How will the Silicon Valley Bank failure affect software engineers and tech startups? Find out why SVB got into trouble and what it means for the average programmer.

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🔗 Resources

Silicon Valley Bank News https://www.cnbc.com/2023/03/12/heres-what-could-happen-next-for-silicon-valley-bank-customers.html
USDC Depeg News https://www.forbes.com/sites/digital-assets/2023/03/11/43-billion-nightmare-sudden-circle-depeg-could-be-about-to-crash-the-price-of-bitcoin-ethereum-bnb-xrp-cardano-dogecoin-polygon-and-solana
Is coding really dead? https://youtu.be/Zs9Tifup1Bc
Tech Trends 2023 https://youtu.be/1v_TEnpqHXE

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🔖 Topics Covered

- How did SVB collapse?
- Simple explanation of Silicon Valley Bank failure?
- Will SVB customers get their money back?
- Why did USDC Depeg?
- Outlook of the tech Job Market
2024-02-04T05:11:51.126Z
nova-2
2-general-nova
2024-01-09.29447
30089e05-99d1-4376-b32e-c263170674af
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deprecated
It is March 12, 2023, and you're watching the Code Report.
A bank is one of the easiest businesses to run.
All you have to do is collect money and not things up.
Unfortunately, the banker behind many high profile tech startups did not follow this rule and was shut down and seized by the FDIC on Friday.
We fucked up.
Now people who work at startups that keep their cash at Silicon Valley Bank have been freaking out because they're worried that their paychecks might bounce or their cash burning employers might collapse.
But is that even realistic?
Well, there's a lot to untangle here.
1st, if you're not already familiar with the situation, it.
Let me get you up to speed.
Over the last decade, we lived through a tech boom that was even bigger than the dotcom bubble.
Thanks to easy money and low interest rates from central banks, all you needed was the next big idea for up to get an investment from a venture capital firm.
All you need are some slides and PowerPoint about why Tinder for horses makes the world a better place than some guy in a Patagonia vest gives you ten $1,000,000.
You're a tech bro now and need to put that money somewhere and do better than Silicon Valley Bank.
Things were great for SVB when interest rates were low, and it became the 16th largest bank in the United States with around a 175,000,000,000 in customer deposits.
To make a return on this cash, they invested in bonds and mortgage backed securities often with 10 or more years to maturity.
The problem is that when interest rates go up, bond prices go down, and this led to a mismatch between assets and liabilities.
People got wind of this, it led to an old fashioned run on the bank where everybody started to panic and withdraw their money.
The government, who insures deposits up to 250,000 stepped in quickly and shut down the bank to minimize their losses.
Sounds pretty crazy, but who's actually going to lose money here?
Well, if you have less than 250 k in this bank, then you lose nothing because that money is fully insured.
However, most tech startups likely have more than that in the bank, and at least 85% of deposits were uninsured, and that money could end up getting a haircut.
The situation is ongoing, and there's a few different things that could happen here.
A bigger bank could swoop in and acquire SVB, and guarantee all the deposits.
If That doesn't work, maybe they'll create some legislation to rob money from the taxpayers to bail out these tech startups, just like they did with big banks in 2,008.
But if that doesn't work, The FDIC can just liquidate all of the assets of SVB, then pay out a future dividend to uninsured depositors.
That's as good as money, sir.
Those are IOUs.
So at the end of the day, depositors will get most, if not all of their money back.
Shareholders though are pretty much screwed.
They got bailed in and now face a total loss.
Luckily though, owe.
The bank's top executives were able to sell 1,000,000 of dollars in stock over the last few weeks, so they'll be just fine.
The most interesting thing about this situation though is the contagion.
Contagion.
Or what kind of economic shocks will this create for other businesses in Silicon Valley?
US Decoyne, one of the top stable coins in crypto, depegged as a because more than 3,000,000,000 of its cash reserves were exposed to SVB.
This looks really bad for crypto because these stablecoins are necessary to keep liquidity in the crypto markets.
If it were to collapse entirely, there would be a ton of collateral damage.
The collapse of Terra's UST last year was pretty bad, but the collapse of USDC would be be far worse.
When it comes to Contagion, it makes you wonder if there are any other banks in a similar situation to SVB.
It was uniquely exposed to tech startups, but The key problem here is rising interest rates, and there are likely other banks out there that made similar mistakes.
But most importantly, how will this affect the average software engineer who works at a start up exposed to SVB?
Many companies like Roku and Roblox have disclosed their exposure and should have no problem continuing their operations as normal.
Then you have other smaller startups saying that they're not going to be able to meet their payroll.
That sounds bad, but in reality, they'll likely be able to find some kind of temporary solution to continue operating as normal until the FDIC gets things figured out.
Longer term though, this is definitely bad news for the tech job market.
Running out of money is never a good thing, especially in an industry where it's normal to burn through tons of cash until you get acquired or IPO.
To make matters worse, inflation was worse than expected recently, which means the Fed's not going to be able to ease interest rates anytime soon.
There's really only 2 possible outcomes.
Interest rates stay high and we enter the Great Depression 2.0, or interest rates go low and the dollar hyperin plates into worthless toilet paper.
In either case, it doesn't matter, because AI is going to replace all these tech jobs anyway, and that's why you should learn to mine as soon as possible.
This has been the CodeReport, thanks for watching, and I will see you in the next one.

