SPECIAL EPISODE: Silicon Valley Bank Goes Bust

[@danlanch]

I died at 'halloumi to my falafel' 😂 Ed is one of the best things that's happened to ProfG... Love this partnership

[@mbg9650]

Scott is at his best when there is turmoil.

[@Kav1an]

Was waiting for this episode! I cannot stress enough how critical SVB was to the tech industry. In the 2010’s and 2020-2022, if you wanted to get funded, you almost definitely needed an SVB account. SVB was perceived as the “safe” bank for tech, and founders proudly displayed their bank in their prospectus. Everyone who was anyone had an account there, or knew someone on the board. They were also almost a status symbol in a way, equivalent to Amex.

[@RH-lg9uc]

BLockFi announced the has $227 million there. The issue I see is that SVB may be saved but there are like hundreds of banks, businesses, and investors that will be crushed by this

[@AB-qt4dj]

They were somebody. They less of somebody now. Pride plays a role in their demise.

[@darbyheavey406]

Safe…you mean delusional. Many of the tech firms are non viable firms. Tesla only survived because of massive government support.

[@slovokia]

Treasury notes are maturities from 2 to 10 years. Treasury bills are maturities from 4 weeks to 52 weeks. Treasury bonds are maturities 20 years to 30 years. SVB invested in Treasury notes and mortgage backed securities.

[@MariodeFelipe]

Thanks Professor, This happened in Europe, see the history of Banco Santander takeover of Banco Popular on a weekend. This was the first movement under a new legislation that came as a consequence of the 2008 crisis. Banco Popular had the 50% of Spains SME, in the end, depositors didn't loose a single dollar. Shareholders lost 100%, the bank was sold for 1 dollar.

[@markcampanelli]

So the solution for businesses not feeling safe outside of the 4 or 5 too-big-too-fail banks is to have one of those big banks buy up SVB in a fire sale with risk hedged through government guarantees. Late-stage crony capitalism performing at its best. Also, state your conflicts of interest upfront.

[@BenC.handle]

The reporting shows stock sales and bonuses to bankers. If you make a followup video, you should discuss that.

[@ollieandotis]

The bonuses is a bad look due to the timing of this collapse but I think it was a part of an annual performance review for 2022 and those are paid out on around this time at many similar organizations. So I think the bonuses are more like wages for work already done, which I think is fair. Not sure about the stock sales. Could just be normally scheduled and just looks bad because of timing or could be actually bad.

[@Captdeets]

Senior execs of public companies typically sell through what is called a 10b-5 plan which sets up in advance a sale of x shares if the stock is at x price or above. Focusing on “insider sales” is a risky way to assess what is going on inside a company. Execs are paper rich and want to take chips off the table and usually are massively overweighted with their companies stock in their portfolios/wealth so it is a wise diversification strategy to exercise options and sell them.

[@txsphere]

When I heard this in the news the first my first thought was "I wonder what the prof will have to say about this?" Glad Ed asks good questions.

[@gandhi9936]

Forgot to mention the number of insider shareholders who sold large chunks of their shares in the weeks leading up to the bankruptcy!

[@jeffhreid]

Exactly, glossed right over that for sure

[@jtrealfunny]

If all the depositors over 250,000K lost 20% is that really so catastrophic, and couldn't better regulation ensure better balance sheet management for banks in this class, regulate them like the top 4. SVB was a risk management failure, no? Totally agree that a private market solution would be ideal and seems reasonable given everything we know. Sort of like FTX but when you look at the balance sheet there are real assets there. Great content and thanks for creating and sharing.

[@ehlava]

Thanks! I have a request for Monday that you discuss the elimination of Glass-Steagall, and if it was still in place would this (and Bear Stearns) have happened, and if it should be brought back.

[@darrellstyner0001]

Good stuff, thanks! I think Scott dodged Ed's question a bit about whether or not SVB should have been more tightly regulated. He said assets should be marked to market, but what about other parts of the stress tests? If it's a good idea for the biggest banks, why not for the 16th largest bank in the country? Why this arbitrary cutoff of 250 billion?

[@blessings2you435]

Agree! Thank you, Ed. It was a pleasure to hear YOUR voice a bit.

[@philippebyrnes1213]

Scott is proof why audio engineers need compressors. Maybe Scott could find a compressor for himself as well. The pharmaceutical industry is pretty creative.

[@blessings2you435]

@Philippe Byrnes... No kidding!! It got waaay too long winded.

