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The sentiment on Twitter seems to be “tough. You, Etsy seller, took a risk by selling on a platform that used a bank that made a bad investment. The tax payer s

The sentiment on Twitter seems to be “tough. You, Etsy seller, took a risk by selling on a platform that used a bank that made a bad investment. The tax payer shouldn’t bail out a bunch of rich pottery artists.” These sorts of effects (Etsy sellers not getting paid) are going to show up all through the ecosystem if 25% of venture backed companies can’t make payroll next week. SVB equity holders should go to zero. But it’s in our collective best interest to make sure that depositors have timely access to some meaningful portion of their deposits.

UncleOxidant 4y ago
> if 25% of venture backed companies can’t make payroll next week. That percentage seems really high. Is it likely that 25% of all venture backed companies had all of their money in SVB? Of the ones that did, many of the smaller ones could still meet payroll next week and possibly for a few weeks based on $250K that they'd still have access to. We found out that Roku, for example, had a large amount of money in SVB, but it was only about 25% of their cash meaning they had cash in other banks as well that are still liquid. Will Roku even lose all of that 25%? Probably not. They won't be able to access it for a while, but in the end they'll probably end up getting at least some of that back.
- deleted 4y ago
  [deleted]
- Beaver117 4y ago
  >Will Roku even lose all of that 25%? Probably not. They won't be able to access it for a while, but in the end they'll probably end up getting at least some of that back. How will they get it back? The bank is gone. FDIC will only give them $250k right?
  - hoofhearted 4y ago
    No. FDIC will initially write checks to everyone with an account for up to $250,000.. Once the dust has settled, they will return whatever they recover back to the account holders accordingly.
  - loeg 4y ago
    The bank had assets worth something like 90-100% of deposits. Deposits beyond the 250k insurance limit will get paid back at 90-100 cents on the dollar (hopefully 100) based on what the FDIC can sell the bank or its assets for. Absolute worst case, uninsured depositors take a single digit percent haircut. They don't lose 100% beyond $250k, like you're suggesting.
    - bombcar 4y ago
      Iirc Indymac was 50% recovery above the $250k line.
      - loeg 4y ago
        Why would that be relevant here? The worst case depends on the failed bank's assets vs deposits. SVB's assets are worth significantly more than 50% of deposits above $250k, so depositors will get a bigger percent of deposits back.
        thephyber 4y ago
        I wouldn’t be so quick to write off the mention of other fire sales. SVB’s assets may look good on paper, but they couldn’t sell those assets in the past few months or weeks, which is the prelude to Thurs/Fri. I think the more important questions are: (a) are the assets actually there and fairly valued? (b) can anyone actually sell the assets quickly for near their current states value in the open market? I think people underestimate how much prices swing when the assets are that large, there are few possible buyers, and everyone in every investment company is re-running their models this weekend with the assumption that SVB’s woes might also be independently happening in other larger banks.
        loeg 4y ago
        They couldn't sell them without becoming insolvent, because selling them would transition them from Hold-to-Maturity to Mark-to-Market. I don't think there's any difficulty selling 10-year MBS notes at market prices (at some discount to their HTM accounted value).
  - thephyber 4y ago
    > How will they get it back? The bank is gone. FDIC will only give them $250k right? The FDIC opened up a new bank with a different name. On Monday, the insured $250k of deposits will be available and some modest amount above that will also be available. The FDIC announced a dividend will be paid next week to uninsured deposits. The remaining balances depend on how much of the assets are needed to be liquid short term versus long term.[1] The bank has a massive amount of assets and deposits. They just aren’t liquid and the run on the bank snowballed the illiquidity. They need something like a massive insurance company to offer them an annuity backed by their own treasuries — something to unlock short term liquidity of their assets. [1] https://www.axios.com/2023/03/10/silicon-valley-bank-government-control-fdic https://www.axios.com/2023/03/10/silicon-valley-bank-governm...
