, and quite a discount on the deposits. If there are such banks willing to do so, that is.

No one knows for sure. We don&#x27;t know what the value of their HTM MBS actually is on the open market.What we do know for sure though, is that this process will take months, maybe years, to play out and many startups will run out of money long before this is resolved.

&gt; If you had more than $250k in SVB yesterday you probably just took a huge haircut.You may not lose money. The money isn’t gone yet. The restructuring may save the money. There’s a playbook for this sort of thing.

That gummint fiat money looking better all the time.

If people have to be reassured to begin with, it&#x27;s already over. Money only exists because people keep believing it does. As soon as they stop believing it&#x27;s gone.

For business banking, you want a bank that understands your business. SVB was in the first rank of banks that understood startups.Many startups aren&#x27;t particularly sophisticated financially and just kept their capital in cash in the bank.

They become illiquid because they don&#x27;t have access to their money that was in SVB. They can&#x27;t make payroll, can&#x27;t pay vendors and landlords. The employees will leave first. Vendors next.

Bridge loans, DES, convertible notes, etc..., I&#x27;m sure their were loan &quot;products&quot; for startups similar to helocs (likely what put them in the hole). The appetite for crypto&#x2F;fintech startups was huge during the pandemic and likely pressured them to get creative on products and overleveraged. It&#x27;s all unwinding now.Unfortunately, harder now for startups, mind that all those startup dreams from laid off FANG staff just got their rug pulled.

But why would the startups become illiquid?Do they get the investments from the banks or do they park the investment money in this bank?And why this bank, when there are many more risk averse institutions out there?

They &#x27;understand&#x27; startups. That is, they were willing to work with founders of new ventures, didn&#x27;t require insane proof of provenance of funds (because suddenly millions of dollars would appear overnight), and would support founders with mortgages, for example, that were running companies that weren&#x27;t yet necessarily profitable but were well-funded nevertheless.

They were proactive in incubators and allowed new companies to open accounts and make large deposits right away, when many mainstream banks wouldn’t or were too slow. I’m guessing plenty of startups stuck with them through inertia at least.

I can&#x27;t say specifically for tech startups, but a lot of times lenders will require you to use their banking services as a funding requirement.

Try to walk to BofA as an entity that didn&#x27;t exist yesterday and see how that goes.

High interest rate and naive customers who think they’re the smartest guys in the room.

&gt; Hundreds of startups will become illiquid as a result of SVB&#x27;s collapse,I know SVB was like a &quot;high tech bank&quot; that partnered with things like Stripe Atlas, but is there any reason that startups were using it for their regular operating funds? Other than the name, was there something that actually made this bank particularly suitable for them?

Yep... I bet this is about to pull forward a lot of startup death. Gun now to VC heads to save things. Forcing decisions they were hoping they wouldn&#x27;t have to make for at least another 6-12 months.

LMAO. Can&#x27;t even believe how many people were confidently asserting that nothing was wrong yesterday. If you had more than $250k in SVB yesterday you probably just took a huge haircut.Hundreds of startups will become illiquid as a result of SVB&#x27;s collapse, and there will be major layoffs here in the next 90 days as founders realize that they lost their funds and cannot raise in the current VC environment.

The knowledge that this would happen is why it happened in the first place.  SVB execs won&#x27;t take a pay cut.

The &quot;bad bank&quot; (SVB) will be liquidated and the proceeds distributed to the creditors.  How much that will be for depositors won&#x27;t be clear until that process occurs.

Probably just a haircut. How much nobody knows yet, but according to the FDIC release, 3 months ago they actually had $209B of assets, so it&#x27;s not a FTX-like &#x27;oops we accidentally your money&#x27; scenario.

250k on march 13th. The rest of the account will be released as the FDIC sells the banks assets, which will probably take months.

I&#x27;m copy&#x2F;pasting a commend I made elsewhere, but I&#x27;m not sure this is the case.&gt; I worked at a startup that took in over $100m in investment, and I was curious so I asked the cofounder how they protected that. According to him the money was divided up into chunks smaller than $249k, pushed off to a custom entity made just for the purpose, and then invested in bonds or CDs on a rotating basis.Basically if you have a ton of money having it sit in a bank account is one of the worst things you could do with it, so most people who bring in a lot mostly just keep operational expenses in their bank account while leaving the rest of the money in other financial instruments.

$250k is guaranteed by FDIC insurance.The rest is limbo until the bank is liquidated and the remaining money is distributed.

So any startup which had more than $250k in SVB only has $250k left now I&#x27;m assuming? Hopefully this doesn&#x27;t have a bad domino effect.

