[HN Gopher] Silicon Valley Bank paid out bonuses hours before se...
___________________________________________________________________
Silicon Valley Bank paid out bonuses hours before seizure
Author : VagueMag
Score : 92 points
Date : 2023-03-11 21:20 UTC (1 hours ago)
(HTM) web link (www.axios.com)
(TXT) w3m dump (www.axios.com)
| simonebrunozzi wrote:
| I have no problem with compensating employees for work done in
| 2022.
|
| The problem I might have, and I guess many others, is the
| incompetence of SVB executives and the board of directors, in
| relation to how they (didn't) handle this particular risk.
| phone8675309 wrote:
| Some of the work they did in 2022 and before likely contributed
| to them being unable to handle this risk, so why should the be
| rewarded for running this bank into the ground before
| depositors and other creditors are made whole?
| npunt wrote:
| It seems like a bad way to run a bank if these kinds of large
| risk decisions (buying ~$80b in 10y bonds at ~1.5%) are solely
| driven by a few execs and the BoD, while everyone else in the
| bank is just a drone.
|
| If employee comp (yearly and even historic bonuses) was tied to
| the bank's catastrophic risk levels, I bet you'd see banks
| restructure their operations to curtail these kinds of
| catastrophic risk factors. Smart people wouldn't join banks
| where they didn't have a say in that. Instead, we get short-
| termism where the longest timeframe people care about is 'this
| years bonus'. Banking is too important to be that stupid.
| danpalmer wrote:
| Bonuses are often calculated months in advance, and employees are
| also normally told about them weeks or more before they are paid
| (they're often even in contracts).
|
| Despite the guy on Twitter calling the SVB issues in January, and
| arguably long term mismanagement that led to the downfall, the
| actual issues happened rapidly, over a matter of days.
|
| These just didn't happen on the same time scale, and bonuses
| can't be undone in a matter of days with employees expecting them
| and even contracts demanding them.
|
| There's a lot of reasonable takes on this whole terrible
| situation, but implying or suggesting that the bonus payouts were
| part of it or that employees are to blame for taking them is a
| terrible take.
| coldtea wrote:
| > _These just didn 't happen on the same time scale, and
| bonuses can't be undone in a matter of days with employees
| expecting them and even contracts demanding them._
|
| Exactly.
|
| Only withdrawals by account holders, regular bank employee
| salaries, and corporate salaries depending on the bank can be
| undone in a matter of minutes. Never executive bonuses.
|
| /s
| amacneil wrote:
| Sure they could. To put it in perspective, thousands of
| companies are unable to pay their employees and vendors this
| week due to the SVB collapse.
|
| It does not seem unreasonable that SVB employee bonuses for
| "great job done in 2022" should have been delayed given the
| clear evidence on Thursday that the bank was imploding.
| danpalmer wrote:
| The perspective is not lost on me, I just think it's
| completely unrealistic on multiple fronts: it's a tiny
| fraction of the money, it's executed on a very different
| timeline and potentially not possible to stop (certainly not
| easy, HR may not even talk to treasury), and it may be
| against their contracts.
|
| In jobs like this bonuses are also not just "great job"
| money, they're a predictable part of compensation that people
| depend on.
| mbreese wrote:
| _> and it may be against their contracts_
|
| Those contracts are with a company that doesn't exist
| anymore... so I'm not sure that's a good argument.
|
| I get that this is part of the compensation that people
| rely on (I've seen Christmas Vacation), but it's a really
| bad look. Paying out bonuses right before your company is
| taken over by the Feds is a horrible PR image. Regardless
| of if it is the right thing to do or not.
| dylan604 wrote:
| >Those contracts are with a company that doesn't exist
| anymore
|
| the company existed when the payment was made though, so
| why would your comment anything at the time of the
| payouts?
| npunt wrote:
| I appreciate the complexity of the unwind, and that many
| employees may not have had a direct hand in the risk that
| SVB accrued, but I think there's a bigger picture at play.
|
| Banks are supposed to be one of the bedrocks upon which the
| economy rests and they are given certain privileges (like
| access to low interest rates ordinary people cannot get) as
| part of that role. Its clear the financial sector needs to
| have an extremely close eye on it to not cause all sorts of
| destruction across the economy, which it still manages to
| do pretty regularly out of a fun mix of short-termism,
| stupidity, and greed.
|
| So from a signaling perspective, if the org is sitting on a
| lot of risk and employees may have benefitted during the
| accrual of that risk, shouldn't they also face
| consequences? Wouldn't that cause each employee in a bank
| to pay some more attention to the fundamentals of the org,
| to put pressure on any situation where large risk accrual
| happens? Wouldn't that cause the internal structure of
| banks to change so that more eyes were on these large risk
| accrual moments, because talented people wouldn't join
| unless they knew their livelihoods weren't at risk by one
| bad decision? Regulations can't be the only form of
| pressure for banks to not fuck up.
| ssss11 wrote:
| Sorry but it's as simple as a directive to the person who
| clicks "Pay Now" to not do that yet.
|
| A predictable part of compensation is being paid your
| regular wage on time and for many clients of SVB this is
| probably not possible this week coming.
|
| They should have halted the bonuses.
| danpalmer wrote:
| It's not always that simple. Making several thousand
| payments totalling as much as $100m is not "clicking a
| button". The process of making those transfers could be
| days or even weeks long. Payroll processes and the actual
| transacting involved typically take at least a few days.
