[HN Gopher] SVB insider says employees are angry with CEO
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SVB insider says employees are angry with CEO
Author : rntn
Score : 69 points
Date : 2023-03-13 21:05 UTC (1 hours ago)
(HTM) web link (www.cnn.com)
(TXT) w3m dump (www.cnn.com)
| henry2023 wrote:
| Is it me or this insider is pissed off because his shares (or
| options) went to zero while the deposits of the creditors were
| matched 100%
|
| No mention of zero risk management. No mention of possible
| contagion effect. No mention of hundreds of workers not knowing
| if they're going to be paid
|
| Individualism at its finest
| Loughla wrote:
| >"That was absolutely idiotic, They were being very transparent.
| It's the exact opposite of what you'd normally see in a scandal.
| But their transparency and forthright-ness did them in."
|
| This doesn't sound like a great employee to quote.
|
| >Get on a jet and fly to Kuwait like everyone else and give them
| control of one-third of the bank.
|
| Or this.
|
| >"The saddest thing is that this place is Boy Scouts," he said.
| "They made mistakes, but these are not bad people."
|
| Which makes me question the point at the end of the article. It's
| fascinating watching these articles come out and trying to guess
| who is behind them and for what purpose.
| riskneutral wrote:
| I think you are missing some context around this story. Banking
| can be a confusing topic.
|
| What that employee is referring to, and it is a great employee
| quote, is the fact that SVB's unexpected announcement that it
| was selling HTM securities at a loss and publicly raising
| equity is the singular event that really triggered the whole
| crisis. The CEO's poorly calibrated communication and lack of
| action in the midst of a run on his bank had sealed the bank's
| fate by Thursday afternoon.
|
| The point this employee is making is that instead of this kind
| of "Boy Scout" transparency about its efforts to shore up its
| balance sheet (which only served to cause panic), the CEO
| should have quickly and privately closed a deal to raise
| capital only announced the deal after it was done. I don't know
| if doing a deal with a Middle Eastern Sovereign Wealth Fund
| would have helped avoid an accidental panic. But they could
| have very easily sold SVB to a larger bank before the CEO's
| own-goal of causing a run on his bank by announcing forced
| selling of bonds at a loss and a public capital raise. Once the
| bank run had begun, it was impossible for a buyer to step in.
|
| I believe that it must have been greed and overconfidence at
| the core of their problems. They didn't want to hedge their IR
| exposures, didn't want the expense of raising capital quietly,
| didn't want the expense of diversifying their funding sources
| away from volatile depositors, etc.
| antibasilisk wrote:
| >Banking can be a confusing topic.
|
| 'you wouldn't get it' is a line trotted out by every bullshit
| artist trying to con you.
| riskneutral wrote:
| I didn't say you wouldn't get it. Maybe you don't want to
| get it?
|
| Let's say you own a restaurant and you find a mouse in your
| kitchen. You could:
|
| 1. Call an exterminator overnight to make sure you don't
| have a larger problem and contain the issue before the shop
| opens the next morning. Improve your kitchen hygiene
| standards going forward but don't draw unnecessary
| attention to your renewed efforts.
|
| 2. Call the local news station over to your restaurant to
| get live action footage of you catching the mouse. Go on
| camera and give a speech about how you've already scheduled
| for an exterminator to come in a few days, and the last
| thing the customers need to do is panic.
|
| Which option is the correct business decision, from the
| owner's perspective?
| fifilura wrote:
| Representatives from Alecta, the swedish pension fund that
| was big owner said the same.
|
| That SVB had presented a plan that was agreed upon with the
| owners but instead they sold their assets with a loss and
| went out publicly to seek investment without having an
| agreement with anyone.
|
| They declared this a "big mistake"
| justinclift wrote:
| > Which makes me question the point at the end of the article.
|
| To generate controversy, which generates clicks, therefore
| revenue.
| miguelazo wrote:
| I really love that they used a pic of CEO Becker from a recent
| Michael (ex-con, Junk Bond King) Milken Institute event.
|
| >For their part, Sonnenfeld and Tian argue Jerome Powell, Biden's
| pick to lead the Federal Reserve, and his colleagues deserve at
| least some of the blame.
|
| "There should be no mistaking that Silicon Valley Bank's collapse
| was a direct result of the Fed's persistent and excessive
| interest rate hikes," they wrote.
|
| Why? Because the Fed's war on inflation depressed both the value
| of the bonds Silicon Valley Bank was relying on for capital and
| the value of the tech startups the bank catered to.