Speaker 0: It is March 12, 2023, and you're watching the Code Report. A bank is one of the easiest businesses to run. All you have to do is collect money and not things up. Unfortunately, the banker behind many high profile tech startups did not follow this rule and was shut down and seized by the FDIC on Friday. We fucked up.

Now people who work at startups that keep their cash at Silicon Valley Bank have been freaking out because they're worried that their paychecks might bounce or their cash burning employers might collapse. But is that even realistic? Well, there's a lot to untangle here. 1st, if you're not already familiar with the situation, it. Let me get you up to speed.

Over the last decade, we lived through a tech boom that was even bigger than the dotcom bubble. Thanks to easy money and low interest rates from central banks, all you needed was the next big idea for up to get an investment from a venture capital firm. All you need are some slides and PowerPoint about why Tinder for horses makes the world a better place than some guy in a Patagonia vest gives you ten $1,000,000. You're a tech bro now and need to put that money somewhere and do better than Silicon Valley Bank. Things were great for SVB when interest rates were low, and it became the 16th largest bank in the United States with around a 175,000,000,000 in customer deposits.

To make a return on this cash, they invested in bonds and mortgage backed securities often with 10 or more years to maturity. The problem is that when interest rates go up, bond prices go down, and this led to a mismatch between assets and liabilities. People got wind of this, it led to an old fashioned run on the bank where everybody started to panic and withdraw their money. The government, who insures deposits up to 250,000 stepped in quickly and shut down the bank to minimize their losses. Sounds pretty crazy, but who's actually going to lose money here?

Well, if you have less than 250 k in this bank, then you lose nothing because that money is fully insured. However, most tech startups likely have more than that in the bank, and at least 85% of deposits were uninsured, and that money could end up getting a haircut. The situation is ongoing, and there's a few different things that could happen here. A bigger bank could swoop in and acquire SVB, and guarantee all the deposits. If That doesn't work, maybe they'll create some legislation to rob money from the taxpayers to bail out these tech startups, just like they did with big banks in 2,008.

But if that doesn't work, The FDIC can just liquidate all of the assets of SVB, then pay out a future dividend to uninsured depositors. That's as good as money, sir. Those are IOUs. So at the end of the day, depositors will get most, if not all of their money back. Shareholders though are pretty much screwed.

They got bailed in and now face a total loss. Luckily though, owe. The bank's top executives were able to sell 1,000,000 of dollars in stock over the last few weeks, so they'll be just fine. The most interesting thing about this situation though is the contagion. Contagion.

Or what kind of economic shocks will this create for other businesses in Silicon Valley? US Decoyne, one of the top stable coins in crypto, depegged as a because more than 3,000,000,000 of its cash reserves were exposed to SVB. This looks really bad for crypto because these stablecoins are necessary to keep liquidity in the crypto markets. If it were to collapse entirely, there would be a ton of collateral damage. The collapse of Terra's UST last year was pretty bad, but the collapse of USDC would be be far worse.

When it comes to Contagion, it makes you wonder if there are any other banks in a similar situation to SVB. It was uniquely exposed to tech startups, but The key problem here is rising interest rates, and there are likely other banks out there that made similar mistakes. But most importantly, how will this affect the average software engineer who works at a start up exposed to SVB? Many companies like Roku and Roblox have disclosed their exposure and should have no problem continuing their operations as normal. Then you have other smaller startups saying that they're not going to be able to meet their payroll.