  - ceejayoz 4y ago
    $250k is the absolute minimum cap, if the bank managed to set literally every dollar they were supposed to be holding on fire in the parking lot. SVB was only a little (relatively speaking) underwater, so people over $250k are likely to take only a little haircut. Bad for the bank, not particularly disastrous for the individual accounts, even the big ones.
bpicolo 4y ago
Etsy's statement makes it seem like this is just a payment rails issue, not a funds issue
- deleted 4y ago
  [deleted]
- tedivm 4y ago
  Yeah same thing happened with Rippling- they had to push through some changes so they could handle payroll through another company, but ultimately got it all out. I remember Gusto having an issue a year or two ago, but since they already had code in place to use a backup they ended up making all payments on time.
  - dannyw 4y ago
    Rippling used their corporate reserves to do so.
- bigiain 4y ago
  That might be true. But they never explicitly said that, so I’m unconvinced that they’re not just buying time, and hoping that on Monday FDIC will release a pile of now-locked-up-funds that are an existential risk to Etsy.
deleted 4y ago
[deleted]
mediasavvy 4y ago
Did I miss Etsy declaring bankruptcy?
swatcoder 4y ago
You’re mischaracterizing what’s happening at Etsy and at most responsibly managed businesses that worked with SVB. There’s an inevitable operational issue when a bank fails and this causes delays in normal process as funds, accounts, data, and workflows need to be shuffled around. These organizations will get some, but probably not all, of their money back out and were prepared to weather this sort of event regardless. That’s a different issue than companies thinking they didn’t need to prepare for bank troubles. Some of those were naively managed by people who didn’t understand the scale of wealth they were tasked to manage and its risks, nor understood that they needed to hire someone who could manage it for them safely. And some of those were managed or advised by people intentionally betting that the government would bail them out of the tail risk that they did know about. We need to be extremely wary of encouraging that latter group, even if it comes at the expense of burning a few inexperienced startup founders.
- halayli 4y ago
  Your tone insinuates that you're a genius and everyone else is dumb. Hindsight is 20/20.
  - chottocharaii 4y ago
    'Hindsight is 20/20' is an odd way to respond to a regular financial occurrence since the ledger was invented. This stuff is in no sense outside the realm of a responsible CFO's imagination
    - halayli 4y ago
      You're simplifying the issue down to a CFO looking at a ledger?
- qqqwerty 4y ago
  The days of keeping you money under your mattress are long gone. The vast majority of modern day economic activity takes place electronically, and as such requires partnering with a number of different financial organizations to make that happen. The government created this mess by lowering the regulations on community banks[1]. They should be the ones to clean it up. There are literally zero reasons why we can't have fully insured deposits. Even better, there are literally zero reasons why we can't have zero risk deposit accounts (hello fed), but they choose not to give it to us so that the bankers can make a profit on our money. Small and medium size businesses are the life blood of our economy. And modern economies work on trust and specialization. You shouldn't need an advanced degree in financial engineering just to run a small cat sweater shop on etsy. [1] https://www.cnbc.com/2018/05/24/trump-signs-bank-bill-rolling-back-some-dodd-frank-regulations.html https://www.cnbc.com/2018/05/24/trump-signs-bank-bill-rollin...
armchairhacker 4y ago
