Mike Masnick ✅

So... the summary is that for all the fear some people had that taxpayers would "bail out billionaires," and the corresponding fear that companies had that "a ton of our money could evaporate and destroy the economy with massive downstream impact"... FDIC/Treasury stepped in and did the right thing: depositors made whole, no taxpayer funds, bank assessment to make up any difference, & SVB equity/unsecured debtholders (mostly) wiped out.

A very good result.

Mar 12, 2023 at 11:03pmWeb
Show threadMike Masnick ✅Mar 12, 2023
Also, this avoids the very scariest result in my mind: that Peter Thiel, who likely set off the bank run in the first place, would step in and buy up the remains at a discount, and then own SVB.
Show threadDr James J TeethMar 12, 2023

@mmasnick

Peter Thiel is a Bond villain. No one can tell me otherwise.

Show threadThomas H Jones IIMar 13, 2023
It's evocative of HHGTTG's "first Up against the wall when the revolution comes" line. :p
Show threadVissMar 12, 2023
@mmasnick thats a legit horrorshow
Show threadVissMar 12, 2023
@mmasnick though we get to find out how things will work in the morning (presuming our new bank actually lets us in. its been phonetag-via-email since friday)
Show threadMike Masnick ✅Mar 12, 2023
@Viss yup. fingers crossed for tomorrow morning...
Show threadVissMar 12, 2023
@mmasnick even if it takes a few days, we'll be ok. we're small and used to this flavor of asshattery.
Show threadMike Masnick ✅Mar 12, 2023
@Viss pretty much the same for us.
Show threadVissMar 12, 2023
@mmasnick heh, highfive :D
Show threadKaren StrickholmMar 12, 2023
@mmasnick Yes. He is icky
Show threadErtainMar 12, 2023
@mmasnick I keep reading that guy's name as "Peter Thief". How appropriate.
Show threadJRMar 12, 2023
@mmasnick I have seen several people implicate Theil, was he talking SVB down?
Show threadJRMar 13, 2023

@mmasnick Nevermind.

https://finance.yahoo.com/news/peter-thiels-founders-fund-got-114055626.html

Yahooist Teil der Yahoo Markenfamilie

Show threadNick 'The Viking'Mar 12, 2023

@mmasnick

tl;dr is?

If your funds were under the $250k limit you'll just need to wait a little while? Anything over that is gone and WTF were you thinking?

Show threadMike Masnick ✅Mar 12, 2023
@nlarson830 no. all depositors made whole, no matter how much.
Show threadNick 'The Viking'Mar 12, 2023

@mmasnick

Thanks, that makes it easier and more clear!
Collateral damage limited to culpable parties?

Show threadMike Masnick ✅Mar 13, 2023
@nlarson830 shareholders of svb wiped out. execs of svb fired.
Show threadNick 'The Viking'Mar 13, 2023

@mmasnick

Seems a decent outcome considering the situation. Likely nuances yet to be revealed and as always... butterfly flaps it's wings....

Show threadPaul ShreadMar 13, 2023
@mmasnick @nlarson830 would love to see them claw back recent stock sales and bonuses by execs
Show threadMatt QuirionMar 12, 2023
@mmasnick god, I hope some very online VC types took a bath though.
Show threadRobert A. HillMar 12, 2023
@mquirion @mmasnick Oh they will. That may be the funniest part of this gambit from the VCs.
Show threadMatt CoralloMar 12, 2023
@mquirion they weren’t ever going to, they didn’t have much exposure, that’s not how VC works.
Show threadMatt QuirionMar 12, 2023
@matt eh, I suspect a number of them were pretty heavy shareholders of SVB. Hence the pushing of portfolio companies to the bank and hence the calls from many for a recapitalization.
Show threadMatt CoralloMar 12, 2023
@mquirion maybe some but most weren’t, SVB offered genuinely better and easier to acquire financial services for startups than larger banks.
Show threadPaul ShreadMar 13, 2023
@matt @mquirion a lot of venture funded startups were at risk so the VCs win...of course
Show threadMatt CoralloMar 13, 2023
@pshread that’s true, but VCS weren’t short on cash, most have hardly deployed in six months, the startups that were most likely to succeed would have gotten fresh funding, more ownership for the VCs at lower cost!
Show threadIts Not A Hoax 🤞Mar 12, 2023
@mquirion OK, I give. What's a VC?🙄
Show threadSueMar 13, 2023
@PDFlynn @mquirion venture capitalist
Show threadPB Livin'Mar 13, 2023
@PDFlynn @mquirion the investors who fund startups
Show threadVolineMar 16, 2023

@PDFlynn @mquirion VC= venture capitalist

See for example Sequoia Capital

https://en.wikipedia.org/wiki/Sequoia_Capital

Sequoia Capital - Wikipedia

Show threadIts Not A Hoax 🤞Mar 17, 2023
@Voline OK, but are they like investors? I mean, investment firms or something?
Show threadBricinMar 12, 2023

@mmasnick except Peter Thiel and his cronies got out.

Maybe in the sequel.

Show threadThomas H Jones IIMar 12, 2023
@Bricin @mmasnick People with inside information usually do get out first. Question is, is there a paper trail to be uncovered. Sounded like Theil was already making misdirection noises, last week, around what prompted them to precipitate the run.
Show threadBricinMar 12, 2023

@ferricoxide @mmasnick No idea if "causing a bank run" is even a legal thing if the person involved is not directly tied to the bank somehow?