That sounds bad, but in reality, they'll likely be able to find some kind of temporary solution to continue operating as normal until the FDIC gets things figured out. Longer term though, this is definitely bad news for the tech job market. Running out of money is never a good thing, especially in an industry where it's normal to burn through tons of cash until you get acquired or IPO. To make matters worse, inflation was worse than expected recently, which means the Fed's not going to be able to ease interest rates anytime soon. There's really only 2 possible outcomes.

Interest rates stay high and we enter the Great Depression 2.0, or interest rates go low and the dollar hyperin plates into worthless toilet paper. In either case, it doesn't matter, because AI is going to replace all these tech jobs anyway, and that's why you should learn to mine as soon as possible. This has been the CodeReport, thanks for watching, and I will see you in the next one.
It is March 12, 2023, and you're watching the Code Report. A bank is one of the easiest businesses to run. All you have to do is collect money and not things up. Unfortunately, the banker behind many high profile tech startups did not follow this rule and was shut down and seized by the FDIC on Friday. We fucked up. Now people who work at startups that keep their cash at Silicon Valley Bank have been freaking out because they're worried that their paychecks might bounce or their cash burning employers might collapse. But is that even realistic? Well, there's a lot to untangle here. 1st, if you're not already familiar with the situation, it. Let me get you up to speed. Over the last decade, we lived through a tech boom that was even bigger than the dotcom bubble. Thanks to easy money and low interest rates from central banks, all you needed was the next big idea for up to get an investment from a venture capital firm.
banking
finance
investing
All you need are some slides and PowerPoint about why Tinder for horses makes the world a better place than some guy in a Patagonia vest gives you ten $1,000,000.
You're a tech bro now and need to put that money somewhere and do better than Silicon Valley Bank. Things were great for SVB when interest rates were low, and it became the 16th largest bank in the United States with around a 175,000,000,000 in customer deposits. To make a return on this cash, they invested in bonds and mortgage backed securities often with 10 or more years to maturity. The problem is that when interest rates go up, bond prices go down, and this led to a mismatch between assets and liabilities. People got wind of this, it led to an old fashioned run on the bank where everybody started to panic and withdraw their money. The government, who insures deposits up to 250,000 stepped in quickly and shut down the bank to minimize their losses. Sounds pretty crazy, but who's actually going to lose money here? Well, if you have less than 250 k in this bank, then you lose nothing because that money is fully insured. However, most tech startups likely have more than that in the bank, and at least 85% of deposits were uninsured, and that money could end up getting a haircut. The situation is ongoing, and there's a few different things that could happen here. A bigger bank could swoop in and acquire SVB, and guarantee all the deposits. If That doesn't work, maybe they'll create some legislation to rob money from the taxpayers to bail out these tech startups, just like they did with big banks in 2,008. But if that doesn't work, The FDIC can just liquidate all of the assets of SVB, then pay out a future dividend to uninsured depositors. That's as good as money, sir. Those are IOUs. So at the end of the day, depositors will get most, if not all of their money back. Shareholders though are pretty much screwed. They got bailed in and now face a total loss. Luckily though, owe. The bank's top executives were able to sell 1,000,000 of dollars in stock over the last few weeks, so they'll be just fine. The most interesting thing about this situation though is the contagion. Contagion. Or what kind of economic shocks will this create for other businesses in Silicon Valley? US Decoyne, one of the top stable coins in crypto, depegged as a because more than 3,000,000,000 of its cash reserves were exposed to SVB. This looks really bad for crypto because these stablecoins are necessary to keep liquidity in the crypto markets. If it were to collapse entirely, there would be a ton of collateral damage. The collapse of Terra's UST last year was pretty bad, but the collapse of USDC would be be far worse.
cryptocurrency
banking
finance
mortgages
stock market