[@jeffhreid]

The it’s different this time, no systematic risk, nothing to see here whistling past the graveyard is mind numbing. People will NEVER LEARN!!

[@jasonjstdr]

A bank run is impossible for any bank to withstand. Banks don’t keep a depositor’s money in the bank. Banks lend money to borrowers. If every customer demands their money, then the bank will fail. According to Prof G, VCs caused run on SVB.

[@rocketman1058]

In eastern Europe we say: the profits are privatized and the loss is nationalized

[@adamday2067]

Love your videos professor, just superb !

[@VirmanaMarketing]

Socialism for us, rugged capitalism for you… Why 3-year T-Bills and not 6-month T-Bills? Poor risk management is a bitch. Also, why didn’t account holders have insurance to protect them over FDIC limits? Also, why not setup overnight sweeps to protect their cash? This is all very basic CFO procedures. The fact they hire junior finance employees and call them CFOs makes me want to change my job to become a fractional CFO… run or no run if you are crying wolf your account isn’t protected, you deserve to be on the bread line.

[@AB-qt4dj]

I’m on the board of a $25M credit union and I even understand this concept. It’s mind boggling that SVB got to this point.

[@GregCurtin45]

Thank you Scott and Ed for the clarification (and working on the weekend to help us better understand)

[@benrj]

"That sounds predatory I don't think...," I wager that is exactly what will happen. The vultures are circling, and many of them are the VCs that caused the crash to begin with.

[@kapdolkim1914]

Any CEO who had a large portion of their cash at one financial institution should be fired. There are idiots at the top.

[@oppenheim2]

The regulator, FDIC, can either sell the bank or assets to another bank, banks, private capital, etc. Remember, SVB also has property, customers, employees, etc.

[@NolanAntonucci]

If anyone reading this wants to understand Sacks' take, as opposed to contrasting out of context tweets, just listen to the All-In Podcast from yesterday. I appreciate Scott's opinion and David Sacks' on this matter and news at-large.

[@johnvonleibniz]

This is my understanding of David Sacks' take: (1) SVB equity holders should not be bailed out. (2) Depoiters should be made whole in order to prevent this contagion from entering poorly capitalized (or even well-capitalized) regional banks. Is that a fair assessment?

[@MFunkibut]

"Last helicopter off the embassy in Hanoi"!?!?!? Prof G, me and two other really old guys even got the reference :)

[@AB-qt4dj]

I’m 35 and I understood the reference.

[@markbrzezinski8889]

SVB is a good specialised business. The other small banks are not. No one will back them. They have the same problem with long bonds being out of favour and if there is a run on a rumour then the business gets wiped out with no white night. I agree there will be a white night for SVB but the next small bank will be the panic trigger. We are back to the FED shovelling money on each problem to cover up the smell.

[@FinancialShinanigan]

We need more bankruptcies so we can get additional episodes lol

[@therJrep]

At the beginning “oH mY gOdddd!¡ a special episode” 🤣

[@cryptobiose4809]

🤣🤣🤣

[@AB-qt4dj]

There will be more. Could be only a few. Could be many. There will be more.

[@willl7780]

cold lol

[@willl7780]

@@AB-qt4dj yelen said banks are safer then ever so there will be a bunch more

[@jet4tv]

Best Finance, News Podcast out there! Still shocked NOT millions of followers...Yet :) Thanks Scott n Ed

[@tigerrx7]

A lot of people are on one channel, audio-only podcast (Spotify, Apple, etc.)

[@geremycao4919]

Great nuanced take

[@scottdavis4439]

Scott explained this the best and simplest way possible. Thanks sensei!!

[@nathanieldauschmidt4472]

Have an auction but exclude all banks over $1trillion in assets. I feel like this episode is missing any perspective from middle America. VCs (who don’t fund things outside of the coasts) caused this mess and then are expect us all to clean it up. Their herd mentality in investing translated to herd mentality in a bank run.

[@sandworm5212]

Monday is going to be fun.

[@cmartin1226]

Love you Prof G podcast, show, youtube, or lecture you have helped me learn so much and become more financially intelligent

[@libaax1342]

1. This was not a Black Swan event Prof. That no one wanted to see it coming, is one thing, that interest rates would rise/and were rising, after so many years, is another. 2. You are new on this side of the pond, not sure if you heard of Northern Rock, as Ed is too young to remember. 3. A fan!

[@tonybryant4578]

Thanks Scott. Working on the weekend!!!!!!!!!!!!!!!!!!!!

