I feel like there's almost a level of glee about SVB going under. But as far as I can tell, it's a big loss for folks who like innovation. And unless arrangements are made to unlock liquidity for depositors, many people may not get paid for their labor and many otherwise viable businesses could fall into crisis.
@LouisIngenthron When I was in grad school a decade ago, a classmate and I started a company with a couple thousand of student loan money. We opened an account with SVB completely online, and were treated like the business we hoped to become one day. Like most businesses, it didn't pan out. We had 99 problems, but business banking wasn't one.
@LouisIngenthron Had SVB collapsed then, FDIC would have made us whole. But probably not in time for us to survive.
@LouisIngenthron also you're completely wrong about who keeps more than 250k in the bank. Rich people tend to invest their wealth. Companies need liquidity for payroll and services. You don't have to be a very big company at all to have payroll that exceeds 250k.
@acjay Those are fair points. And I absolutely do feel bad for the employees living paycheck-to-paycheck who might not get paid.
But I still struggle to have any sympathy for the people and companies hoarding millions, especially when I see how often that money passes hands through nepotism.
It's definitely messier than anyone would like, but when the rich spend so much time concentrating their wealth instead of using it to fairly compensate the people doing the actual work, they shouldn't expect much sympathy when an event comes along that levels the playing field, even a little.
>"When I was in grad school a decade ago, a classmate and I started a company with a couple thousand of student loan money."
Is that even legal?
>"Had SVB collapsed then, FDIC would have made us whole. But probably not in time for us to survive."
When the FDIC steps in, deposits are available literally overnight. You, and anyone you had cut a check to, would not have even noticed it.
>"And I absolutely do feel bad for the employees living paycheck-to-paycheck who might not get paid."
When this happens, employees are first in line. (At least that's how it used to be decades ago, not sure if that's the currently the case with all the graspingness in the system now).
Also, a company would need to have more than 100 employees to exceed the 250K in weekly payroll. If their employees were near the poverty threshold it would take a few hundred employees to exceed 250K in a week. I think it would be gross mismanagement for a company that size to not have any risk management in place for an interruption of liquidity like this.
@Pat @LouisIngenthron
> Is that even legal?
Don't know, tbh. Hope I don't get arrested 😄
> When the FDIC steps in, deposits are available literally overnight.
Got it. That's comforting to know, for folks in that position. I would assume some things would break though, outside of checks and ACH. Like data feeds for accounting.
> Also, a company would need to have more than 100 employees to exceed the 250K in weekly payroll.
I would consider a company with 100-200 employees a small business. I'm not a corporate finance person, so I don't know at what point you start actively managing the risk of your top 20 bank going under. I do know there are services that sweep cash across banks, effectively increasing insurance, with minimal added complexity.
>"I do know there are services that sweep cash across banks, effectively increasing insurance, with minimal added complexity."
TIL! 🙂
@acjay @Pat Strongly disagree with a 100-employee company being considered "small".
Another point: If you're doing $250k per period in payroll, that's $6.5 million per year in payroll expenses alone. That means that company's bringing in at least ~$10 mil a year just to break even without even considering material or facility costs.
These are not small companies we're talking about.
>'Strongly disagree with a 100-employee company being considered "small".'
Much legislation in the US specifies that companies under 500 employees are "small" businesses. This is so politicians
can say that they are helping small businesses when in reality they are subsidizing the wealthy.
@acjay
@Pat @LouisIngenthron I mean, this is all just semantics. Obviously mom and pop businessesare smaller than that, but there are several orders of magnitude beyond 100-person companies, and people running most 100-person companies are generally nowhere near being billionaires.
@LouisIngenthron I mean, if it were a bank that focused on high net wealth taxes dodgers, I'd be right with you. And to be fair, I think they did do some personal banking focused on the needs of people with a lot of equity wealth. But as banks go, as far as I know (not an expert here), they were one that actually played a productive role in the economy.
I'm so for critiquing Silicon Valley-style entrepreneurship, but the implosion of SVB is probably going to have some level of collateral damage to people who did nothing to deserve it. And even if the system contains it, it's still the loss of an institution that didn't suck, IMO.
@acjay "not a bank for rich people" yet it held billions for venture capitalists.
Real innovators typically don't have millions lying around in the bank... the lucky few with the right connections to get absurd funding for their absurd ideas do.
So, yes, us underfunded innovators are enjoying a bit of schadenfreude watching their incestuous self-dealing finance rings collapse.