John Otterson

[John Otterson @j_otter]

Roll on you Bears!!!

https://t.co/7K4neJTmnF

[Jackson Square Ventures @jsv_vc]

We’re committed to building AI that improves lives & unlocks a better future for humanity. We are proud to sign the Open Letter: Build AI for a Better Future along with @SVAngel, @OpenAI, @Meta, @Google, @Microsoft & many others!

Join us here: https://t.co/JGybqEdszJ

[John Otterson @j_otter]

@jsv_vc @etxeba Living your best life with 1:1 technology enabled training, excited to see CoPilot achieve its potential!

[John Otterson @j_otter]

@jsv_vc @dunn @Bonobos @jeffbercovici Important topics at JSV Book Club! Thank you Andy Dunn and Jeff Bercovici for sharing perspectives on mental health and entrepreneurship.

[John Otterson @j_otter]

I'm just going to drop this here courtesy of Axios...

[Jackson Square Ventures @jsv_vc]

Join us on May 16 as the JSV Book Club hosts @Bonobos Founder, @dunn, to share the story behind his book, Burn Rate.

Register here: https://t.co/nQRUE8Geqk #MentalHealthAwarenessMonth

[John Otterson @j_otter]

Join us on May 30th in San Francisco as we host a @Techweek_ happy hour and panel discussion on M&A for high growth startups featuring leadership from @DocuSign, @Artera_io, @Jellyvision, and @Demandbase!

Register here: https://t.co/ETmWQ3r53R #TechWeek

[John Otterson @j_otter]

@asanwal Anti-hype, deliberate and disciplined, is back...

[John Otterson @j_otter]

@paulkrugman Bruh, what is the amount of those same duration MBS/HTM held by pension funds? insurance companies? other banks? every financial firm across the economy?!?

[John Otterson @j_otter]

@paulkrugman Where is your source that crypto was on or near SVB’s balance sheet?!? If you have a legit source, please share how much crypto. Let me know if you come up with a number different than $0….

[John Otterson @j_otter]

@DavidSacks Good point!

[Bill Ackman @BillAckman]

Recent events have made clear in the mind of the average American that there is a risk that they could lose money doing something they used to think of as safe -- Being a depositor. We have had a two-tiered system since the GFC where a few large banks have the explicit backing of the taxpayer and the rest have $250k of deposit insurance. This two-tiered system worked until it didn't work.

In a world with @Twitter - speed spread of information and smart-phone-enabled bank accounts where withdrawals can be made with the push of a button, no bank is safe from a run unless the depositor has an explicit gov't guarantee that ensures that they always have complete access to the total value of their deposits. Without this guarantee, the non-systemically important banks (non-SIB banks) will likely continue to experience large withdrawals.

This problem is compounded by the stock market. Consumers now understand that when a bank stock collapses, it is only a matter of days before the bank fails due to liquidity demands by their depositors.

The rewards for being a depositor are minimal compared with the risk of loss from losing access to funds needed to run your business or household. Until this problem is solved, our banking system is at risk. The more time the public is exposed to a period of uncertainty, the more imprinted deposit risk is on the mind of the public.

That is why it is critically important that our gov't promptly puts its full faith and credit behind our deposit system.

If in fact, your deposit is safe if a bank fails, as in SVB and Signature, then why is it difficult for the gov't to confirm that your deposit is money good when your bank is still operating?

We need a temporary systemwide deposit guarantee that will remain in place until our outmoded $250k deposit guarantee program is modernized. Since this new system can't be created over a weekend, we need a stop-gap measure to get us through the next few days and weeks.

The alternative is one bank failure after the next. The weakest three have already fallen. The market is already telling you who is number four. This is not the way one maintains confidence in a banking system.

Lastly, the more banks that fail, the higher the cost of capital will be for non-SIB banks. This will have a profound long-term impact on the cost of capital for small and medium-sized businesses, a cost that has already increased materially due to the overall rise in rates. It is not helpful to put even more pressure on these critically important drivers of our economy.

[John Otterson @j_otter]

@paulkrugman Bruh, Silvergate and Signature were crypto. SVB is start-up and emerging growth companies, that are the growth engine of the economy, as well as funds. Please get your facts correct before you libel thousands of dedicate employees.

[John Otterson @j_otter]

Grateful for the outcome given potential catastrophic downside.

[Hemant Taneja @htaneja]

Relieved that FDIC has protected deposits. Continuity for thousands of companies & paychecks for millions, at 0 taxpayer cost. Must figure out how the critical services SVB provided for tech/vc thrive in SVB/successor. Proud of industry collaboration to catalyze this outcome.