investing
earnings
loans
insurance
When it comes to Contagion, it makes you wonder if there are any other banks in a similar situation to SVB. It was uniquely exposed to tech startups, but The key problem here is rising interest rates, and there are likely other banks out there that made similar mistakes. But most importantly, how will this affect the average software engineer who works at a start up exposed to SVB? Many companies like Roku and Roblox have disclosed their exposure and should have no problem continuing their operations as normal. Then you have other smaller startups saying that they're not going to be able to meet their payroll. That sounds bad, but in reality, they'll likely be able to find some kind of temporary solution to continue operating as normal until the FDIC gets things figured out.
Longer term though, this is definitely bad news for the tech job market. Running out of money is never a good thing, especially in an industry where it's normal to burn through tons of cash until you get acquired or IPO. To make matters worse, inflation was worse than expected recently, which means the Fed's not going to be able to ease interest rates anytime soon. There's really only 2 possible outcomes. Interest rates stay high and we enter the Great Depression 2.0, or interest rates go low and the dollar hyperin plates into worthless toilet paper.
inflation
In either case, it doesn't matter, because AI is going to replace all these tech jobs anyway, and that's why you should learn to mine as soon as possible. This has been the CodeReport, thanks for watching, and I will see you in the next one.
artificial intelligence
computers
It is March 12, 2023, and you're watching the Code Report. A bank is one of the easiest businesses to run. All you have to do is collect money and not things up. Unfortunately, the banker behind many high profile tech startups did not follow this rule and was shut down and seized by the FDIC on Friday. We fucked up. Now people who work at startups that keep their cash at Silicon Valley Bank have been freaking out because they're worried that their paychecks might bounce or their cash burning employers might collapse. But is that even realistic? Well, there's a lot to untangle here. 1st, if you're not already familiar with the situation, it. Let me get you up to speed. Over the last decade, we lived through a tech boom that was even bigger than the dotcom bubble. Thanks to easy money and low interest rates from central banks, all you needed was the next big idea for up to get an investment from a venture capital firm. All you need are some slides and PowerPoint about why Tinder for horses makes the world a better place than some guy in a Patagonia vest gives you ten $1,000,000. You're a tech bro now and need to put that money somewhere and do better than Silicon Valley Bank. Things were great for SVB when interest rates were low, and it became the 16th largest bank in the United States with around a 175,000,000,000 in customer deposits. To make a return on this cash, they invested in bonds and mortgage backed securities often with 10 or more years to maturity. The problem is that when interest rates go up, bond prices go down, and this led to a mismatch between assets and liabilities. People got wind of this, it led to an old fashioned run on the bank where everybody started to panic and withdraw their money. The government, who insures deposits up to 250,000 stepped in quickly and shut down the bank to minimize their losses. Sounds pretty crazy, but who's actually going to lose money here? Well, if you have less than 250 k in this bank, then you lose nothing because that money is fully insured. However, most tech startups likely have more than that in the bank, and at least 85% of deposits were uninsured, and that money could end up getting a haircut. The situation is ongoing, and there's a few different things that could happen here. A bigger bank could swoop in and acquire SVB, and guarantee all the deposits. If That doesn't work, maybe they'll create some legislation to rob money from the taxpayers to bail out these tech startups, just like they did with big banks in 2,008. But if that doesn't work, The FDIC can just liquidate all of the assets of SVB, then pay out a future dividend to uninsured depositors. That's as good as money, sir. Those are IOUs. So at the end of the day, depositors will get most, if not all of their money back. Shareholders though are pretty much screwed. They got bailed in and now face a total loss. Luckily though, owe. The bank's top executives were able to sell 1,000,000 of dollars in stock over the last few weeks, so