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Silicon Valley Bank, two years later - Mick - 02-08-2025

A few weeks back, the FDIC sued 17 former executives and directors of Silicon Valley Bank alleging gross negligence and breaches of fiduciary duty. They claimed that the defendants ignored basic fundamentals of banking prudence and the bank’s risk policies, taking on excessive risk for short-term gains.

They cited failure to hedge interest rate-sensitive, long-term government bonds and related mortgage-backed securities, along with a “grossly imprudent” $294 milllion dividend to its parent that drained needed capital less than three months before the bank collapsed.

Named defendants include Gregory Becker, Daniel Beck, Marc Cadieux, Laura Izurieta, Michael Kruse, Michael Descheneaux, Eric Benhamou, Roger Dunbar, Joel Friedman, Mary Miller, Kate Mitchell, Beverly Matthews, Garen Staglin, Elizabeth Burr, Richard Daniels, Alison Davis and Jeffrey Maggioncalda. The executives had lobbied hard to water down oversight requirements. And Becker is currently facing scrutiny after he sold $3,578,652.31 in common stock two weeks before SVB was shut down by federal regulators.

Lawyers for former Chief Risk Officer Laura Isurieta said that it was outrageous that she was named in the suit because she had repeatedly warned against imprudent investments for (literally) years. But, of course, she had to be named, though she stepped down in April 2022, long before the collapse.
This is a 25-minute video on the collapse of Silicon Valley Bank presented from a basic angle. If you’re at all sophisticated in financial matters, it’s not for you. If you’re a comparative novice, it’s an excellent video.

Here's a few interesting nuggets if you don't want to sit through the video:

1.      SVB had $182 billion in assets, but only $74 billion in performing loans. It had invested $108 billion in long-term financial instruments that paid essentially nothing which was the highest average of any U. S. bank.
2.      97% of SVB's mortgage-backed securities (remember those from 15 years ago?) were 10+ years in duration with a weighted average yield of 1.56%.
3.      The majority of those assets were on the balance sheet as hide hold to maturity, meaning they weren’t accounted for at market value.
4.      89% of SVB’s deposits exceeded the FDIC’s insurance threshold.
5.      They did that because…
6.      The Fed had signalled that there would be no inflation for the foreseeable future, and then…
7.      The Fed raised interest rates higher and faster than they had for two generations.
8.      VC and client behavior played a significant role.       VC investment declined as rates increased and less funding means startups burned cash at 2x pre-2021 levels
9.      “Big Four/Too Big to Fail” bank net unrealized losses skyrocketed (chart at 16:45 mark)
10.  Check out the “loan to deposit” ratio chart at the 19:19 mark. SVB is basically off the scale (in a very unhealthy way).
11.  Bears repeating: SVB, unlike other banks, did not have customer diversity, nor did they diversify their assets.
I’m fascinated by SVB’s collapse, it just seemed so counterintuitive that a bank dedicated to the wealthiest tech and innovation in humankind’s history would collapse. I’ve known every SVB CEO since meeting their original CEO, Roger Smith, as a senior Finance major in college. I liked and trusted all of them, except Greg Becker.

Here’s Becker’s Wikipedia page. He’s so shady that (a) his birthdate is a moving target and (b) it appears he claimed an MBA early in his career that he did not earn (but opened up opportunities for him) and ©, as he stated in his Senate testimony, right after the bank collapsed, Becker flew first class to his Hawai’i home to leave the remaining executives to deal with the failure. He stated he wanted to be with his family, meaning his second wife Marilyn. 

Escape To Maui: Living In Disgrace Never Looked This Good! - Beat of Hawaii

RE: Silicon Valley Bank, two years later - JohnR34231 - 02-08-2025

Yeah, the way I heard it SVB had a commitment to raise the money it needed to take the appropriate write-down and stay in business. Super VC Peter Thiel (a Stanford grad) told all his companies to withdraw their funds and that started the bank run that caused the collapse. I always thought that SVB had a close enough relationship with the VC's that they would be willing to work with them through this crisis. I guess they did, except for Thiel.