|
| _Of course, Silicon Valley Bank had more than a year to prepare
| for both of those issues._
|
| Exactly.
| uejfiweun wrote:
| Yeah, to "Sonnenfeld and Tian", it's like gimme a break. The
| fed is in no way responsible for the results of every single
| bank out there. This is on SVB and SVB alone. More broadly, I'm
| sad that this event is likely going to disrupt the war on
| inflation and interest rate hikes. It might be time to start
| preparing for more inflation, or as Dorsey predicts, even
| hyperinflation.
| more_corn wrote:
| Ya think? I bet the shareholders (ex-shareholders ?) are pissed
| too.
| [deleted]
| quantified wrote:
| The weird thing is that transparency about the difficulty at the
| bank is exactly what leads to the run. The incentives of the
| banking system are to hide reality in case of a financial breach.
| Whereas for a security breach, the incentives need to be to be
| forthright.
|
| How's an executive supposed to keep the nuance of when to lie?
| nradov wrote:
| Officers of a publicly traded corporation aren't legally
| allowed to lie about anything financially material to the
| business. That would be securities fraud, and could potentially
| expose them to personal civil liability or even criminal
| charges. They might be allowed to delay announcing some
| material issues, but they can't outright _lie_.
| iaabtpbtpnn wrote:
| What good is a bank executive who can't?
| yellowstuff wrote:
| There's a 2014 paper that describes this dynamic. Clients want
| deposits (bank liabilities) that act like cash, but they are
| backed by assets that have fluctuating values. Banks need to be
| "optimally opaque" to make this work.
|
| https://economics.sas.upenn.edu/pier/working-paper/2014/bank...
| dragontamer wrote:
| They're mad at the match, but they aren't mad at the powderkeg.
|
| SVB didn't have a Chief Risk Officer from April 2022 through
| January 2023. They were flying blind. While the Fed raised
| interest rates, the bank seemingly moved forward without any risk
| assessments.
|
| A new Chief Risk Officer was named in January 2023. The top
| insiders then sold tons of shares in February, suggesting that
| they all realized something was wrong. In the next public report
| on March 8th at 4pm, they announce a capital raise to offset
| their now booked losses. This sets off a bank run on March 9th.
| And the rest is history.
|
| -----------
|
| Maybe instead of blaming the bank run on March 9th (the lit
| match), they need to focus more on the 10+ months of poor risk
| assessments and blatant insider-trading in February (suggesting
| that the higher-ups discovered the issue and acted upon it for
| personal financial gains).
|
| --------------
|
| Sure, the email / press release on March 8th was poorly written.
| So poorly written it set off a bankrun. The CEO deserves some of
| the blame here for such shoddy writing that set off the stampede.
|
| But that wasn't the issue. The issue was all the "dry powder"
| that the bank accumulated over the past year.
| SubuSS wrote:
| Aren't these execs bound by trading windows and 10b5-1 like
| filing requirements?
| yieldcrv wrote:
| yes, they filed new 10b5-1 and used them. they did the
| needful. it will probably cause the rules to change.
| [deleted]
| aaomidi wrote:
| The CEO is responsible for lack of CRO too
| kurthr wrote:
| They wouldn't have been legally allowed to be out of
| compliance without a change in regulations.
|
| https://www.reuters.com/article/us-usa-trump-dodd-
| frank/trum...
| listenallyall wrote:
| What exactly are you saying, that it would have been
| illegal for a bank to allow its risk officer to resign or
| to leave?
| berkeleyjunk wrote:
| I don't think so. I think they are saying that if the
| original regulations were still in place, the bank would
| not have been able to make these "investments" even
| without a Risk Officer.
| michaelt wrote:
| If only workers could sign contracts with some sort of
| 'notice period' allowing their employer time to hire a
| replacement....
| fsckboy wrote:
| All this C-suite nonsense is just a bunch of... nonsense, it
| needs to stop. Let me explain what I mean. After a quick
| google:
|
| _What is a Chief risk officer?_
|
| _CROs report to the board and the CEO on various issues,
| including insurance, IT security, financial audits, internal
| audits, global business variables, fraud prevention, and other
| internal corporate matters._
|
| That's all cost-center stuff, none of that has anything to do
| with the banking line of business. It doesn't need to be chief
| anything and it had nothing to do with the failure of SVB.
|
| A bank's entire business and reason for existence is risk
| pooling and risk arbitrage, making money on the interest rate
| spreads between being on different sides of different products.
| The CEO of a bank cannot afford not to be qualified to be the
| head of banking risk. He should have quants working for him and
| reporting to him, but the buck stops with him.