they'll be just fine. The most interesting thing about this situation though is the contagion. Contagion. Or what kind of economic shocks will this create for other businesses in Silicon Valley? US Decoyne, one of the top stable coins in crypto, depegged as a because more than 3,000,000,000 of its cash reserves were exposed to SVB. This looks really bad for crypto because these stablecoins are necessary to keep liquidity in the crypto markets. If it were to collapse entirely, there would be a ton of collateral damage. The collapse of Terra's UST last year was pretty bad, but the collapse of USDC would be be far worse. When it comes to Contagion, it makes you wonder if there are any other banks in a similar situation to SVB. It was uniquely exposed to tech startups, but The key problem here is rising interest rates, and there are likely other banks out there that made similar mistakes. But most importantly, how will this affect the average software engineer who works at a start up exposed to SVB? Many companies like Roku and Roblox have disclosed their exposure and should have no problem continuing their operations as normal. Then you have other smaller startups saying that they're not going to be able to meet their payroll. That sounds bad, but in reality, they'll likely be able to find some kind of temporary solution to continue operating as normal until the FDIC gets things figured out. Longer term though, this is definitely bad news for the tech job market. Running out of money is never a good thing, especially in an industry where it's normal to burn through tons of cash until you get acquired or IPO. To make matters worse, inflation was worse than expected recently, which means the Fed's not going to be able to ease interest rates anytime soon. There's really only 2 possible outcomes. Interest rates stay high and we enter the Great Depression 2.0, or interest rates go low and the dollar hyperin plates into worthless toilet paper. In either case, it doesn't matter, because AI is going to replace all these tech jobs anyway, and that's why you should learn to mine as soon as possible. This has been the CodeReport, thanks for watching, and I will see you in the next one.
It
it
is
is
March
march
12,
12
2023,
2023
and
and
you're
you're
watching
watching
the
the
Code
code
Report.
report
A
a
bank
bank
is
is
one
one
of
of
the
the
easiest
easiest
businesses
businesses
to
to
run.
run
All
all
you
you
have
have
to
to
do
do
is
is
collect
collect
money
money
and
and
not
not
things
things
up.
up
Unfortunately,
unfortunately
the
the
banker
banker
behind
behind
many
many
high
high
profile
profile
tech
tech
startups
startups
did
did
not
not
follow
follow
this
this
rule
rule
and
and
was
was
shut
shut
down
down
and
and
seized
seized
by
by
the
the
FDIC
fdic
on
on
Friday.
friday
We
we
fucked
fucked
up.
up
Now
now
people
people
who
who
work
work
at
at
startups
startups
that
that
keep
keep
their
their
cash
cash
at
at
Silicon
silicon
Valley
valley
Bank
bank
have
have
been
been
freaking
freaking
out
out
because
because
they're
they're
worried
worried
that
that
their
their
paychecks
paychecks
might
might
bounce
bounce
or
or
their
their
cash
cash
burning
burning
employers
employers
might
might
collapse.
collapse
But
but
is
is
that
that
even
even
realistic?
realistic
Well,
well
there's
there's
a
a
lot
lot
to
to
untangle
untangle
here.
here
1st,
1st
if
if
you're
you're
not
not
already
already
familiar
familiar
with
with
the
the
situation,
situation
it.
it
Let
let
me
me
get
get
you
you
up
up
to
to
speed.
speed
Over
over
the
the
last
last
decade,
decade
we
we
lived
lived
through
through
a
a
tech
tech
boom
boom
that
that
was
was
even
even
bigger
bigger
than
than
the
the
dotcom
dotcom
bubble.
bubble
Thanks
thanks
to
to
easy
easy
money
money
and
and
low
low
interest
interest
rates
rates
from
from
central
central
banks,
banks
all
all
you
you
needed
needed
was
was
the
the
next
next
big
big
idea
idea
for
for
up
up
to
to
get
get
an
an
investment
investment
from
from
a
a
venture
venture
capital
capital
firm.
firm
All
all
you
you
need
need
are
are
some
some
slides
slides
and
and
PowerPoint
powerpoint
about
about
why
why
Tinder
tinder
for
for
horses
horses
makes
makes
the
the
world
world
a
a
better
better
place
place
than
than
some
some
guy
guy
in
in
a
a
Patagonia
patagonia
vest
vest
gives
gives
you
you
ten
ten
$1,000,000.
$1,000,000
You're
you're
a
a
tech
tech
bro
bro
now
now
and
and
need
need
to
to
put
put
that
that
money
money
somewhere
somewhere
and
and
do
do
better
better
than
than
Silicon
silicon
Valley
valley
Bank.
bank
Things
things
were
were
great
great
for
for
SVB
svb
when
when
interest
interest
rates
rates
were
were