Look at this post on Reddit: "NO BAILOUTS for Silicon Valley Bank - which lent exclusively to the ultra rich" (https://www.reddit.com/r/WorkReform/comments/11om9o5/no_bailouts_for_silicon_valley_bank_which_lent/ https://www.reddit.com/r/WorkReform/comments/11om9o5/no_bail...) Fortunately, some of the top commenters are pointing out that some of these "ultra-rich" are actually small business owners who don't live lavishly but whose income depends on having >$250k in the bank. And also that flat-out "no bailout" affects employees who aren't getting payed and Etsy sellers. Unfortunately, many others are openly saying things like "Maybe they should cut back on the avocado toast?" which is very ironic if you (perhaps mistakenly) consider "they" to be the lower guys. OP actually makes an excellent reply in the comments: > How about we setup a $150 billion bailout fund through Congress? > The prioritization should be: > - Priority 1: workers > - Priority 2: pensions > - Priority 3: small busineses > Can we agree the way we bailed out the banks in 2008 was wrong? So many lost their jobs & their retirements while the banks lived to see another day. > I think this plan helps correct the mistakes of 2008. The only way a bailout of any company is acceptable is if the bailout of workers is of equal or greater value. But...you titled the post "NO BAILOUTS", not "Bailout WORKERS AND SMALL BUSINESSES ONLY". This is like "defund the police" and "dissolve ICE": the underlying motive is genuinely great, but the messaging is terrible.
- tedunangst 4y ago
  Why in the world would anyone think SVB needs $150 billion?
- gruez 4y ago
  >But...you titled the post "NO BAILOUTS", not "Bailout WORKERS AND SMALL BUSINESSES ONLY". This is like "defund the police" and "dissolve ICE": the underlying motive is genuinely great, but the messaging is terrible. I'm convinced that the reason this stuff happens time and time again is that within activist circles, everyone is trying to outdo each other in terms of ideological fervor, leading to the most extremist policies being put out.
  - krapp 4y ago
    >I'm convinced that the reason this stuff happens time and time again is that within activist circles, everyone is trying to outdo each other in terms of ideological fervor, leading to the most extremist policies being put out. T he people who originally professed this messaging legitimately believed these systems (ICE, the police) to be irreparably corrupt and that mere reform was impossible, and their message was coming from a place of rage, alienation and frustration. That message inevitably got co-opted by the mainstream and watered down into something palatable, and thus ineffectual and easily ignored, but its adherents were (and remain) sincere. Not everyone is LARPing or trying to out virtue-signal each other.
makestuff 4y ago
Another thing people aren’t realizing is all of these SAAS companies just sell their tools to each other. No one will be paying the bills (that includes their cloud bills too). IMO it is going to put a huge damper in any tech recovery this year.
- deleted 4y ago
  [deleted]
shkkmo 4y ago
There is no reason companies can't make payroll next week besides incompetence. The insured balanced will be available Monday and additional dividends on uninsured balances will land by the end of the week. There is not indication in this article that sellers will not get paid, but those payments be delayed by a week or two as things get sorted. It SVB causes some companies to go bankrupt, they were in a precarious financial position already and did a bad job of managing their risks. While I would support some legislative effort to support customers of tech companies that ate hurt by this collapse, bailing those tech companies out is not the way to do that.
- mikekij 4y ago
  Incorrect. I have friends with $500k payroll deposits due at noon Monday. Fdic has made no guarantees that they’ll have access to a sufficiently large amount to cover.
  - shkkmo 4y ago
    And they can't get a bridge loan from Brex or some other financial institution? They also can't delay part of those payroll deposits a couple of days until later in the week when the uninsured partial dividends get paid?
chernevik 4y ago
> make sure that depositors have timely access to some meaningful portion of their deposits. The FDIC has said they will do exactly this, as expected by anyone familiar with prior bank failures. This will ultimately a hassle to manage and perhaps a very modest loss on deposited funds. Some companies will find their runway to the next equity event shortened by 5% or 10%.

