zlacker

YC's previous recommendation was to use Silicon Valley Bank. That ended well.

>>Animat+(OP)
What's the context here? When, where and for what did they recommend SVB?

(FWIW, it did end well, as going with a relatively large federally insured bank meant that no one lost any money during the crash)

>>n2d4+Q
SVB was considered the "standard" bank for all startups for decades so it's not surprising that YC would give the same advice. If you run a startup out of a normal bank sometimes you get weird glitches: https://mitchellh.com/writing/my-startup-banking-story

Of course today startups are probably using Mercury/Ramp/whatever.

>>Animat+(OP)
SVB depositors were mildly interrupted, no doubt, but there's little reason not to exercise extreme moral hazard in banking. OPM will bail you out via FDIC. Theoretically that has a limit but in practice FDIC usually will bail out the full balances even over the nominal limit.

If I had an FDIC account I would basically want a bank that invests my money in the most wildly hazardous ways with the most reckless financial controls to give the max returns and flexibility, then let everyone else bail me out if it went south.

>>mothba+58
> OPM will bail you out via FDIC.

I'm waiting for the demands for a bailout when the next big stablecoin goes bust. Especially if it's Trump's.[1]

[1] https://finance.yahoo.com/news/trump-usd1-stablecoin-hits-5b...

>>wmf+S4
I don't see any weird glitches there

chase did what they were asked for years

up to the point they were told there had fraud going on, at which point the walls went up

which is entirely as to be expected

>>mothba+58
Go back to the SVB failure threads here and observe the freak out before the decision was made to reimburse deposits above FDIC limits. Sometimes you’re lucky, but luck is not effective risk management.

>>mothba+58
“in practice FDIC usually will bail out the full balances even over the nominal limit”

That’s not true. It takes the systematic risk exemption and agreement between the fdic/fed reserve board and the president to make that happen. I think it’s happened like 4 times out of the thousands of bank bailouts that have happened.

There are other cases where the acquiring bank took on uninsured funds (like jpmc did for first republic) but in that case your gamble is that the other depositors on the banks balance sheet are desireable to the acquirer. Which presumably isn’t the case for your hypothetical max risk run bank.

>>kasey_+0C1
But didn't it technically not even apply at the end of the day for SVB? They sold the bank to another bank, which is what usually happens, and that other bank assumed all its deposits and liabilities. The FDIC didn't have to pay out any deposits and thus the limit didn't come into play.

>>morphe+rf2
No. They got the exemption. The insurance fund was hit both for insured and uninsured deposits. The fdic then issued a special assessment to cover it.

Do all of us paid for bad risk management of the svb customers and the moral hazard is real, just not the default.