(03-22-2023 02:47 PM)Hambone10 Wrote: (03-22-2023 10:54 AM)tanqtonic Wrote: I actually at times worked closely with SVB. I think the DeSantis comments on DEI are great red meat, and short on factual issues.
Seemingly the sport de jour is to blame DEI and fags/commies/cross dressers for the spate of bank issues.
I saw someone highlight Credit Suisse's ex- ex- ex- CEO's cross dressing bent with reference to the failure of that institution. Without reference to Credit Suisse's actual dodgy medium term issues that ultimately destroyed their credibility (that is harboring and actively promoting tax evasion, implication in money laundering, loaning and losing multiple billion+ loans to failed hedgies, spying for foreign governments, etc etc etc.)
The move to paint everything that fails as the implication of DEI is becoming de rigueur these days apparently. I look on the blame of DEI with a somewhat jaundiced eye. They failed because their capital structure weakened, and people with uninsured deposits got edgy.
If you want to play the nothing but Treasuries game, it is an awful trap -- even more so when 95% of your depositors are in the uninsured deposits category. Uninsured depositors are an easily spooked group, mind you.
That is 98% of the problem of SVB, unless you approach it from a red meat standpoint.
The argument they are making is that many of their investments were tied to poor economic, but good social virtue activities. It's not about the ex ex ex ceo being a cross dresser, but about giving a loan to a drag show venue with poor economics becuase of the virtues that such a loan might signal.... perhaps to ATTRACT some of those wealthy, uninsured investors by being able to 'sell' them your virtue.
Poor economic loan and investment decisions could easily lead to a drop in capital that would cause those same depositors to get spooked.
I don't know if that it true or not, and opinions will vary and the 'facts' probably point to numerous inputs.... but I do know that it is consistent with what I DO know to be true; not only of SVB and their lending pro-forma, but of 25 years of being in that business.... helping banks make investment decisions... including ones 'popular' with their depositors and board members.
The issus for me is why uninsured depositors were bailed out. How the inability of someone who clearly has excess cash to get 100% of their money (over 250k) bank has some sort of implication for the banking system as a whole... ESPECIALLY when the primary source of repayment to the fund that is bailing them out is an assessment on every OTHER depositor. If this is the new normal, then the 250k limit is now infinite... and if its not, then why would I want to put my money ANYWHERE except at a large bank??
In the case of SVB I can give you a very explicit background into your last question.
SVB was notorious in not just giving mid size tech companies loans, but also in terms of those loans.
You had to do *all* your finance and transactional needs with them in the form of covenant. If that covenant was breached (i.e. a 2k account at another institution), your entire 20 million dollar line and loans were at risk of being called then and there.
Additionally, the consensus was that C-levels were expected to bank there as well. To not do so, would put consideration of being in the loan line at risk.
SV C-levels tend to have much larger bank and money market accounts than normal. At one startup I was at, I would guess the 3 person C-suite roster had between 20 - 40 million dollars liquid -- high for normal, but far from unheard of in SV. To a tee they banked at SVB, and tended to do very deep accounts. In fact, even at the tier below them, *I* was urged to bank there by them. Because the more upper and semi-upper level mgmt that banked there -- the smoother ride it would be.
Back to the corporate side -- I know of at least 10 mid-size tech firms that had multi-millions in the bank. SVB. Names you know.
Finally, at the 'startup level' (when you got your various rounds, that moolah had to go somewhere. Again -- same story.
When the bugout came, I know three people in particular learned that they were on the hook personally as board members for salaries -- that pierces the veil. At the end of the day, the decision for SVB was simple --
a) do the 250k limit, wipe out tranches of financing in the banks for the startups, wipe out millions that the mid-sizes had. At that point a normal BOD will simply do a cut and burn with the company. Slash everyone they could -- since all the monies of the companies above the 250k limit disappeared; or
b) allow the startups and mid sizes to keep their payrolls from being cut 90%.
Not saying it was wrong or right -- but that was the end line decision for the FDIC and Treasury with respect to SVB account holders.
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Texas university defends DEI, affirmative action as a ‘matter of national security’