UncleOxidant 4y ago

> if 25% of venture backed companies can’t make payroll next week. That percentage seems really high. Is it likely that 25% of all venture backed companies had all of their money in SVB? Of the ones that did, many of the smaller ones could still meet payroll next week and possibly for a few weeks based on $250K that they'd still have access to. We found out that Roku, for example, had a large amount of money in SVB, but it was only about 25% of their cash meaning they had cash in other banks as well that are still liquid. Will Roku even lose all of that 25%? Probably not. They won't be able to access it for a while, but in the end they'll probably end up getting at least some of that back.

deleted 4y ago
[deleted]
Beaver117 4y ago
>Will Roku even lose all of that 25%? Probably not. They won't be able to access it for a while, but in the end they'll probably end up getting at least some of that back. How will they get it back? The bank is gone. FDIC will only give them $250k right?
- hoofhearted 4y ago
  No. FDIC will initially write checks to everyone with an account for up to $250,000.. Once the dust has settled, they will return whatever they recover back to the account holders accordingly.
- loeg 4y ago
  The bank had assets worth something like 90-100% of deposits. Deposits beyond the 250k insurance limit will get paid back at 90-100 cents on the dollar (hopefully 100) based on what the FDIC can sell the bank or its assets for. Absolute worst case, uninsured depositors take a single digit percent haircut. They don't lose 100% beyond $250k, like you're suggesting.
  - bombcar 4y ago
    Iirc Indymac was 50% recovery above the $250k line.
    - loeg 4y ago
      Why would that be relevant here? The worst case depends on the failed bank's assets vs deposits. SVB's assets are worth significantly more than 50% of deposits above $250k, so depositors will get a bigger percent of deposits back.
      - thephyber 4y ago
        I wouldn’t be so quick to write off the mention of other fire sales. SVB’s assets may look good on paper, but they couldn’t sell those assets in the past few months or weeks, which is the prelude to Thurs/Fri. I think the more important questions are: (a) are the assets actually there and fairly valued? (b) can anyone actually sell the assets quickly for near their current states value in the open market? I think people underestimate how much prices swing when the assets are that large, there are few possible buyers, and everyone in every investment company is re-running their models this weekend with the assumption that SVB’s woes might also be independently happening in other larger banks.
        loeg 4y ago
        They couldn't sell them without becoming insolvent, because selling them would transition them from Hold-to-Maturity to Mark-to-Market. I don't think there's any difficulty selling 10-year MBS notes at market prices (at some discount to their HTM accounted value).
- thephyber 4y ago
  > How will they get it back? The bank is gone. FDIC will only give them $250k right? The FDIC opened up a new bank with a different name. On Monday, the insured $250k of deposits will be available and some modest amount above that will also be available. The FDIC announced a dividend will be paid next week to uninsured deposits. The remaining balances depend on how much of the assets are needed to be liquid short term versus long term.[1] The bank has a massive amount of assets and deposits. They just aren’t liquid and the run on the bank snowballed the illiquidity. They need something like a massive insurance company to offer them an annuity backed by their own treasuries — something to unlock short term liquidity of their assets. [1] https://www.axios.com/2023/03/10/silicon-valley-bank-government-control-fdic https://www.axios.com/2023/03/10/silicon-valley-bank-governm...
- ceejayoz 4y ago
  $250k is the absolute minimum cap, if the bank managed to set literally every dollar they were supposed to be holding on fire in the parking lot. SVB was only a little (relatively speaking) underwater, so people over $250k are likely to take only a little haircut. Bad for the bank, not particularly disastrous for the individual accounts, even the big ones.

bpicolo 4y ago

Etsy's statement makes it seem like this is just a payment rails issue, not a funds issue

deleted 4y ago
[deleted]
tedivm 4y ago
Yeah same thing happened with Rippling- they had to push through some changes so they could handle payroll through another company, but ultimately got it all out. I remember Gusto having an issue a year or two ago, but since they already had code in place to use a backup they ended up making all payments on time.
- dannyw 4y ago
  Rippling used their corporate reserves to do so.
bigiain 4y ago
That might be true. But they never explicitly said that, so I’m unconvinced that they’re not just buying time, and hoping that on Monday FDIC will release a pile of now-locked-up-funds that are an existential risk to Etsy.

deleted 4y ago

[deleted]

mediasavvy 4y ago

Did I miss Etsy declaring bankruptcy?

swatcoder 4y ago

You’re mischaracterizing what’s happening at Etsy and at most responsibly managed businesses that worked with SVB. There’s an inevitable operational issue when a bank fails and this causes delays in normal process as funds, accounts, data, and workflows need to be shuffled around. These organizations will get some, but probably not all, of their money back out and were prepared to weather this sort of event regardless. That’s a different issue than companies thinking they didn’t need to prepare for bank troubles. Some of those were naively managed by people who didn’t understand the scale of wealth they were tasked to manage and its risks, nor understood that they needed to hire someone who could manage it for them safely. And some of those were managed or advised by people intentionally betting that the government would bail them out of the tail risk that they did know about. We need to be extremely wary of encouraging that latter group, even if it comes at the expense of burning a few inexperienced startup founders.

halayli 4y ago
Your tone insinuates that you're a genius and everyone else is dumb. Hindsight is 20/20.
- chottocharaii 4y ago
  'Hindsight is 20/20' is an odd way to respond to a regular financial occurrence since the ledger was invented. This stuff is in no sense outside the realm of a responsible CFO's imagination
  - halayli 4y ago
    You're simplifying the issue down to a CFO looking at a ledger?
qqqwerty 4y ago
The days of keeping you money under your mattress are long gone. The vast majority of modern day economic activity takes place electronically, and as such requires partnering with a number of different financial organizations to make that happen. The government created this mess by lowering the regulations on community banks[1]. They should be the ones to clean it up. There are literally zero reasons why we can't have fully insured deposits. Even better, there are literally zero reasons why we can't have zero risk deposit accounts (hello fed), but they choose not to give it to us so that the bankers can make a profit on our money. Small and medium size businesses are the life blood of our economy. And modern economies work on trust and specialization. You shouldn't need an advanced degree in financial engineering just to run a small cat sweater shop on etsy. [1] https://www.cnbc.com/2018/05/24/trump-signs-bank-bill-rolling-back-some-dodd-frank-regulations.html https://www.cnbc.com/2018/05/24/trump-signs-bank-bill-rollin...