We already knew Thiel was a bad guy, but an illegally bad guy? Way outside of my knowledge.

Show threadThomas H Jones IIMar 12, 2023

Whether intending to cause a run or not, if inside-information is used to make a financial decision impacting the "public", legal sanction can follow.

/shrug

Show threadJohn MinnihanMar 12, 2023

@mmasnick i'm reading the press release + see no mention of how exactly the FDIC is resolving this.

have you seen that detailed anywhere?

Show threadMike Masnick ✅Mar 12, 2023
@jbminn which part is unclear?
Show threadJohn MinnihanMar 12, 2023

@mmasnick

where's the money coming from that is making depositors whole above the insured limit of $250k tomorrow?

Show threadMike Masnick ✅Mar 12, 2023
@jbminn combination of existing assets and FDIC funds in the *short* term, which will be replenished by all other FDIC banks if they have to dip into those FDIC funds. So, basically IF they need extra, other banks will make up the difference. But it shouldn't be that much and spread across many institutions.
Show threadJohn MinnihanMar 12, 2023

@mmasnick

so the securities that becker was trying to sell (did sell some?) are gonna be used to restore deposit values.

that makes sense, but what a clown show those VCs triggered with their letters.

Show threadMike Masnick ✅Mar 12, 2023
@jbminn they were unable to complete the sale. they still have those very secure investments on the asset side of the balance sheet.
Show threadMike Masnick ✅Mar 12, 2023
@jbminn (I should clarify -- they did sell some recently, but the investment round they pitched on wednesday did not come to pass)
Show threadJohn MinnihanMar 12, 2023
@mmasnick yeah, that's what i thought
Show threadBricinMar 12, 2023

@jbminn @mmasnick My naive recollection/understanding is they were selling $2.25b in assets Thursday and raising $500m via stock. Call that $3b.

Given $42b were attempted to be pulled out on Friday and leaving them with a cash balance of - $986m then an asset sale quickly and/or a small Fed loan would get them cash positive.

But won't they need to basically block the entire $40b going out (or $42 - $986m - $2bb I guess = $40b)?

(all numbers from memory, likely off quite a bit)

Show threadJohn MinnihanMar 12, 2023

@mmasnick thiel must be really proud.

i hope people treat him appropriately. (i know his wasn't the only letter)

Show threadA thought an image some wordsMar 12, 2023
@jbminn @mmasnick I hope Thiel finally gets everything from life that he deserves!
Show threadWilliam BellMar 13, 2023
@mmasnick @jbminn You mean $74bn of loans to VC backed companies and VC firms?
Show threadMatt CoralloMar 12, 2023
@mmasnick the money came from a fund that they charge other banks to cover losses, so “it’s not a tax” is kinda nonsense. The government charged a set of companies money and is using that pot.
Show threadWilliam BellMar 13, 2023

@mmasnick @jbminn Sorry but that means this was a bailout and public money is being used. Everyone else who deposits money in a bank, which is virtually all people, will bailout SVB corporate depositors. They should have let them take a haircut and worked it out with the SVB assets.

If you are going to backstop all deposits then you have to change the FDIC system because it is not set up like this currently.

Show threadSeth GoldsteinMar 12, 2023
@mmasnick Agree.
Show threadmacsimconMar 12, 2023
@mmasnick it’s not a very good result because when the banks have to pay for SVB, they’ll just raise rates on the rest of us to compensate.
Show threadMike Masnick ✅Mar 12, 2023
@macsimcon still remains to be seen what the difference is that will have to be covered. It might not be very much at all, based on what SVB held in assets.
Show threadMatt CoralloMar 12, 2023
@mmasnick it appears they mostly offered to buy long-dated bonds at face value (ie substantially overpaying). That’s most of the money and should cover all the banks in question here - they’re all underwater *today* with long-dated securities and notes that would put them at par.
Show threadThomas H Jones IIMar 12, 2023

@macsimcon @mmasnick Every participating institution already pays in/has the cost of potential rescues on their books.

In a competitive banking market, any given bank "raising rates on the rest of us" potentially provides advantage to their competitors.

Show threadmacsimconMar 15, 2023
@ferricoxide @mmasnick That’s naive. If one big bank raises fees, the other four will too. Want proof? Two payment processors were already not refunding processing fees on chargebacks, so Square finally did the same. It didn’t require collusion, Square just felt they were leaving money on the table as their competitors were already not refunding those fees. In a market with few competitors (thanks deregulation), that’s how it goes.
Show threadThomas H Jones IIMar 15, 2023

@macsimcon @mmasnick

See: "In a competitive banking market".

Show threadÉibhear 🔭Mar 12, 2023
@mmasnick A considered response alright.
Show threadRoss GradyMar 12, 2023
@mmasnick I feel like "bank assessment to make up any difference" is going to come out of the pockets of US banking customers, many of whom are taxpayers, in the form of fees, higher interest rates on loans, and lower interest paid on deposits, so . . . ¯\_(ツ)_/¯
Show threadMike Masnick ✅Mar 12, 2023
@rossgrady if they don't have to sell in an emergency (which they don't any more!), the long term assets are stable and worth plenty. If there's any difference it will be quite small, especially when spread among all the FDIC insured banks
Show threadSteve HolmesMar 13, 2023
@mmasnick @rossgrady it seems to me that if we are now insuring deposits without a 250k cap the cost of the insurance fees should be higher for very large deposits.