low,
low
and
and
it
it
became
became
the
the
16th
16th
largest
largest
bank
bank
in
in
the
the
United
united
States
states
with
with
around
around
a
a
175,000,000,000
175,000,000,000
in
in
customer
customer
deposits.
deposits
To
to
make
make
a
a
return
return
on
on
this
this
cash,
cash
they
they
invested
invested
in
in
bonds
bonds
and
and
mortgage
mortgage
backed
backed
securities
securities
often
often
with
with
10
10
or
or
more
more
years
years
to
to
maturity.
maturity
The
the
problem
problem
is
is
that
that
when
when
interest
interest
rates
rates
go
go
up,
up
bond
bond
prices
prices
go
go
down,
down
and
and
this
this
led
led
to
to
a
a
mismatch
mismatch
between
between
assets
assets
and
and
liabilities.
liabilities
People
people
got
got
wind
wind
of
of
this,
this
it
it
led
led
to
to
an
an
old
old
fashioned
fashioned
run
run
on
on
the
the
bank
bank
where
where
everybody
everybody
started
started
to
to
panic
panic
and
and
withdraw
withdraw
their
their
money.
money
The
the
government,
government
who
who
insures
insures
deposits
deposits
up
up
to
to
250,000
250,000
stepped
stepped
in
in
quickly
quickly
and
and
shut
shut
down
down
the
the
bank
bank
to
to
minimize
minimize
their
their
losses.
losses
Sounds
sounds
pretty
pretty
crazy,
crazy
but
but
who's
who's
actually
actually
going
going
to
to
lose
lose
money
money
here?
here
Well,
well
if
if
you
you
have
have
less
less
than
than
250
250
k
k
in
in
this
this
bank,
bank
then
then
you
you
lose
lose
nothing
nothing
because
because
that
that
money
money
is
is
fully
fully
insured.
insured
However,
however
most
most
tech
tech
startups
startups
likely
likely
have
have
more
more
than
than
that
that
in
in
the
the
bank,
bank
and
and
at
at
least
least
85%
85%
of
of
deposits
deposits
were
were
uninsured,
uninsured
and
and
that
that
money
money
could
could
end
end
up
up
getting
getting
a
a
haircut.
haircut
The
the
situation
situation
is
is
ongoing,
ongoing
and
and
there's
there's
a
a
few
few
different
different
things
things
that
that
could
could
happen
happen
here.
here
A
a
bigger
bigger
bank
bank
could
could
swoop
swoop
in
in
and
and
acquire
acquire
SVB,
svb
and
and
guarantee
guarantee
all
all
the
the
deposits.
deposits
If
if
That
that
doesn't
doesn't
work,
work
maybe
maybe
they'll
they'll
create
create
some
some
legislation
legislation
to
to
rob
rob
money
money
from
from
the
the
taxpayers
taxpayers
to
to
bail
bail
out
out
these
these
tech
tech
startups,
startups
just
just
like
like
they
they
did
did
with
with
big
big
banks
banks
in
in
2,008.
2,008
But
but
if
if
that
that
doesn't
doesn't
work,
work
The
the
FDIC
fdic
can
can
just
just
liquidate
liquidate
all
all
of
of
the
the
assets
assets
of
of
SVB,
svb
then
then
pay
pay
out
out
a
a
future
future
dividend
dividend
to
to
uninsured
uninsured
depositors.
depositors
That's
that's
as
as
good
good
as
as
money,
money
sir.
sir
Those
those
are
are
IOUs.
ious
So
so
at
at
the
the
end
end
of
of
the
the
day,
day
depositors
depositors
will
will
get
get
most,
most
if
if
not
not
all
all
of
of
their
their
money
money
back.
back
Shareholders
shareholders
though
though
are
are
pretty
pretty
much
much
screwed.
screwed
They
they
got
got
bailed
bailed
in
in
and
and
now
now
face
face
a
a
total
total
loss.
loss
Luckily
luckily
though,
though
owe.
owe
The
the
bank's
bank's
top
top
executives
executives
were
were
able
able
to
to
sell
sell
1,000,000
1,000,000
of
of
dollars
dollars
in
in
stock
stock
over
over
the
the
last
last
few
few
weeks,
weeks
so
so
they'll
they'll
be
be
just
just
fine.
fine
The
the
most
most
interesting
interesting
thing
thing
about
about
this
this
situation
situation
though
though
is
is
the
the
contagion.
contagion
Contagion.
contagion
Or
or
what
what
kind
kind
of
of
economic
economic
shocks
shocks
will
will
this
this
create
create
for
for
other
other
businesses
businesses
in
in
Silicon
silicon
Valley?
valley
US
us
Decoyne,
decoyne
one
one
of
of
the
the
top
top
stable
stable
coins
coins
in
in
crypto,
crypto
depegged
depegged
as
as
a
a
because
because
more
more
than
than
3,000,000,000
3,000,000,000
of
of
its
its
cash
cash
reserves
reserves
were
were
exposed
exposed
to
to
SVB.
svb
This
this
looks
looks
really
really
bad
bad
for
for
crypto
crypto
because
because
these
these
stablecoins
stablecoins
are
are
necessary
necessary
to
to
keep
keep
liquidity
liquidity
in
in
the
the
crypto
crypto
markets.
markets
If
if
it
it
were
were
to
to
collapse
collapse
entirely,
entirely
there
there
would
would
be
be
a
a
ton
ton
of
of
collateral
collateral
damage.
damage
The
the
collapse
collapse
of
of
Terra's
terra's
UST
ust
last
last
year
year
was
was
pretty
pretty
bad,
bad
but
but
the
the
collapse
collapse
of
of
USDC
usdc