armchairhacker 4y ago

Look at this post on Reddit: "NO BAILOUTS for Silicon Valley Bank - which lent exclusively to the ultra rich" (https://www.reddit.com/r/WorkReform/comments/11om9o5/no_bailouts_for_silicon_valley_bank_which_lent/ https://www.reddit.com/r/WorkReform/comments/11om9o5/no_bail...) Fortunately, some of the top commenters are pointing out that some of these "ultra-rich" are actually small business owners who don't live lavishly but whose income depends on having >$250k in the bank. And also that flat-out "no bailout" affects employees who aren't getting payed and Etsy sellers. Unfortunately, many others are openly saying things like "Maybe they should cut back on the avocado toast?" which is very ironic if you (perhaps mistakenly) consider "they" to be the lower guys. OP actually makes an excellent reply in the comments: > How about we setup a $150 billion bailout fund through Congress? > The prioritization should be: > - Priority 1: workers > - Priority 2: pensions > - Priority 3: small busineses > Can we agree the way we bailed out the banks in 2008 was wrong? So many lost their jobs & their retirements while the banks lived to see another day. > I think this plan helps correct the mistakes of 2008. The only way a bailout of any company is acceptable is if the bailout of workers is of equal or greater value. But...you titled the post "NO BAILOUTS", not "Bailout WORKERS AND SMALL BUSINESSES ONLY". This is like "defund the police" and "dissolve ICE": the underlying motive is genuinely great, but the messaging is terrible.

tedunangst 4y ago
Why in the world would anyone think SVB needs $150 billion?
gruez 4y ago
>But...you titled the post "NO BAILOUTS", not "Bailout WORKERS AND SMALL BUSINESSES ONLY". This is like "defund the police" and "dissolve ICE": the underlying motive is genuinely great, but the messaging is terrible. I'm convinced that the reason this stuff happens time and time again is that within activist circles, everyone is trying to outdo each other in terms of ideological fervor, leading to the most extremist policies being put out.
- krapp 4y ago
  >I'm convinced that the reason this stuff happens time and time again is that within activist circles, everyone is trying to outdo each other in terms of ideological fervor, leading to the most extremist policies being put out. T he people who originally professed this messaging legitimately believed these systems (ICE, the police) to be irreparably corrupt and that mere reform was impossible, and their message was coming from a place of rage, alienation and frustration. That message inevitably got co-opted by the mainstream and watered down into something palatable, and thus ineffectual and easily ignored, but its adherents were (and remain) sincere. Not everyone is LARPing or trying to out virtue-signal each other.

makestuff 4y ago

Another thing people aren’t realizing is all of these SAAS companies just sell their tools to each other. No one will be paying the bills (that includes their cloud bills too). IMO it is going to put a huge damper in any tech recovery this year.

deleted 4y ago
[deleted]

shkkmo 4y ago

There is no reason companies can't make payroll next week besides incompetence. The insured balanced will be available Monday and additional dividends on uninsured balances will land by the end of the week. There is not indication in this article that sellers will not get paid, but those payments be delayed by a week or two as things get sorted. It SVB causes some companies to go bankrupt, they were in a precarious financial position already and did a bad job of managing their risks. While I would support some legislative effort to support customers of tech companies that ate hurt by this collapse, bailing those tech companies out is not the way to do that.

mikekij 4y ago
Incorrect. I have friends with $500k payroll deposits due at noon Monday. Fdic has made no guarantees that they’ll have access to a sufficiently large amount to cover.
- shkkmo 4y ago
  And they can't get a bridge loan from Brex or some other financial institution? They also can't delay part of those payroll deposits a couple of days until later in the week when the uninsured partial dividends get paid?

chernevik 4y ago

> make sure that depositors have timely access to some meaningful portion of their deposits. The FDIC has said they will do exactly this, as expected by anyone familiar with prior bank failures. This will ultimately a hassle to manage and perhaps a very modest loss on deposited funds. Some companies will find their runway to the next equity event shortened by 5% or 10%.