| deepsun wrote:
| I clicked that "Pay Now" button in my business. Nothing
| really that complex there, once the amounts are
| calculated (usually by automated programs). The rest is
| just regular ACH transfers, which take 2 business days to
| clear.
| JumpCrisscross wrote:
| > _process of making those transfers could be days or
| even weeks long_
|
| Every payroll processor worth their salt has a big red
| abort button. Worst case: funds hit flagged and are then
| reversed.
| dehrmann wrote:
| Yeah. HR had most likely started the final bonus payout
| process before they knew about the bank's situation. This
| was just a coincidence of timing.
| coldtea wrote:
| This surely takes "charitable intepretation" to a whole
| new level!
| FireBeyond wrote:
| "in retrospect, we have significant doubts about the job you
| did in 2022".
| [deleted]
| JumpCrisscross wrote:
| > _bonuses can 't be undone in a matter of days with employees
| expecting them and even contracts demanding them_
|
| If the executives running payroll knew there was material risk
| of insolvency, this is fraudulent conveyance and could (and
| should) be flawed back. Those employees' claims then go into
| the stack with other creditors.
|
| That said, the FDIC probably signed off on this because what
| _will_ zero the value of the franchise is every employee who
| earned a bonus jumping ship over the weekend.
| fredgrott wrote:
| no mismanagement was weeks not days. When the FED change
| interest rates commercial Mortgage securities were hit and SVB
| had exposure to that financial product.
| bequanna wrote:
| Since I hear a lot of people calling out the Fed, Let's be
| perfectly clear about who is to blame.
|
| SVB chose to invest in 10-year duration MBS that was yielding
| only 1.5% when higher rates were known to be just around the
| corner. The risk/reward in no way made sense.
|
| Simple incompetence and/or greed.
| nico wrote:
| You might be right. It still looks bad for them.
| sharkjacobs wrote:
| lol eat the rich
| throwaway81523 wrote:
| Did the bonus checks clear?
| phone8675309 wrote:
| You'd have to be a really stupid exec to approve drawing bonus
| checks from your own bank.
| s1artibartfast wrote:
| Why is that? I assume all banks pay their employees bonuses
| from their own funds. Why would a bank hold a payroll account
| in a second Bank?
| paulddraper wrote:
| > were previously scheduled to be disbursed on March 10. That
| date ultimately coincided with the bank's takeover by the Federal
| Deposit Insurance Corporation.
|
| Okay.
|
| > [FDIC offered] The employees would be compensated 1.5x times
| their normal salaries, while hourly workers would receive 2x
| their normal wages for overtime.
|
| Wow. Failure really does pay :)
| mbreese wrote:
| FDIC just took over a failing bank and wants to spin it out
| quickly. To do that, you need to know where the bodies are
| buried. With that in mind, it's better to keep the existing
| people in place for as long as possible.
|
| Remember, this is a short-term gig and there is no guarantee
| that there will be a job for them after this has all played
| out. As an incentive to keep the existing people around, they
| need a carrot to keep them from getting a new (more stable)
| job.
| s1artibartfast wrote:
| The FDIC understands supply and demand. This is a crisis
| situation and they are trying to track down 200 billion
| dollars. For this weekend and perhaps the coming weeks, these
| employees have some of the most valuable information on the
| planet. The vast majority are probably good employees that had
| nothing to do with the specific decisions that landed the bank
| in this situation
| compiler-guy wrote:
| The fdic absolutely needs the everyday employees who know the
| business to show up and be productive. These will be the
| employees who know the passwords and account info and the day
| to day work of the bank. They aren't the executives who made
| the bad decisions. In some ways, they are the victims of the
| executives' bad decisions just like the depositors.
| monocasa wrote:
| That's pretty common when the government has to take over a
| business. You basically give them employees an incentive to not
| start shredding and instead work with and enable the .gov
| takeover as smoothly as possible. Practically there'll be a lot
| of extra work and you want the people who know their systems
| best assisting.
| [deleted]
| ryukoposting wrote:
| To people who don't work in finance, maybe it seems reasonable to
| take away bonuses from employees at a failing bank. It sounds
| crazy to me. My finance friends are in PE, not banking, but they
| do soul-crushing work for grueling hours specifically because of
| that end-of-year bonus.
| coldtea wrote:
| Yeah, unlike those people working on third party companies
| depending on the bank for their salaries...
|
| I mean, who works harder and needs the money more, a finance
| executive waiting for their bonus, or a single mother of two
| working two jobs, one of which happened to be in a company
| depending on this bank for its salary payments?
|
| Obvioysly the former!
| ryukoposting wrote:
| What if the single mom worked at the investment bank?
| z3c0 wrote:
| It appears you're injecting a lot of details into the
| situation that were not specified in the article, seemingly
| to stir the pot. I see no mention of "executive bonuses"
| specifically - just bonuses, which are common for employees
| on the lower rungs as well. What makes you think there aren't
| "single mothers working two jobs" at SVB?
| ipaddr wrote:
| Who to say the bonus isn't going to a single mother of three
| or four or 18. Who deserves it more logic ends up in no one
| being deserving enough. Why give any money to these groups
| when there are people living/dying on the street. Do humans
| even deserve it, there are many species in worse shape.
| arrosenberg wrote:
| Poor vampires, how will they survive?
| [deleted]
___________________________________________________________________
(page generated 2023-03-11 23:00 UTC)