Folks at Facebook like to lecture others, sometimes via software, regarding gender equity. What happens inside their own company? “Meta has a pay gap problem, with women abroad getting lower pay and smaller bonuses than men” (Business Insider):
The company, formerly known as Facebook, continues to pay women less than men, whether they’re hourly workers or on salary, according to Meta’s most recently available reports on pay inequity in the UK and Ireland. The company also hands women smaller bonuses, the reports said.
The report on Meta’s pay gap in Ireland is the most recent, having been released quietly in December as part of a new law in the country that went into effect last year. In 2022, women working for Meta in Ireland were paid 15.7% less on average than men at the company. The difference in bonus pay in the country is even larger, with the average bonus for women being 43.3% lower than those that go to men.
For women working at Meta in the UK, where the company operates out of London, the pay gap is smaller but still prevalent, according to a report from last year detailing pay data from 2021. The average woman there was paid 2.1% less than the average man. And again, the difference in bonuses is much starker, with the average bonus going to women being 34.8% less than bonuses paid to men.
The lords of Silicon Valley are also fond of reminding the peasants how much smarter they are about money, even as many venture capital firms there underperform the S&P 500 (HBR 2014; a 2019 article). What about something simple like running a bank? With about $200 billion in deposits to protect, Silicon Valley Bank made a big bet that the Vanquisher of Corn Pop wouldn’t set off hyperinflation. The bank bought long-term Treasury bonds. When Bidenflation took off, the value of these bonds collapsed. From “What’s Going on With Silicon Valley Bank?” (WSJ):
SVB Financial bought tens of billions of dollars of seemingly safe assets, primarily longer-term U.S. Treasurys and government-backed mortgage securities. SVB’s securities portfolio rose from about $27 billion in the first quarter of 2020 to around $128 billion by the end of 2021.
These securities are at virtually no risk of defaulting. But they pay fixed interest rates for many years. That isn’t necessarily a problem, unless the bank suddenly needs to sell the securities. Because market interest rates have moved so much higher, those securities are suddenly worth less on the open market than they are valued at on the bank’s books. As a result, they could only be sold at a loss.
Many of the bank’s deposits are sizable enough that they don’t carry Federal Deposit Insurance Corp. protection. SVB said it estimates that at the end of 2022 the amount of deposits in its U.S. offices that exceed the FDIC insurance limit was $151.5 billion.
Before it disappears, let’s have a look at their home page:
Certainly nobody can accuse them of failure to represent a diversity of hairstyles.
What can you do to protect yourself in case some other banks were overconfident regarding our current rulers and their Borrow-and-Spend-Like-Drug-Dealers economic policy? Move money that is in cash into mutual funds or common stocks. The bank is just a custodian for these assets and if the bank fails you’re still a shareholder at the same level. If you must have cash of more than $250,000, spread it among multiple banks.
Let’s dig a little deeper into this failed bank. It seems that they too might have built a culture of equity by underpaying a group of employees unified by a gender ID:
They were experts on “sustainable finance” whose own enterprise just happened not to be sustainable.
Related:
- The Lost Bank lesson: Make sure you have a lot of friends in Washington, D.C. (failure of Washington Mutual)
- “One Million Masks | SVB COVID-19 Response” (YouTube), in which SVB gives money to Shafqat Islam so that he can turn around and give non-N95 masks to people who want to avoid an aerosol virus
Virtually every SVB customer with meaningful liquid assets used either sweeps or their treasury program.
In that scenario you have no deposits per se: the bank is custodian of your shares in a BlackRock Government Money Market fund or similar.
They will most likely be sold to JPM or GS next week for pennies on the dollar, and the buyer will then boost their earnings for the next 5 years by marking the artificially devalued assets back to market.
And say what you will about our government, but thanks to US banking regulations, even a total failure is only a minor inconvenience. SVB will be up and processing deposits on Monday.
Residents of other countries have lost their entire balances of both cash and securities over the past few years when this happened there. (Cyprus, Lebanon, Russia, etc.)
John: That’s a good point. This will prove to be a great day for one of the politically connected too-big-to-fail banks! That was one of the themes of the book The Lost Bank. It wasn’t even clear that Washington Mutual had inadequate reserves, but the Feds spread rumors about them and they were bought for nothing by JP Morgan Chase after a slow-motion bank run.