RE: Silicon Valley Bank, two years later - Goose - 02-08-2025

(02-08-2025, 01:12 PM)JohnR34231 Wrote:  Yeah, the way I heard it SVB had a commitment to raise the money it needed to take the appropriate write-down and stay in business. Super VC Peter Thiel (a Stanford grad) told all his companies to withdraw their funds and that started the bank run that caused the collapse. I always thought that SVB had a close enough relationship with the VC's that they would be willing to work with them through this crisis. I guess they did, except for Thiel.
My understanding is that all those VC with companies over the insurance limit in their portfolios were staring at each other and wondering if/when the dam would break. Nobody wanted to be left holding the bag. Thiel was first, but the situation was far from stable. If a VC lost lots of OPM by recommending his companies stand pat,  his situation would be worse than that of SVB :-). IMO it was only a matter of (not much) time before somebody else acted similarly.

RE: Silicon Valley Bank, two years later - TonyLima - 02-08-2025

"All major crime is an inside job." - Slim Pickens, "Rancho Deluxe"

RE: Silicon Valley Bank, two years later - chrisk - 02-08-2025

Former execs comment on SVB collapse

https://fortune.com/2024/10/13/chasing-yield-inside-joke-svb-collapse-bond-portfolio-fed-rate-hikes/

RE: Silicon Valley Bank, two years later - JohnR34231 - 02-09-2025

Where was Jimmy Stewart when they needed him?

RE: Silicon Valley Bank, two years later - Mick - 02-09-2025

(02-08-2025, 11:17 PM)chrisk Wrote:  Former execs comment on SVB collapse

https://fortune.com/2024/10/13/chasing-yield-inside-joke-svb-collapse-bond-portfolio-fed-rate-hikes/

Lots of comments from Ken Wilcox, the CEO just prior to Becker. He grew the bank from $4 bils. to $20 bils. by focusing exclusively on tech lending (prior CEOs lent to real estate, churches, etc.). Made sense. And Ken's personality, shall we say, was similar to that of engineers. I could see a comfort level there.

I agree with everything Wilcox said in the article except for:

“By God, the regulators, practically—when you’re as big as they were in 2023—they’re living with you, and they know everything you’re doing,” Wilcox said, adding: “They knew, trust me, that the long term bond portfolio was growing … so why didn’t they tell Greg?”

Yeah. First...everyone, particularly the former Chief Risk Officer had advised Becker against chasing yield, the enormously stupid bet that doomed the bank. Second...my guess is that regulators repeatedly informed Becker and all 17 people named in the lawsuit that their investment strategy was cataclysmic. Third...week 1 of a Finance 101 class, you learn not to acquire long-term, low-performing assets when interest rates are rising. It's what doomed the S&Ls.

Becker knew what he was doing. He was just colossally stupid.

RE: Silicon Valley Bank, two years later - Mick - 01-05-2026

Annual update on Silicon Valley Bank:

1. Here's the FDIC Complaint (breach of fiduciary duty and gross negligence) from a year ago:  FDIC-Complaint.pdf. 34 page complaint, fun reading. $294 million dividend paid less than three months before the bank failure.
2. Those sued include CEO Greg Becker, CFO Daniel Beck, CCO Marc Cadieux, President and former CFO Michael Descheneaux, Treasurer Michael Kruse, Chief Risk Officer Laura Izurieta. Directors include Eric Benhamou, Roger Dunbar, Joel Friedman, Mary Miller, Kate Mitchell, Beverly Matthews, Garen Staglin, Elizabeth Burr, Richard Daniels, Alison Davis and Jeffrey Maggioncalda. All but Burr, Davis and Maggioncalda served on one or more of Asset Liability Committee, the Risk Committee, or the Finance Committee.
3. Bailey Glasser (of West Virginia/Wash DC) and ArentFox Schiff repping FDIC.
4. The circumstances surrounding former Chief Risk Officer Laura Iurieta several quarters before the bank's failure must be interesting.
5. Motion to dismiss lawsuit denied a few months ago.
6. A separate securities class action filed by SVB shareholders naming Becker, Beck, the SVB Directors and underwriters, the investment banks underwriting Silicon Valley Bank securities and the auditor, KPMG. Here's a link to the complaint:  BERNSTEIN LITOWITZ BERGER and failed motions to dismiss:  ORDER by Judge Noel Wise denying for Chandra Vanipenta v. SVB Financial Group et al :: Justia Dockets & Filings. KPMG filed request for reconsideration in July, 2025, also denied.
7. Becker appears to be using Orrick for his defense, Beck seems to be using Gibson Dunn, Cadieux using Morrison & Foerster, Descheneaux using Hogan Lovells, Kruse use Latham & Watkins, and Izurieta using Skadden. Directors appear to be using WilmerHale. SVB Financial Group using Sullivan & Cromwell.
8. Both litigations are active. Cases now in discovery phase. This is going to be a while. Buckle up...