Heads up founders who banked with SVB - Customers with accounts in excess of $250,000 should contact the FDIC toll-free at 1-866-799-0959

Isn&#x27;t that a death sentence for a startup? Even if you get your money back years later, you&#x27;re company is already dead because it can&#x27;t make payroll. At that point, the money will just go back to the VCs?

they turn into creditors of the bank to try to get the money back from asset sales. That could take years though it isn&#x27;t quick

What happens to the deposits above $250k in this case?Ouch for startups that didn&#x27;t pull.

The FDIC calls them failed banks by definition. If they step in, you failed. They have a failed bank list and Sivb is going on it.

That&#x27;s pretty normal for confidence based stuff like this. There isn&#x27;t really a point in regulators&#x2F;insurers releasing a &quot;well we&#x27;re about half confident&quot; message. So it flips from full confidence to zero confidence. Bit jarring but the sharp transition is not unexpected.

This is how quickly a bank run can happen. They announced they were seeking funding, people started withdrawing all their money, and the investors all pulled out, leaving SVB high and dry. Now it&#x27;s dead.

It is fun (in a morbid kind of way) just seeing how quickly the confidence on these things turn.&quot;Company is 200 years old and we will go for another 200 years more!&quot;2 Days later&quot;Whoops, all the moneys gone. Bye!&quot;

&gt; Silicon Valley Bank is the first FDIC-insured institution to fail this year.Wow FDIC is fully calling it a failed bank. Just yesterday they were releasing statements saying they’re in a good position. Uncle Sam just fully opened Pandora’s box and made the judgement public!

Mercury isn&#x27;t a bank, it uses Evolve Bank &amp; Trust and Choice Financial Group.

Well that escalated quickly. Glad I am banking w&#x2F; Mercury and hope they are not impacted by this.

That&#x27;s some terrible risk management. I can&#x27;t believe they thought Fed&#x27; action during the covid crisis wouldn&#x27;t cause inflation and prompt them to increase interest rates.

I&#x27;m a bit confused. (Haven&#x27;t followed in detail) Did they not mark to market the bonds they bought and ended up insolvent in reality but not in their books? Shouldn&#x27;t the regulators have pulled the trigger earlier, then? Or is this just a liquidity issue and the bank is solvent, but the assets need to be sold?

So they did exactly the same thing that FTX did - gambled with clients&#x27; money and lost.

Interesting, thanks. What with the bad bet being some fairly boring bonds... that should mean their investment didn&#x27;t, say, lose 90% of its value or something. Just that the 10% (or whatever it was) it dropped was enough to put them over the edge. But if they sell off those bonds that&#x27;s still a fair amount of money that can be recovered... right?

Its worth pointing out that bonds are just debt instruments and that their recoverable value responds to changes in the economic environment in pretty much the same way as direct loans with similar term would.

I think an important backdrop here is the initial catalyst for this (to my understanding) was a decline in VC funding and elevated cash burn in their clients, leading to a net outflow of deposits, which is ultimately what necessitated selling securities in the first place.When the economy is generally healthy and your clients are diversified, deposits remain fairly stable. If this had happened, SVB likely would not have needed to sell the low-yield mortgage backed securities to cover liquidity. SVB is very exposed to the venture community and very impacted by the changing climate.

During the last couple years, SVB got a ton of deposits, and they didn&#x27;t have matching loan demand. So they invested the money in bonds. Unfortunately they make a bet that interest rates would stay low, and bought longer duration (~10 year) bonds.Interest rates have gone up, so the bonds they bought have lost value. They tried this week to fix that by selling part of the portfolio and raising capital, but did it in a ham-handed way and triggered a bank run.

They made some bad-in-hindsight bets on low-interest, medium-duration debt, rates went up 4%+, and also startups have less cash in this environment, so they were obligated to realize losses on the debt to pay withdrawals.  The end result being they were undercapitalized or at least not well-capitalized.  They attempted to raise funds by selling equity but this incited a run on the bank.

What&#x27;s the best brief summary of what has happened so far?

Anyone know what the fire drill is on this?  I imagine SV CFOs on the phone with Goldman Sachs trying to get a 5 million dollar credit line by COB today.  Or shutting down operations.

That’s a whole lot of startups
not making payroll or their SaaS payments

I could understand like, getting the funds deposited to SVB, then managing your corporate funds in a larger more regulated bank

common wisdom held that it made it easier for investors to get you money -- especially from the usual sand hill road folks..

Why did startups use SVB over larger commercial banks? Every place I&#x27;ve worked has used them for some reason. I don&#x27;t get it.

FDIC Takes over Silicon Valley Bank