[@jeffhreid]

The best thing can happen for the little guy would be for JPM and the other big banks to go down. They are evil scumbags. Bank locally

[@dianedean4170]

Thank you so much, Scott and Ed, for your intelligent conversation regarding this debacle. I believe your podcasts are fascinating and informative. Cooler heads need to prevail in a timely manner 😊

[@thebradelliott]

I'm not smart, so please indulge me: 1. Start-ups need more cash so start withdrawing funds from SVB 2. SVB doesn't have enough short-term liquidity, so starts selling off treasury bills at a loss to cover withdrawals 3. This causes panic, and more start-ups then start to withdraw funds 4. SVB can't sell treasury bills fast enough or at such huge losses and the bank failed So, if everyone remained calm this wouldn't have had happened as SVB had enough long-term liquidity (assets greater than liabilities)?

[@damianpriday4655]

I was looking forward to this !

[@andre-le-bone-aparte]

Question: SVB was in the S&P 500, with around 1.3 Million shares and weighted at %0.04 of the index. - What happens in this situation?

[@proskillr]

Goes to $0 and the index drops by .04%

[@therJrep]

Or gets bailed out. Either way yeah not big enough by itself to effect the s&p 500. buttttttt if a contagion starts and a domino effect starts where other banks blow up, we could be in financial crisis mode again…

[@ollieandotis]

SVB the company is not going to be bailed out, the company is already dead. The depositors should be backstopped and made whole, if you deposited your money into SVB, it isn’t your fault that the bank itself failed

[@josericaurtejaen1985]

You just get a new company PODD takes its place Insulet Corporation

[@andre-le-bone-aparte]

@@ollieandotis - Even Circle and USDC who held cash deposits there? - Seems like a political hot potato to bail out Crypto Stable Coins.

[@8088I]

Peter Thiel called for "A Run😱 on SVB," the day Before.

[@alansnyder8448]

Nobody is talking about a bail-in for this situation, but there seem to be some bail-in options. I'm surprised nobody is talking about it.

[@8088I]

Possible that Bonds were bought on Margin. Need to find out.

[@blessings2you435]

@I... THAT would be interesting to know.

[@therJrep]

Pretty sure they just blew up due to a mismatch in cash flows/duration

[@httr21skins]

Is that allowed? If yes, then that’s nuts.

[@therJrep]

@@httr21skins basically how the Bank of England blew up in 2022

[@Larimerst]

It wasn't long duration per se; It was SVB's failure to hedge duration risk that brought the bank down.

[@SP-wg5pn]

You are correct they are a commercial bank, the government insures 250000 per depositor, and should be looking for the private sector to take over from there. And no company should have only one bank there has alway have to be a plan "b"

[@richardalbrecht7596]

Excellent analysis as usual! However, I am not sure about the argument that everyone would just go to the largest bank to avoid any risks... There are a lot of smaller competitive banks in the world that are still alive... Silicon Valley Bank was also a badly managed bank. The reserve was unsuficient and looking at their CEO and CFO selling most of their shares less than a month prior to the crash. Here is the beginning of the problem. There are a lot of startups that have chosen other banks, with reason...

[@familei3349]

After 3 percent, they should've started hedging, but they were greedy trying to pinch out a few percent of gains for the year. No worries. I'm sure all top staff received their big bonus before the fire sale started.

[@johng496]

Not only did they get their bonuses, they also cashed out their stock. Illegal as all hell.

[@andyjohnson9714]

Scotts ear Polsters on his Sony studio headphones have been changed while Ed’s are still original.

[@joeovip]

Thanks guys! For this episode. Learned so much. Amazing.

[@sylarfx]

Sacks, Ackman, and the rest of the folks sowing panic and hysteria about bunk runs should be held accountable for market manipulation by SEC or whatever institution that polices it.

[@soundrapandianravichandran4315]

Very insightful , thoughtful as always 👍🏻👏

[@jacksonj3082]

Excellent assessment - CEO CFO CMR sold their shares in advance of this collapse, should they be held accountable and their proceeds be confiscated ? Understand your point about making depositors whole, but is that fair that the CEO CFO CMO were the first to take their money and run, but depositors are made whole even though they knew the risk of any deposit amount over $250k?

[@whtmasterd]

Great commentary on this crisis, so much common sense, will anyone in power come to the same conclusion.

[@vasantos-re4hb]

Big dawg, you need to serve on the Fed. It's not a job you want, but it's a job that would do this country a world of good.