|
| Responsibility works best in a hierarchy, you're in charge of
| something, you report to somebody who is in charge of you and
| what you do, but at a minimum, the CEO needs to know the core
| business cold, and sideline delegate only things that are not
| of that nature. A bank needs that job description up above, but
| it's not C suite. Having a C-suite encourages egotism and
| distributes risk (not interest rate risk) in an un-responsible
| way, if you have a chief of something, why it must be taken
| care of, right? There's only room for one chief. In addition to
| that, COO, CFO, CMO have pretty standard meanings, but no
| reason they can't be called VP of Operations,
| Treasurer/Controller/VP of Finance, and VP of Marketing though.
| dahdum wrote:
| Of course they'll want to blame anything other than the stupidly
| high risk strategies that got them there.
|
| SVB had the highest compensation in the industry for 2018, and
| averaged ~$293k/employee last year while hitting top scores for
| work-life balance, remote options, and employee satisfaction.
|
| For fun...here are the top paying banks in 2018:
|
| 1. SVB - $250k
|
| 2. First Republic - $247k
|
| 3. Signature Bank - $216k
|
| SVB and Signature just failed, First Republic is down 75% over
| the past 5 days.
|
| https://archive.is/3QXIO
| opportune wrote:
| It's actually hilarious that the three most troubled banks had
| the highest employee compensation (though that data is 4 years
| old). The headline writes itself
| x0x0 wrote:
| I wonder if that is anything more than the lack of retail
| banking skewing wages. ie you lack lots of branches staffed
| with relatively low-paid tellers.
| nerdponx wrote:
| I remember seeing a list on Reddit the other day showing other
| banks that also were heavily invested in MBSes similar to what
| SVB were invested in, and First Republic was on that list. I
| assume the market quickly lost confidence in all of the banks
| on that list.
| hn_throwaway_99 wrote:
| Lots of comments questioning the wisdom of this quote, but I
| think it's essentially spot on, albeit lacking some tact:
|
| > You're in business for 40 years and you are telling me you
| can't raise $2 billion privately? Get on a jet and fly to Kuwait
| like everyone else and give them control of one-third of the
| bank.
|
| That is, despite the fact that the run on the bank was the
| culmination of bad risk management, not the start, it was
| absolutely not a foregone conclusion the bank would fail. They
| definitely should have already had any asset commitments signed
| before they went public. Then they would have been able to say,
| truthfully, "we are in a stronger capital position than we've
| ever been in" as opposed to "please don't panic". SVB had a lot
| of value in their unique expertise that an outside investor would
| have valued before the run on the bank - it's really sad that
| institutional knowledge will be lost now.
| tqi wrote:
| "You're in business for 40 years and you are telling me you can't
| raise $2 billion privately? Get on a jet and fly to Kuwait like
| everyone else and give them control of one-third of the bank."
|
| A lot to unpack there...
| SoftTalker wrote:
| Sounds like how the mob used to "help" businesses that needed
| cash.
| [deleted]
| paganel wrote:
| For those wondering (like I was), the Kuwait quote is actually
| real, from the article itself. Maybe those "SVB insiders"
| should have just been better at doing their jobs.
| djaouen wrote:
| I am super happy this employee lost his job lol
| tqi wrote:
| TBH i think this is just saying the quiet part out loud.
| Everyone wants to trumpet their commitment to a higher
| mission and their core values and whatever else during the
| good times but when their backs are against the wall, none of
| that matters.
| wolverine876 wrote:
| It says some people are blaming the Fed's interest rate hikes.
| Should the Fed adjust the people's monetary policy to help some
| bankers?
|
| SVB couldn't, and isn't responsible for, anticipating interest
| rate changes (who could have seen those hikes coming? /s) and
| managing the risk? What else are they paid to do?
| ROTMetro wrote:
| If only there was some sort of 'insurance' to hedge against
| this that the bank could have availed themselves of.
| gnicholas wrote:
| Other banks saw the hikes coming (and plenty of regular people
| did too), and bought insurance hedges. SVB was relatively
| unique in not doing so.
| cm2187 wrote:
| It seems to me that from what I read, the root cause is that the
| bank was funded with corporate deposits and deposits from
| institutional investors, both of which are known to be volatile
| in a stress, and treated punitively by the liquidity regulations
| imposed on larger banks (in fact financial institutions deposits
| cannot be used to finance anything else than liquid assets). And
| they funded buy and hold positions of bonds with these deposits,
| not hedging the interest rate risk.
|
| All of which are internal fuckups and none of which I read in
| this article...
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