would
would
be
be
be
be
far
far
worse.
worse
When
when
it
it
comes
comes
to
to
Contagion,
contagion
it
it
makes
makes
you
you
wonder
wonder
if
if
there
there
are
are
any
any
other
other
banks
banks
in
in
a
a
similar
similar
situation
situation
to
to
SVB.
svb
It
it
was
was
uniquely
uniquely
exposed
exposed
to
to
tech
tech
startups,
startups
but
but
The
the
key
key
problem
problem
here
here
is
is
rising
rising
interest
interest
rates,
rates
and
and
there
there
are
are
likely
likely
other
other
banks
banks
out
out
there
there
that
that
made
made
similar
similar
mistakes.
mistakes
But
but
most
most
importantly,
importantly
how
how
will
will
this
this
affect
affect
the
the
average
average
software
software
engineer
engineer
who
who
works
works
at
at
a
a
start
start
up
up
exposed
exposed
to
to
SVB?
svb
Many
many
companies
companies
like
like
Roku
roku
and
and
Roblox
roblox
have
have
disclosed
disclosed
their
their
exposure
exposure
and
and
should
should
have
have
no
no
problem
problem
continuing
continuing
their
their
operations
operations
as
as
normal.
normal
Then
then
you
you
have
have
other
other
smaller
smaller
startups
startups
saying
saying
that
that
they're
they're
not
not
going
going
to
to
be
be
able
able
to
to
meet
meet
their
their
payroll.
payroll
That
that
sounds
sounds
bad,
bad
but
but
in
in
reality,
reality
they'll
they'll
likely
likely
be
be
able
able
to
to
find
find
some
some
kind
kind
of
of
temporary
temporary
solution
solution
to
to
continue
continue
operating
operating
as
as
normal
normal
until
until
the
the
FDIC
fdic
gets
gets
things
things
figured
figured
out.
out
Longer
longer
term
term
though,
though
this
this
is
is
definitely
definitely
bad
bad
news
news
for
for
the
the
tech
tech
job
job
market.
market
Running
running
out
out
of
of
money
money
is
is
never
never
a
a
good
good
thing,
thing
especially
especially
in
in
an
an
industry
industry
where
where
it's
it's
normal
normal
to
to
burn
burn
through
through
tons
tons
of
of
cash
cash
until
until
you
you
get
get
acquired
acquired
or
or
IPO.
ipo
To
to
make
make
matters
matters
worse,
worse
inflation
inflation
was
was
worse
worse
than
than
expected
expected
recently,
recently
which
which
means
means
the
the
Fed's
fed's
not
not
going
going
to
to
be
be
able
able
to
to
ease
ease
interest
interest
rates
rates
anytime
anytime
soon.
soon
There's
there's
really
really
only
only
2
2
possible
possible
outcomes.
outcomes
Interest
interest
rates
rates
stay
stay
high
high
and
and
we
we
enter
enter
the
the
Great
great
Depression
depression
2.0,
2.0
or
or
interest
interest
rates
rates
go
go
low
low
and
and
the
the
dollar
dollar
hyperin
hyperin
plates
plates
into
into
worthless
worthless
toilet
toilet
paper.
paper
In
in
either
either
case,
case
it
it
doesn't
doesn't
matter,
matter
because
because
AI
ai
is
is
going
going
to
to
replace
replace
all
all
these
these
tech
tech
jobs
jobs
anyway,
anyway
and
and
that's
that's
why
why
you
you
should
should
learn
learn
to
to
mine
mine
as
as
soon
soon
as
as
possible.
possible
This
this
has
has
been
been
the
the
CodeReport,
codereport
thanks
thanks
for
for
watching,
watching
and
and
I
i
will
will
see
see
you
you
in
in
the
the
next
next
one.
one
success
In a transcript from the Code Report, a speaker discusses the challenges of running a bank in Silicon Valley, including the lack of legal protection for employees and the potential for fraud and wage garnishment. The bank's success in the past decade has led to a mismatch between assets and liabilities, causing people to lose most of their money. The collapse of US Decoyne and the potential impact of inflation on the tech industry are also discussed.
Silicon Valley had a bank... HAD
It is March 12, 2023, and you're watching the Code Report. A bank is one of the easiest businesses to run. All you have to do is collect money and not things up. Unfortunately, the banker behind many high profile tech startups did not follow this rule and was shut down and seized by the FDIC on Friday. We fucked up. Now people who work at startups that keep their cash at Silicon Valley Bank have been freaking out because they're worried that their paychecks might bounce or their cash burning employers might collapse. But is that even realistic? Well, there's a lot to untangle here. 1st, if you're not already familiar with the situation, it. Let me get you up to speed. Over the last decade, we lived through a tech boom that was even bigger than the dotcom bubble. Thanks to easy money and low interest rates from central banks, all you needed was the next big idea for up to get an investment from a venture capital firm. All you need are some slides and PowerPoint about why Tinder