[@gibber1sh-c6w]

Bailout? Let them eat cake... ...or how about a one-time $600 check from the government. That should do it.

[@AB-qt4dj]

Great comment

[@kevalmehta8503]

I was just thinking: I am looking forward to the Prof G show on Monday to get the commentary on SVB. Thanks for the early special episode on SVB. Good insight as always.

[@NeverSarcasticMan]

The US gov, Fed, banks, and other financial institutions aren’t corrupt at ALL.

[@willmurrin9344]

Found this channel a month ago. Planning to stick around!

[@jeffhreid]

They never want government when there’s money to be made but oh how they cry to their cronies when the chips are down

[@sjr7822]

Some say not to worry about the small banks, but, I know this affects companies, and what the fed will do may affect us all, so the question is~is this contained to only this tech sector? In 2010 congress passed legislation no more bailouts by taxpayers, now there are bail-ins. The FDIC only has enough money to rescue 3 big banks, I've read in 2008

[@eddenoy321]

Yes the sector issue. The real estate sector is what worries me. Real Estate is massively overvalued now. So I am concerned about other banks. Most banks fund home and building purchases, and now those values are seriously out of whack..

[@alansnyder8448]

Nobody is talking about a bail-in for this situation, but there seem to be some bail-in options. I'm surprised nobody is talking about it.

[@MaxTyco]

THE best podcast

[@salvadorpuente8716]

I still don't understand why people use "They've been around a long time." as an argument for why a bank/business won't go bankrupt. SVB has been around for 40 years but WaMu bank and Lehman Bros were around for over 100 years old and their collapse and demise was fast and spectacular.

[@avisitorhere]

Management lost but they were smart enough to hand out the bonuses to themselves on March 9th when it was due to go out March 10th.

[@jasourwnjl]

And sell a bunch of shares in the lead up, too bad we are not smart enough to throw them in jail.

[@George-jm4rn]

There is more than one kind of bailout, Scott. And this was not a black swan event. If the government (the people) is to back stop all losses, then nationalize all the banks. People with such self interest tied to an issue should have their opinions judged accordingly. This was not Scott's finest hour.

[@mykibalzy]

Thank you!

[@kikolatulipe]

The VC created/planned this bank run ? Peter thiel behind this ? Postmortem will tell the whole story!

[@yootuub301]

It’s not the size of the bank. It’s th presence and effectiveness of the Risk Assessment Officer.

[@madskeptic6816]

Thank you Prof G for your calm, thoughtful, and intelligent insights into the demise of SVB. So far your analysis has been spot on. As you predicted, earlier tonight the feds announced that all deposits were good, not just those at or below $250k.

[@samw4758]

Prof G and David Sacs have the same opinion. Good enough for me.

[@yootuub301]

Isn’t selling their bonds even at a discount a move to address liquidity with making the remaining principle available to withdrawals?

[@m1nhhoang]

The last helicopter out of Saigon, prof. G. Not Hanoi.

[@blessings2you435]

@Minh Hoang "The Fall of Saigon". 🙏 🚁 It's been relegated to just a "hip" catch-phrase now. Honestly, I don't think prof G is old enough to recall the specifics of that horrific moment in human history... SVB's "collapse" (subject to a Biden bail-in) is hardly a worthy comparison. Sorry prof. But...imo: you were firing the wrong cylinders tonight.

[@highbrass3749]

We basically had the same thing happen in Afghanistan. We can start using “last helicopter out of Kabul” now.

[@kevconobiwon]

11:25 - I wonder what happened ?

[@ayannafit2441]

Hmm.. not that they had an obligation or that they were friends, but if they knew their stuff they would know that panicking would only make things worse - which is exactly what happened.

[@dougw7804]

Interesting to hear the Sunday pundits today asked about whether the Government bails out SVB. Most were like "welllll, we don't know enough" to some saying "no way!" I'll bet a bailout package is presented, even as the CEO ditched on the slide out.

[@AnberThe]

I think the FDIC insurance should be raised somewhat. Perhaps 1mill. but it’s an L for the remaining.

[@AB-qt4dj]

FDIC is insufficiently funded as it is.

[@paulchabot4235]

If it's bad to have just the big banks controlling fund flow, then having ONE of them swoop in and "save" this crisis would lead to other issues no? Maybe Gov't needs to manage the transfer of SVB accounts to MULTIPLE larger banks by setting a subsidized price on the bonds and limiting the % sold to each player (which would depend on the pool of players).

[@mbg9650]

What about SIVB's CEO who sold his stocks in February?