Pretty good summary in here with quotes from near-insiders and some interesting photos:

Chasing yield was an inside joke at SVB—until the bank collapsed | Fortune

RE: Silicon Valley Bank, two years later - TrumpCard - 01-05-2026

It's been a while, and this isn't my industry, so I had to look a bit to remind myself of the 2023 banking crisis.  It looks like the DIF look losses in the range of $16 billion - $20 billion on the SVB bailout and then additional losses of ~$15 billion on the First Republic Bank bailout and ~$2 billion on the Signature Bank failure.  As I understand it, the DIF is in the process of replenishing the losses through special assessments to banks, rather than by payments from the U.S. General Fund or other taxpayer sources.  When the Swiss government brokered the sale of Credit Suisse to UBS, it appeared Credit Suisse shareholders and bondholders might absorb all the losses, but due to legal rulings since that time, the government or the Swiss deposit insurance fund may be on the hook to Credit Suisse bondholders for some of their ~$20 billion in losses.  Does that info all look right to you?

Some additional questions for those who know this field:
--Does it appear that officials at FRB, Signature, and Credit Suisse were similarly culpable, or were their banks victimized unfairly by the panic that set in after SVB collapsed?
--Does it appear that regulators have learned enough from the events in 2023 to be able to prevent a repeat?  
--Has there been significant further consolidation in the banking industry since mid-2023?
--Have depositors continued moving their assets from mid-sized banks to the systemically significant banks deemed "too big to fail"?

Thanks for y'all's input!

RE: Silicon Valley Bank, two years later - Leftcoast - 01-06-2026

Two random thoughts several years later.

I'm still working in the start-up eco-system despite being north of 60 years old.  I'm the oldest guy at my company and have been for several years.  Still love it and moved back to start-ups in my late 50s after tiring of Ops roles within the FAANG treadmill.

I confirm the pre-collapse Peter Thiel phone calls from personal discussions with small start-up CEOs/CFOs.  Those I spoke to were extremely thankful for the heads-up given the mess several days later.  There's no doubt that this precipitated the collapse as rumors and panic flew widely both inside and outside Thiel's network.  So widely that I know of one CFO who was almost fired when his CEO questioned why HE wasn't given any advance notice (from the CFO).

Also, SVB is missed as many start-ups that left are chafing against the backwards practices (fax?, long leadtimes, maintaining actual paper trails, in person signatures, etc) at their "new" banks.  The modern infrastucture built at SVB had many advantages. A number of companies I know found their way back to SVB in it's new form.  It was a good pick-up by First Citizens for several reasons.

Is that what you guys are seeing several years out?

RE: Silicon Valley Bank, two years later - BostonCard - 01-06-2026

(01-05-2026, 12:54 PM)TrumpCard Wrote:  Some additional questions for those who know this field:

--Does it appear that regulators have learned enough from the events in 2023 to be able to prevent a repeat?  

Oh, you sweet summer child. No regulator will ever be able to learn enough to avoid a repeat, and even if they do, the regulated banks will always push back against government regulation that pushes down profits and creates a lot of paperwork.

