Also they had no liquidity management. Who allows a balance sheet structure that lets depositors present $4 billion in a single day? Any competent bank team terms out its liabilities so they don’t all come due at the same time.
Where was the SF FRB? Didn’t they have a team of examiners on-site all the time? Weren’t they looking at liquidity reports and contingency funding plans?
There will be zero appetite to bail out SVB. I don’t recall seeing a bail out for the people of East Palestine OH. VC investing and lending are inherently risky. They assumed that risk and compounded it by poor balance sheet management, most proper run banks would hedge that exposure. The only government support I could see happen is a buyer will likely want a back stop or a guarantee for souring loans from government. Similar thing happened through FDIC arranged mergers in 08, I don’t think it should be provided but without that guarantee I don’t see a buyer. Those discussions are being had in bank board rooms across America this weekend.
You know what's scary? I'm worried that some airlines are full on woke and now value diversity above all else. It's one thing to crash a bank, quite another to crash airplanes. If pilots are hired based upon being gay, brown and transgender, versus actual flight skills, track record, it's not going to end well.
I too look forward to the abandonment of the touchy feely crap. But it only seems to be ramping. Glad that I'm older and don't have to work in corporate ever again. "Diversity", makes me want to throw up, especially when most practitioners of it are racist. ESG is for morons. Good day and thanks for the post.
Speaking of Nevada, the Las Vegas airport and the adverse effects of DEI, Tucker has done a couple of segments on the application of DEI to the hiring of airline pilots, and has singled out Southwest Airlines. It seems pretty clear that pilots hired under the old school standards are feeding information for these reports. I typically transit through Harry Reid (ugh!) airport to fly from Reno to SoCal, relying on Southwest, but now I'm having second thoughts. Bank failures are bad enough, but they pale in comparison with plane crashes. Any ideas on how to factor this into your travel plans?
Great post from Cochrane. VCs and their portfolio companies put money in poorly run bank that sucks up to them. VCs realize bank is poorly run. VCs cause run. VCs demand bailout - Silicon Valley is the largest regional whine producer on Twitter this weekend. Maybe a bailout is the right answer. Maybe the VCs and the LPs should take a big hit too. Cronyism at its best. https://johnhcochrane.blogspot.com/2023/03/silicon-valley-bank-blinders.html
Lots of really good info here. One small point. When you say pay payroll and pay the irs. Agree, but the big issue is paying the employee payroll taxes withheld from their paychecks. That is what is known as the "trust fund portion". Personal liability, IRS will never ever, let me repeat that, the IRS will never ever settle on that. You pay, keep paying or upon your death, your estate will keep paying any trust fund amount, interest or penalties due. Its one of the very very few areas that they can go after any ERISA covered assets you have too. They can even garnish your SS payout. Never not pay trust fund amounts when due. Pay them above all else if you have any responsibility over this. If you are a signor on the bank account - make sure its paid.
I'll freely admit that I have very little idea what Silicon Valley Bank was doing. But when it comes to stuff that I'm mostly ignorant about, like cryptocurrency, I don't put my money into it. So I have no money in SVB, noting in crypto, and don't have to worry too much about it.
I understand that Biden is trying to destroy the country, although I don't understand why. I do have some investments in "precious" metals, small ingots of lead and copper with brass bases.
There was no hedging, but there was a swap on the books, but I don't know the terms (legs), nor the margin schedule, nor the PRIVATE counterparty of who of course now owns part of the problem.
I'm wondering if Uncle Larry's pressures via ISS got them that particular flavor of "Risk" officer. Seems to have helped.
I also found it interesting that they were CA chartered, yet CEO sat on SF Fed board until last night. Still a LOT of dust flying, so I'll wait til some more thumps hit the floor. (I don't THINK I'm going to get tapped on the shoulder, so we'll see....)
Any predictions about the sale of company stock by SVB upper management in the run up to the failure? Some of these schmucks are woke, but I bet when it comes to their own backsides. I hope someone who knows about the trading regs follows up.
And thanks for the summary. I know nothing about business and it made the whole situation a lot more understandable.
None of this makes any sense. How the regulators missed this is amazing. It seems so simple to hedge these positions a year ago, it’s ridiculous that they didn’t.
I would say that Uncle Warren is going to be asked to come in here. It would be ironic considering his disdain for all things crypto.
Also they had no liquidity management. Who allows a balance sheet structure that lets depositors present $4 billion in a single day? Any competent bank team terms out its liabilities so they don’t all come due at the same time.