[Bill Ackman @BillAckman]

The gov’t has about 48 hours to fix a-soon-to-be-irreversible mistake. By allowing @SVB_Financial to fail without protecting all depositors, the world has woken up to what an uninsured deposit is — an unsecured illiquid claim on a failed bank. Absent @jpmorgan @citi or @BankofAmerica acquiring SVB before the open on Monday, a prospect I believe to be unlikely, or the gov’t guaranteeing all of SVB’s deposits, the giant sucking sound you will hear will be the withdrawal of substantially all uninsured deposits from all but the ‘systemically important banks’ (SIBs). These funds will be transferred to the SIBs, US Treasury (UST) money market funds and short-term UST. There is already pressure to transfer cash to short-term UST and UST money market accounts due to the substantially higher yields available on risk-free UST vs. bank deposits. These withdrawals will drain liquidity from community, regional and other banks and begin the destruction of these important institutions. The increased demand for short-term UST will drive short rates lower complicating the @federalreserve’s efforts to raise rates to slow the economy. Already thousands of the fastest growing, most innovative venture-backed companies in the U.S. will begin to fail to make payroll next week. Had the gov’t stepped in on Friday to guarantee SVB’s deposits (in exchange for penny warrants which would have wiped out the substantial majority of its equity value) this could have been avoided and SVB’s 40-year franchise value could have been preserved and transferred to a new owner in exchange for an equity injection. We would have been open to participating. This approach would have minimized the risk of any gov’t losses, and created the potential for substantial profits from the rescue. Instead, I think it is now unlikely any buyer will emerge to acquire the failed bank. The gov’t’s approach has guaranteed that more risk will be concentrated in the SIBs at the expense of other banks, which itself creates more systemic risk. For those who make the case that depositors be damned as it would create moral hazard to save them, consider the feasibility of a world where each depositor must do their own credit assessment of the bank they choose to bank with. I am a pretty sophisticated financial analyst and I find most banks to be a black box despite the 1,000s of pages of @SECGov filings available on each bank. SVB’s senior management made a basic mistake. They invested short-term deposits in longer-term, fixed-rate assets. Thereafter short-term rates went up and a bank run ensued. Senior management screwed up and they should lose their jobs. The @FDICgov and OCC also screwed up. It is their job to monitor our banking system for risk and SVB should have been high on their watch list with more than $200B of assets and $170B of deposits from business borrowers in effectively the same industry. The FDIC’s and OCC’s failure to do their jobs should not be allowed to cause the destruction of 1,000s of our nation’s highest potential and highest growth businesses (and the resulting losses of 10s of 1,000s of jobs for some of our most talented younger generation) while also permanently impairing our community and regional banks’ access to low-cost deposits. This administration is particularly opposed to concentrations of power. Ironically, its approach to SVB’s failure guarantees duopolistic banking risk concentration in a handful of SIBs. My back-of-the envelope review of SVB’s balance sheet suggests that even in a liquidation, depositors should eventually get back about 98% of their deposits, but eventually is too long when you have payroll to meet next week. So even without assigning any franchise value to SVB, the cost of a gov’t guarantee of SVB deposits would be minimal. On the other hand, the unintended consequences of the gov’t’s failure to guarantee SVB deposits are vast and profound and need to be considered and addressed before Monday. Otherwise, watch out below.

[John Otterson @j_otter]

@JasonYanowitz @garrytan Perhaps @garrytan shouldn’t have accelerated the fire in the first place…

[Greg Gretsch @greggretsch]

Absolutely! Some of each firms portfolio companies can move their cash, but others are tied to SVB for debt and won’t be able to. In the end, everyone will get their cash back but it might take time.

What we all risk losing is the best banking partner the industry has ever had.

[Greg Gretsch @greggretsch]

We have a long and trusted relationship with svb over many years, almost every portfolio company of mine (current or exited) has banked and borrowed from svb at some point and they have always been an A+ partner.

[Greg Gretsch @greggretsch]

From a trusted source:

Lehman and Bear Stearns, which were most recent and worst case scenarios, depositors were all made whole (no 250k limit) and cash was available in 8 days and that was worst case.
My gut is this will blow over in terms of depositor cash. #SVB

[Travis Hedge @The_HedgeFund]

There are two kinds of conversations in my inbox:

1) PANIC! MOVING MY MONEY TO A NEOBANK!

2) Remember that time Axel Schupf made a killing by betting on SVB in a crisis? How much can I buy?

SVB has stood by this industry for 40 years, and so should we