for horses makes the world a better place than some guy in a Patagonia vest gives you ten $1,000,000. You're a tech bro now and need to put that money somewhere and do better than Silicon Valley Bank. Things were great for SVB when interest rates were low, and it became the 16th largest bank in the United States with around a 175,000,000,000 in customer deposits. To make a return on this cash, they invested in bonds and mortgage backed securities often with 10 or more years to maturity. The problem is that when interest rates go up, bond prices go down, and this led to a mismatch between assets and liabilities. People got wind of this, it led to an old fashioned run on the bank where everybody started to panic and withdraw their money. The government, who insures deposits up to 250,000 stepped in quickly and shut down the bank to minimize their losses. Sounds pretty crazy, but who's actually going to lose money here? Well, if you have less than 250 k in this bank, then you lose nothing because that money is fully insured. However, most tech startups likely have more than that in the bank, and at least 85% of deposits were uninsured, and that money could end up getting a haircut. The situation is ongoing, and there's a few different things that could happen here. A bigger bank could swoop in and acquire SVB, and guarantee all the deposits. If That doesn't work, maybe they'll create some legislation to rob money from the taxpayers to bail out these tech startups, just like they did with big banks in 2,008. But if that doesn't work, The FDIC can just liquidate all of the assets of SVB, then pay out a future dividend to uninsured depositors. That's as good as money, sir. Those are IOUs. So at the end of the day, depositors will get most, if not all of their money back. Shareholders though are pretty much screwed. They got bailed in and now face a total loss. Luckily though, owe. The bank's top executives were able to sell 1,000,000 of dollars in stock over the last few weeks, so they'll be just fine. The most interesting thing about this situation though is the contagion. Contagion. Or what kind of economic shocks will this create for other businesses in Silicon Valley? US Decoyne, one of the top stable coins in crypto, depegged as a because more than 3,000,000,000 of its cash reserves were exposed to SVB. This looks really bad for crypto because these stablecoins are necessary to keep liquidity in the crypto markets. If it were to collapse entirely, there would be a ton of collateral damage. The collapse of Terra's UST last year was pretty bad, but the collapse of USDC would be be far worse. When it comes to Contagion, it makes you wonder if there are any other banks in a similar situation to SVB. It was uniquely exposed to tech startups, but The key problem here is rising interest rates, and there are likely other banks out there that made similar mistakes. But most importantly, how will this affect the average software engineer who works at a start up exposed to SVB? Many companies like Roku and Roblox have disclosed their exposure and should have no problem continuing their operations as normal. Then you have other smaller startups saying that they're not going to be able to meet their payroll. That sounds bad, but in reality, they'll likely be able to find some kind of temporary solution to continue operating as normal until the FDIC gets things figured out. Longer term though, this is definitely bad news for the tech job market. Running out of money is never a good thing, especially in an industry where it's normal to burn through tons of cash until you get acquired or IPO. To make matters worse, inflation was worse than expected recently, which means the Fed's not going to be able to ease interest rates anytime soon. There's really only 2 possible outcomes. Interest rates stay high and we enter the Great Depression 2.0, or interest rates go low and the dollar hyperin plates into worthless toilet paper. In either case, it doesn't matter, because AI is going to replace all these tech jobs anyway, and that's why you should learn to mine as soon as possible. This has been the CodeReport, thanks for watching, and I will see you in the next one.
In a transcript from the Code Report, a speaker discusses the challenges of running a bank in Silicon Valley, including the lack of legal protection for employees and the potential for fraud and wage garnishment. The bank's success in the past decade has led to a mismatch between assets and liabilities, causing people to lose most of their money. The collapse of US Decoyne and the potential impact of inflation on the tech industry are also discussed.