Where was the SF FRB? Didn’t they have a team of examiners on-site all the time? Weren’t they looking at liquidity reports and contingency funding plans?
Incredible incompetence here on all sides.
There will be zero appetite to bail out SVB. I don’t recall seeing a bail out for the people of East Palestine OH. VC investing and lending are inherently risky. They assumed that risk and compounded it by poor balance sheet management, most proper run banks would hedge that exposure. The only government support I could see happen is a buyer will likely want a back stop or a guarantee for souring loans from government. Similar thing happened through FDIC arranged mergers in 08, I don’t think it should be provided but without that guarantee I don’t see a buyer. Those discussions are being had in bank board rooms across America this weekend.
You know what's scary? I'm worried that some airlines are full on woke and now value diversity above all else. It's one thing to crash a bank, quite another to crash airplanes. If pilots are hired based upon being gay, brown and transgender, versus actual flight skills, track record, it's not going to end well.
I too look forward to the abandonment of the touchy feely crap. But it only seems to be ramping. Glad that I'm older and don't have to work in corporate ever again. "Diversity", makes me want to throw up, especially when most practitioners of it are racist. ESG is for morons. Good day and thanks for the post.
Speaking of Nevada, the Las Vegas airport and the adverse effects of DEI, Tucker has done a couple of segments on the application of DEI to the hiring of airline pilots, and has singled out Southwest Airlines. It seems pretty clear that pilots hired under the old school standards are feeding information for these reports. I typically transit through Harry Reid (ugh!) airport to fly from Reno to SoCal, relying on Southwest, but now I'm having second thoughts. Bank failures are bad enough, but they pale in comparison with plane crashes. Any ideas on how to factor this into your travel plans?
Great post from Cochrane. VCs and their portfolio companies put money in poorly run bank that sucks up to them. VCs realize bank is poorly run. VCs cause run. VCs demand bailout - Silicon Valley is the largest regional whine producer on Twitter this weekend. Maybe a bailout is the right answer. Maybe the VCs and the LPs should take a big hit too. Cronyism at its best. https://johnhcochrane.blogspot.com/2023/03/silicon-valley-bank-blinders.html
Lots of really good info here. One small point. When you say pay payroll and pay the irs. Agree, but the big issue is paying the employee payroll taxes withheld from their paychecks. That is what is known as the "trust fund portion". Personal liability, IRS will never ever, let me repeat that, the IRS will never ever settle on that. You pay, keep paying or upon your death, your estate will keep paying any trust fund amount, interest or penalties due. Its one of the very very few areas that they can go after any ERISA covered assets you have too. They can even garnish your SS payout. Never not pay trust fund amounts when due. Pay them above all else if you have any responsibility over this. If you are a signor on the bank account - make sure its paid.
I heard Harry and Megan had their money there so at least some good can come from this debacle!
I'll freely admit that I have very little idea what Silicon Valley Bank was doing. But when it comes to stuff that I'm mostly ignorant about, like cryptocurrency, I don't put my money into it. So I have no money in SVB, noting in crypto, and don't have to worry too much about it.
I understand that Biden is trying to destroy the country, although I don't understand why. I do have some investments in "precious" metals, small ingots of lead and copper with brass bases.
I'm keeping my head down and hoping for the best.
There was no hedging, but there was a swap on the books, but I don't know the terms (legs), nor the margin schedule, nor the PRIVATE counterparty of who of course now owns part of the problem.
I'm wondering if Uncle Larry's pressures via ISS got them that particular flavor of "Risk" officer. Seems to have helped.
I also found it interesting that they were CA chartered, yet CEO sat on SF Fed board until last night. Still a LOT of dust flying, so I'll wait til some more thumps hit the floor. (I don't THINK I'm going to get tapped on the shoulder, so we'll see....)
🌟 🌟 🌟
Not to different than Orange County
Playing Russian roulette
Any predictions about the sale of company stock by SVB upper management in the run up to the failure? Some of these schmucks are woke, but I bet when it comes to their own backsides. I hope someone who knows about the trading regs follows up.
And thanks for the summary. I know nothing about business and it made the whole situation a lot more understandable.
You invented a new word! "Malfescence". But "Malfeasance" would make a better fit.
None of this makes any sense. How the regulators missed this is amazing. It seems so simple to hedge these positions a year ago, it’s ridiculous that they didn’t.
I would say that Uncle Warren is going to be asked to come in here. It would be ironic considering his disdain for all things crypto.