Y Combinator calls on Congress to act on SVB collapse

Oh no, our private VC firm is screwed by a private bank going under, time to get tax payers to help fund risky ventures in one of the worlds most expensive cities to foot the bill so our equity is stable! How else with other startups be able to access improved mail campaign APIs or ACID-compliant IAAS tooling?! The public need us!

All I want is for the rules to be followed — the ones we all agreed to before this happened. That means no bailouts for anybody, and unfortunately that means some tough lessons would have to be learned.

When an event like this happens and all the sudden the government puts the rest of the public on the hook for the losses, it disastrously erases trust. After 15 years, MOST Americans still have zero trust that the rules are fairly applied. The hidden expense is a lot of cynicism and unrest. We can’t tolerate more of that.

The public can’t mitigate the risks of depositors, and unless you want to invite them into that arena, follow the written rules. We already have a process in place, we only need to follow it now.

Reading this call to Congress, it feels like people believe SVB collapse is similar to FTX. There seems to be a perception that all the uninsured deposits are gone. This just isn't true - SVB had substantial assets and they will cover a lot more than just the insured deposit amount. SVB also had a business which is worth a lot of money to a company like JP or BofA, and a private company is reasonably likely to pay enough for it that depositors will be made whole. No taxpayer money should be needed here.

> Y Combinator calls on Congress to socialize their loses

Whoever calling for bailout or any government intervention in this incident should disclose how much money they have tied up with SVB for others to understand the level of conflict of interest the person has.

I have read that a chief risk assessment officer at SVB was hyper focused on diversity issues, perhaps to the detriment of their grasp of the perilous situation.

Perhaps the was a self-inflicted wound to some degree?

https://www.dailymail.co.uk/news/article-11848705/Woke-head-...

Genuine question: can anyone confirm if SVB required startups participating in their venture loans to use them as their exclusive bank for deposits to ensure collateral?

I heard that mentioned elsewhere and it seems like maybe its indicated at item 5.2 in this registered loan agreement[1], but the internet is a tricky place and legal language doesn’t always say what you think.

That said, it would explain why there was so many uninsured, exclusive deposits and why VC’s who had built those loans into their fundraising recommendations/strategies are freaking out. The usual risk management strategies for large deposit accounts get thrown out the window when they’re disallowed by the loan agreement you depend on, for a loan you’re unlikely to have secured anywhere else.

[1] https://www.sec.gov/Archives/edgar/data/1386858/000119312512...

"we are asking you to save innovation in the American economy" What innovations?

Does any one have the data(or where to look for the data) on how many banks depositor's were reimbursed over and above the FDIC insured amount of 250k in the last 1-2 years of bank failures?

I agree that we should increase regulation on banks and ensure losses are only borne by the ones engaging in risky behavior.

Alternate headlines (based on Y Combinator's actual petition):

"Y Combinator urges stronger regulatory oversight and capital requirements for regional banks."

"Y Combinator urges investigations of any malfeasance or mismanagement by SVB executives."

https://www.ycombinator.com/blog/urgent-sign-the-petition-no...

The "act" they want Congress to make is just a "backstop" of depositors. The thing is, if SVB is bought by another bank, that happens without any action by Congress. (For what it's worth, Nancy Pelosi said today there are multiple potential buyers and "What we would hope to see by tomorrow morning is for some other bank to buy the bank.")

https://twitter.com/JohnGHendy/status/1634934773113290753?s=...

"Free market is good for you, not for me"

Yeah, I don't agree. SVB was so poorly capitalized that any any due diligence whatsoever should have turned up malfeasance - take a look at the JPMorgan note posted here (https://news.ycombinator.com/item?id=35120416). If you have billions in assets then you can't demand the government protect you from not diversifying your portfolio by buying into a single asset class. Any halfway competent CEO could have opened a Vanguard Flagship account or JPMorgan Asset Management account or any other account at a large institutional supplier and created a diversified portfolio.

Just holding a 40/60 split of mixed maturity treasury and corporate bonds and Russel 1000 stocks with low transaction fees would be satisfactory for the majority of companies. And for those that are over that limit or feel they need a more diversified exposure they should have hired a competent asset manager.

And many did do those things. Asking to bail out the people who invested millions of dollars without paying financial professionals to make sure that they did it correctly and with competence is punishing those people that did the right thing. We should provide a safety net in this country for the little guy, but if you have 100s of millions of dollars and you're not willing to hire a few people to make sure you're handling your money correctly I don't have that much sympathy.

People were asking the CEO of SVB what his favorite thing to do to relax was in the last earnings call - the answer is bicycle riding.

Come on.