As long as deposit-taking banks exist, there will consistently be pressure to increase profits from those deposits, with an accompanying increase in risk to those banks… especially after a period of relative calm.

As Warren Buffet is quoted as saying, you never know who is out there swimming naked until the tide recedes.  Undoubtably there are going to be some banks swimming naked out there.

BC

RE: Silicon Valley Bank, two years later - TrumpCard - 01-06-2026

Thanks, BC.  Are loan impairments on office buildings and shopping centers with high post-COVID vacancies the next frontier?

RE: Silicon Valley Bank, two years later - Mick - 01-06-2026

(01-06-2026, 01:59 PM)Leftcoast Wrote:  Two random thoughts several years later.

I'm still working in the start-up eco-system despite being north of 60 years old.  I'm the oldest guy at my company and have been for several years.  Still love it and moved back to start-ups in my late 50s after tiring of Ops roles within the FAANG treadmill.

I confirm the pre-collapse Peter Thiel phone calls from personal discussions with small start-up CEOs/CFOs.  Those I spoke to were extremely thankful for the heads-up given the mess several days later.  There's no doubt that this precipitated the collapse as rumors and panic flew widely both inside and outside Thiel's network.  So widely that I know of one CFO who was almost fired when his CEO questioned why HE wasn't given any advance notice (from the CFO).

Also, SVB is missed as many start-ups that left are chafing against the backwards practices (fax?, long leadtimes, maintaining actual paper trails, in person signatures, etc) at their "new" banks.  The modern infrastucture built at SVB had many advantages. A number of companies I know found their way back to SVB in it's new form.  It was a good pick-up by First Citizens for several reasons.

Is that what you guys are seeing several years out?

Banks are highly leveraged entities. Difficult to make money, easy to slip. I knew and admired many, many SVB officers and administrative people. I thought they were very strong for decades. I respected their founded Bill Biggerstaff, their original CEO Roger Smith (who I met when I was in college), their next CEO, John Dean, and their next CEO, Ken Wilcox. They were agile and versatile...just like a startup. They got into businesses when they should, they honed their processes, they were typically in front of the market. They got out of businesses when they needed to. They grew quickly but prudently through 2019. And then, they tripled in size.

If anyone ever asks me to list the most underrated factors it takes to succeed in business, I would put personal factors at the very top. Appearance, interpersonal style, gravitas, etc. and yes, everyone knows that they are important, but when I think of SVB's later senior management, I think of the little warning bell that went off in the back of my mind when I met them and the predictable, spectacular mistakes that followed when they chased yield.

If you want examples, I'm happy to provide it by PM.

RE: Silicon Valley Bank, two years later - BostonCard - 01-06-2026

Mick dateline='[url=tel:1767739251' Wrote:  1767739251[/url]']


If anyone ever asks me to list the most underrated factors it takes to succeed in business, I would put personal factors at the very top. Appearance, interpersonal style, gravitas, etc. and yes, everyone knows that they are important, but when I think of SVB's later senior management, I think of the little warning bell that went off in the back of my mind when I met them and the predictable, spectacular mistakes that followed when they chased yield.

Your post hints at another very underrated factor for long term success: patience.  I think companies get in trouble when they lose patience.

BC

RE: Silicon Valley Bank, two years later - Treebound - 01-06-2026

Roger Smith was/is one of the good guys.  I had the opportunity to serve on a Stanford board with him some years ago - a class act and great Stanford fan.  Like you LeftCoast, I watched them start to slip/get greedy and I too returned to the start-up world as the "gray matter" amongst the fresh faces - it keeps me agile and engaged (hopefully). As SVB started to tumble we to got the calls from Thiel and co.  Ironically, it happened during my first board meeting and the Thiel guys and the rest of the board angrily clashed over what to do.  Our CFO was caught in the cross fire, but thankfully we took a compromise path that worked out just fine.  

Will this happen again....absolutely.  I like the tide/swimming naked analogy as it's spot on.  I'm now trying to figure out the next opportunity and there are so many options that won't be around in a year or two.  May we live in interesting times.