[akira2501]

> you can blame the Fed for low interest rates, but it's the yield curve inversion and long rates which caused the liquidity/solvency problem not the short term rate hikes

I blame the bank management. They left the risk management position open and spent way too much time, money and effort on marketing during that period of time rather than shoring up their shaky position.

[danielmarkbruce]

It's also questionable that they could account for their bonds the way they did. A company isn't allowed to just decide to put something in the "held to maturity" bucket - they need to both intend to do it and actually be capable of doing it. Given the depositors in question, I don't think they ever met the bar.

[MilnerRoute]

And even then, this article is about the venture capital industry and private equity firms - which for the most part is entirely different than banks.

The problem is apparently that some VCs invested in banks - and banks are about to be more heavily regulated. That's a good thing -- it will get banks implementing the backstops they should've had all along. I really don't mind if some VCs make less money than they'd hoped on their investments in risky banks.

Also, this $500B number is spread across the entire VC industry. And even then, most VCs have heavily diversified portfolios. Just for example, one investor in SVB was Insight Partners -- but their web site lists 800 different investments. They're part of that $500B number, but it will have very little effect on their overall portfolio.

[phoehne]

Actually, I think what they're talking about is that VCs have a lot of investments they would not dump more money into. They use these investments as collateral for loans, based on some kind of valuation (which, given the lack of price discovery is arbitrary). Essentially, they're zero value investments. If these investments were repriced, the actual value of the VC fund would fall.

As the interviewee indicates, if the uninsured depositors had not been bailed out, the VC firms would have had to decide to put more of their "dry powder" (on a temporary basis) into these startups until their deposit claims were adjudicated. the VCs would not have done that, even if they knew they'd get all of it back when the dissolution was complete. That means that the 10 million investment in a 1 billion dollar unicorn currently on their books would suddenly be worthless.

Instead, they're going to continue to carry it at $10 million because there's no price discovery on these highly illiquid assets. Essentially, the last price discovery was when they made the investment which caused the value to be set.

[rlucas]

54% of SVB’s loan book was loans “to” VCs and PEs, but they weren’t loans based upon the funds’ portfolio holdings. They were Capital Call lines, based on the power of the VC to demand that its LPs make good on capital commitments.

(Yes, the fund portfolio holdings were pledged as additional collateral here but that’s secondary. The only thing that could make the CCLOC outstandings get marked down is if the well-heeled institutions and individuals who’ve committed to VC funds stop making their capital calls.)

Even SVB is not crazy enough to lever up against VC portfolio marks.