John: I just talked to a startup CEO. His small company had recently raised money and nearly all of it was sitting in cash at SVB, about $9.6 million. They tried to wire the money out in the few hours before the bank was seized, but think that the transfer didn’t go through. That’s a risk that nobody saw…
Phil: if he really kept $9.6m in business checking he needs a CFO. That cost him $1,200/day in lost interest plus uncompensated risk, as he discovered today.
For what it’s worth, we read the tea leaves and wired out on Thursday afternoon, which did go through.
Feels like the government played the same game with houses. Now that millennials have bought all the foreclosed properties away from generation X & paid in cash from their index funds, the debt from 15 years ago is now paid off & the government doesn’t need to inflate housing prices anymore.
Although most articles focus on the details of the assets SVB held: the WSJ late Friday afternoon came out with the figure that explains the major factor involved in what was the first major example of how bad an internet accelerated panic can be:
https://www.marketwatch.com/amp/story/silicon-valley-bites-the-hand-that-feeds-it-in-svb-bank-run-84d9be20
“Silicon Valley bites the hand that feeds it in SVB bank run …Indeed, a state court filing late Friday noted that the bank was in “sound financial
condition” prior to March 9, when “investors and depositors reacted by initiating withdrawals of $42 billion in deposits from the Bank on March 9, 2023, causing a run on the Bank.” ”
It appears there were issues with their holdings: but ones they were working to resolve and likely could have. It seems the real problem is that no one was panicking until the CEO suggested people needed to remain calm, which suggested there was reason to panic and they did.
It appears it was brought down by a mind bogglingly stupid commentary by the CEO.
A twitter long post gives one impression of what was going on before it did die, though it may be underplaying the issues with the treasuries with its balance sheet:
https://twitter.com/deepakshenoy/status/1634023539631087616
” Since everyone’s making a thread about SVB, here’s my contribution. Silicon Valley Bank is an old boring conservative bank. It is in trouble not because of bad lending practices, but because of a combination of – strange way to invest short term money – announcing a capital raise when another bank went bust – and then telling people not to panic SVB is not the modern Enron. It’s not the modern Lehman. It’s the modern LTCM, that thing that invested in good things and still (nearly) died.
And with $169 bn in deposits, SVB is as big as….HDFC Bank, the second largest bank in India.”
It sounds like on paper it had assets that were larger than its deposits, but they weren’t marked to market. Its unclear if its shut down and presumed fire sale of assets at current market prices over a short period will cause problems covering deposits, or if it’ll be acquired in one piece by an entity that won’t need to do the fire sale.
It seems like the other issue this highlights was people being too confident the government would keep them safe and so they held assets there that were way over the FDIC insurance limits:
https://www.netinterest.co/p/the-demise-of-silicon-valley-bank
“As at the end of 2022, it had 37,466 deposit customers, each holding in excess of $250,000 per account. Great for referrals when business is booming, such concentration can magnify a feedback loop when conditions reverse.
The $250,000 threshold is in fact highly relevant. It represents the limit for deposit insurance. In aggregate those customers with balances greater than this account for $157 billion of Silicon Valley Bank’s deposit base, holding an average of $4.2 million on account each. The bank does have another 106,420 customers whose accounts are fully insured but they only control $4.8 billion of deposits. Compared with more consumer-oriented banks, Silicon Valley’s deposit base skews very heavily towards uninsured deposits. Out of its total $173 billion deposits at end 2022, $152 billion are uninsured. ”
When apparently a comment below suggests there were rational alternatives:
https://marginalrevolution.com/marginalrevolution/2023/03/silicon-valley-bank.html
“Option #1) Sweep to custodial account where you buy short duration treasuries, repos, etc.
Option #2) Setup an ICS Account. This is relatively easy to do and any banking customer with large amounts of cash should be doing it. ICS stands for insured cash sweep. In an ICS account, your cash holdings are distributed amongst 100s of underlying accounts each at a different bank with no account holding more than $250k. All accounts are therefore fully FDIC insured, making your entire balance FDIC insured. Last I checked this could be done up to $125M in deposits for a given company.”
Wikipedia shows ICS is a real thing:
https://www.wikiwand.com/en/Insured_Cash_Sweep
“The Insured Cash Sweep or ICS service is used by banks and savings associations that are insured by the Federal Deposit Insurance Corporation (FDIC). In 2021, the service was reconfigured with several others offered by IntraFi Network into IntraFi Network Deposits and IntraFi Funding.”
one bank describing its ICS service:
https://www.cbhou.com/Resources/Customer-Corner/entryid/237/faqs-your-guide-to-insured-cash-sweep
“The Insured Cash Sweep service has been tested with billions of dollars and designed to comply with FDIC regulations. “
Why is $250,000 still the limit? Barack Obama bumped it to this level in 2008 (see https://archive.fdic.gov/view/fdic/4000 ). It should be $350,000 just to keep pace with Bidenflation (using BLS CPI). Given that our plan seems to be inflation today, inflation tomorrow, inflation forever (see George Wallace), shouldn’t the limit be automatically indexed to official inflation?