[@pat-orl]

At 33min, Scott not realizing SVB successfully lobbied trump to remove their stress testing

[@mrmarkyrichards]

Good listen

[@fidget2020]

Embassy in Saigon, not Hanoi. Helicopters off the Saigon Embassy rooftop…..

[@proskillr]

Special episode!!

[@Queenxmarquise]

❤❤❤❤❤❤❤❤❤❤❤ excellent commentary 😂😂😂😂😂😂😂😂

[@Willior47]

love the podcast but can you please adjust your audio levels? they are extremely low. all you have to do is "normalize" the audio track to bring the highest peak up to 0. thanks guys great show

[@mjkanellos]

I can't seem to hear the peeps very well. Is it just my computer or is this the case for others as well? Maybe a microphone would help?

[@mueslix8391]

Airlines don't get bailouts in my perfect world, but my bank should in the real world?

[@RunAwayTraveler]

The bank system is as strong as tofu.

[@tenminutetokyo2643]

Why isn't anyone talking about the tens of billions of dollars foreign workers remit out of our banks annually. 75% of Silicon Valley workers are foreign. And they all got laid off from their visa jobs.

[@c.p.267]

Once again great content, but I don't agree with the part about moral hazard not being in play here: According to news articles this weekend, management got paid their bonuses just in time before the demise began (which seems shady, but might still be justifiable). But if the reports are true that their top executives (including CFO, CEO) liquidated 7-8figures worth of stocks just last week before this happened, that sure as hell should be persecuted as insider trading with all force. In my opinion that would not only a long way to change public perception, but also discourage others to expect being bailed out because that way these executives would actually lose far more than just their remaining, not vested future stock options.

[@eddiekulp1241]

Govt will bail them out , and poor people will pay the most , way it is

[@AB-qt4dj]

Bailout may happen. Acquisition by a very large bank is also likely. Poor people pay in that scenario too.

[@shosho4real]

One thing is sure... A Silicon Valley startup would rise due to the fall of the Silicon Valley Bank

[@waitup-5198]

What is a VC?

[@paull9839]

Last helicopter out of the embassy in Hanoi??? Lol. The US never had an embassy there

[@gandhi9936]

Start ups are the riskiest bets out there. The vast majority are failures - that is fact! So don’t know what makes your guest so sure that these are sure bets!!!

[@rocketman1058]

Spoiler, the US gov declared that won't bail themnout

[@AB-qt4dj]

The government reverses their stance very frequently. Don’t take them at their word.

[@BSinSeattle]

Pro G!

[@Rnankn]

Banking and finance are public utilities. Privatization of essential services that are not competitive and tend toward monopoly powers always have the same result. Loss of confidence, crises and uncertainty, loss of services, a regulatory administration, and failure. Resulting in public authorities intervening directly or through financial and skill transfers. But why listen to evidence and reason when a religious experience known as Econ 101 reveals a mystical truth that all things must be made market to satiate the gods?

[@dan10400]

not sure i am on the 'making the depositors whole' schtick.

[@ibrahimmuazu8968]

Investing in stock is easy, but buying the right stock without a time-tested strategy is incredibly hard. hence I will suggest you get yourself a financial- advisor that can provide you with entry and exit points on best stocks to buy now or put on a watchlist

[@peterjhona7990]

Find stock with market-beating yields and share that at least keep peace with market long term. For a successful guidiance from a broker or financial advisor

[@goziepartra]

Thanks to a friend of mine who recommend me to the professional in forex trading, Who's helped has make me to earned a lot in the investment

[@michaeldavid3913]

You are right! I diversified my 450K portfolio across various market with the aid of an investment coach, I have been able to generate a little bit above 1.3m in net profit across high dividend yield stocks, ETF and bonds.

[@JamesRussell-ut7jc]

I'm seeking for a more effective investment approach How good is this person at portfolio diversification, particularly with regard to digital assets?

[@ibrahimmuazu8968]

@Agent_DEBORAH01

[@GenXamerica]

Good luck to the small Etsy sellers waiting on a few hundred bucks. There have to be millions selling on the platform. What a mess.

[@blueshattrick]

My bet? Somebody with $2,000 (that they were planning on using for a honeymoon, to Niagara Falls) steps in and "tides everyone over until the bank re-opens"

[@BobQuigley]

Silicon valley bank funders of all things 0/1. Every digital contraption. Every helpful app. Yet the institution had no Apple alarm set warning board members to maybe check your investments. THIS is America in a nutshell.