It's the same dynamic as the toilet paper shortages at the beginning of covid: most people weren't panic buying because they thought that there wouldn't be enough toilet paper to go around if everyone kept cool, they were panic buying because they knew not enough other people were keeping cool.
If it looks like the only reward you'll get for keeping your cool is a few weeks with a dirty bottom, it's hard to avoid joining in the run.
Bank runs are fascinating psychological dilemmas to me. On one hand the SVB CEO was correct - everything would have been fine if every depositor hadn't run for the door. But, when a bank says "please don't run for the door", it's already too late.
https://www.barrons.com/articles/svb-financial-stock-sale-ce...
So ok, we've "punished" SVB's management's poor money-management practices, but in the process we've also punished a lot of companies who had millions of dollars but now only have $250k (with uncertain future access to some portion of the remainder).
Good job! Stick it to those SVB execs! Talk about cutting off your nose to spite your face... or I guess cutting off the noses of others...
Each individual depositor has to make the bail/stay decision with extremely limited knowledge of what everyone else is going to do. They know that the market is freaking out at SVB's sale, and they know VCs are sending panicked emails to their startups telling them to bail. They know that if enough people actually do bail they may lose everything they have (in excess of $250k).
Presented with that information, the only rational move for a depositor is to bail. It's weird to blame the VCs for making the only good choice available to them.
> You're talking as though the SVB depositors are some sort of hive mind capable of acting in concert. They're not.
… is patently absurd. Startups and the VC market are all about meme copying, on everything from which front end stack or build system to use to how to write a “regretful” layoff announcement on LinkedIn, to (apparently) management of funds.
The boards are incestuous with respect to the ecosystem, and absolutely capable of acting in concert, as constantly demonstrated.
Memetic spread is not "acting in concert" in the way I meant it or in the way that OP was demanding. There is no common goal in the kinds of behaviors you're referencing.
PS. people didn't withdraw to spite anybody, this is not kindergarten. They started withdrawing because they don't want their small companies to die and need money for payroll, it's really the only sane thing to do.
And even if you're B2B, if you're 999th in line and your customers are 1000th in line, you're even more screwed. If you're first in line you at least have some remaining assets even if you have no customers. If your assets evaporate at the same time as your customer base then you have nothing.
Not all bank runs are systemic in nature.
The fact that the Feds did not maneuver this is another interesting datapoint.
TP was a result of people shifting from commercial toilet paper to home toilet paper, and supply chains not keeping up. Not from panic buying, fwiw.
https://www.washingtonpost.com/national/coronavirus-toilet-p...
(there are other better sources i'm sure)
> However, because grocery stores and other retailers usually only keep several weeks’ worth of toilet paper in their warehouses, the sudden increase in demand — largely fueled by panic-buying and hoarding — has quickly depleted stocks.
> “Consumers are experiencing nervousness and they are buying more than they should, depleting inventories of an industry that is very lean,” Gonzalez said. “It will take a couple of weeks for people to understand they have enough, and the inventories will increase on the shelves.”
Again, there are similarities to SVB. There were legitimate concerns about SVB's solvency that triggered a run. The same goes for toilet paper: there were a few legitimate hurdles which were made many times worse by panic buying.
[0] https://cnr.ncsu.edu/news/2020/05/coronavirus-toilet-paper-s...
It's just never that simple.
PS. the sentiment still makes no sense, SVB customers did not sign up for the bank to gamble with their money and they have a full moral right to do whatever it takes to get their working capital back the second they start to sense any trouble. These withdrawals are not just stupid meme stock lulz, this money belongs to the customers.
Many banks, even the big ones like Bank of America, Wells Fargo, and Chase, do not want to do this for random new small companies with no history and unknown founders. SVB was -- I believe -- founded in part to fill this gap.
Beyond that, there are also come contractual relationships between some VCs and SVB that require some VC portfolio companies to hold their deposits (at least some amount of them) with SVB. (I don't entirely understand this point, but even if I'm getting it wrong, the previous point is enough.)
The point is that they are supposed to have capitalization requirements and regulations that show they actually have more assets than liabilities.
But in reality they don’t so fractional reserve doesn’t work here. In fractional reserve the bank still has assets worth more than liabilities. That’s the whole point of the regulation.
This bank doesn’t meet that basic requirement
https://en.wikipedia.org/wiki/Bank_run