Actually the FDIC limit should be $0 since there should be private deposit insurance with limits according to what customers want. I recall a Cato Institute paper suggesting one of the things that allowed the S&L crisis back in the 1980s to happen was that the FDIC didn’t risk weight their insurance premiums, and now they only have some token stab at risk weighting, perhaps one tier or something.
With the government involved, there is moral hazard where all these companies likely figured the insurance limits were meaningless since the government would ensure the bank didn’t fail or they would be made whole. The push is likely on now behind the scenes for a bailout, with hyperbolic claims of the damage reported in this Venture Capital Journal article:
https://www.venturecapitaljournal.com/vcs-wrestle-with-whats-next-after-failure-of-svb/
“Tan of Y Combinator said on Twitter that SVB’s failure is “an *extinction level event* for startups and will set startups and innovation back by 10 years or more. BIG TECH will not care about this. They have cash elsewhere. All little startups, tomorrow’s Google’s and Facebooks, will be extinguished if we don’t find a fix.” “
RealityEngineer: If the majority of the affected startups are sufficiently obedient to progressive causes, there will be a bailout. Perhaps it will be called Silicon Valley Relief Fund ($1 trillion).
Fortunately it wouldn’t require $1 trillion to bail them out, but even $50 billion would be an unfortunate cost for startups that were able to have that much cash but too dense to diversity the risk. Startups have lots of sources of risk: their banking shouldn’t be one of them. Current analyst estimates I see are likely even without bailout there will be 80% or so recovery of funds:
https://twitter.com/BobEUnlimited/status/1634545204349792257
“Haven’t done a detailed analysis, but common sense work from a few good accounts (linked below) are penciling out 80c on the dollar for uninsured depositors if there is no bailout. That’s in line with my sense too”
but its unclear how long that’ll take so the issue is most likely a short term bailout.
Some are urging it due to concerns that if it goes under: the issue of people with accounts elsewhere that are over the insurance limit will dawn on the public and cause issues:
https://twitter.com/BobEUnlimited/status/1634539450557505537
“Fed/FDIC decisions on SVB determine whether they risk a bank run trillions of dollars in size. 1/3 of US deposits are in small banks and ~50% are uninsured. Haircutting SVB depositors will raise sensible questions about holding deposits at any small bank, risking a broader run.”
Gary Tan of YC is tweeting to get people to write to Congress to get a bailout:
https://twitter.com/garrytan/status/1634286688922132481
“If you or your company are affected, I recommend that you reach out to your local congressman to get this on their radar TODAY. “
Here we go (https://nypost.com/2023/03/11/silicon-valley-bank-pushed-woke-programs-ahead-of-collapse/):
“Jay Ersapah, head of Financial Risk Management & Model Risk of SVB’s UK branch, also served as company’s European LGBTQIA+ Employee Resource Group co-chair.”
This means virtually all of the SVB assets were purchased at the peak of the Covidian treasury market bubble.
https://twitter.com/INArteCarloDoss/status/1634688424329506816
the elephant in the room. Shit Valley Bank saw it’s deposits almost quadruple from 2019 to 2022 ($ 49 b => $ 190 b). Why? Coz all the QE and fiscal bailout money created a VC funding bubble. What everyone is so itching to do, is keep this spoliation of taxpayers going.
2/2
Don’t know if anyone is still reading these, I just saw this on topic tweet:
https://twitter.com/amasad/status/1635555581980479488
” Republicans are wrong to blame bank collapse on “wokeness”. SVB was not incompetent because they’re woke — instead they use wokeness to cover their incompetence, laziness, and malpractice. It’s an easy moral shield.”
RE: Don’t forget the wokeness on the regulatory side. https://en.m.wikipedia.org/wiki/Mary_C._Daly was in charge of supervising Silicon Valley Bank. “Daly is the first openly gay woman to lead a regional Federal Reserve bank, joining Federal Reserve Bank of Atlanta President Raphael Bostic, who is also openly gay. She is the second woman to lead the San Francisco Fed.” She was great at having a first-class identity, but apparently not so great at noticing the impending failure of a $200 billion bank her organization was supervising.