/biz/ - Business & Finance

some spergy give me the run down
why did it bust?

>>54040528
>be dumb fuck venture capitalist in commiefornia
>easy money comes in
>dump it all in a bank with no protections cause "diversity" and "female leadership"

>be a rich fag that actually earned their money
>spread your funds across 20 banks
>easily get $5,000,000 in FDIC protection
>put the rest into short term bond etfs
>invest the rest
This is natural selection at work

>>54040553
Democrats.

>>54040553
they focused on diversity hiring
not even shitting you it was like 69% diversity and women

turns out non merit based hires are RETARDED and shouldn't manage billions of dollars. They put a lot of their deposits on 10 year bonds before the rate hikes out of greed. The price of those bonds fucking died with the hikes and because it was 10 years, instead of say a year or 3 months or 6 months, they couldn't afford to pay when people wanted their money out

>>54040553
Honestly? King TechnoQueer Peter Theil didn't like their bond portfolio, thought it was underperforming. Tweeted it, bank run. Funniest shit I've ever seen, Californians are batshit insane.

>>54040553

Banks can theoretically issue unlimited loans. Only when you try to transfer the loan from the bank that gave you the loan to another bank, that the loan issuing bank borrow central bank reserves from other banks, to do the transfer inside the central bank ledger.

In a bank like SVB, since startups pay each other, the liabilities of SVB never leaves their ledger, so they can issue even more loans than can a normal bank which needs central bank reserves.

When the bond portfolio of SVB used to generate interest for deposits became cheaper, more people tried to exit SVB, but SVB did not have enough central bank reserves to honor bank transfers. So it had to halt the transfers, or limit it, which created more panicked attempts to transfer money out of the bank.

SVB is just the beginning.

>>54040553
leveraged bondage. basically you buy a lot of bonds for 0.99 (if they're 1-year, 1% bonds). The lower price is the coupon price. The coupon price drops when interest rates go up. Therefore if you had 1% 5 year bonds (for 0.95), and then interest rates went 1->5% in a year, your bond is suddenly worth a lot less if not zero because... the price of a 5 year bond at 5% interest rates should be 0.75, not 0.95, so you basically lost 0.20 per bond because your dumb ass got locked into low rate bonds and then couldn't unload them when rates started to rise. Why anyone would use leverage on <2% bonds is beyond my comprehension. You're welcome lurkers and retards. t- regularly accused of irl autism

OH NO NO NO

>>54040553
Bad luck and nothing more

>>54040553
If understand things correctly, things weren't that bad until people panicked and bank run ensured. I believe they only had a 2b hold ($220b in assets). SVB were getting ready to sell some to cover the hole and word got out there were in bad condition which lowered the price of the stock and scared investors who were willing to save. Basically panicky retards caused this.

>>54040528
It’s the digital era, why don’t we set up a system where anyone can be their own online bank?

>>54040801
Credit unions exist anon

>>54040528
This is a retarded take

The 93% have more than 250k deposits, doesn't mean they get nothing but max. 250k, so the big players are screwed, the unknown number of people that barely have more than 250k in are less screwed

>>54040857
And if your employer is a big player then you are screwed.

>promoted to head of institutional risk management

>>54040757
You're sort of right. A lot of customers were withdrawing money (because they were tech startups and things aren't so hot for them at the moment) so SVB were forced to sell Treasuries at a loss instead of being able to wait for maturation because the bonds were at about 1.6% when you can get much higher interest rates these days. This led to a realised loss of about 2 billion so they asked for investor funding to cover the hole but this just alerted VCs to do a bank run and e-mail all of the companies they invest in who also bank at SVB to do a bank run.

Basically SVB were retards and also forced by regulation to take money from highly volatile, risky startups and lock up that money in 5-year bonds and hope that nothing bad happens in that 5-year period.