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Urgent: Sign the petition now

ycombinator.com

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Re: Urgent: Sign the petition now

#681

Post by beezle »

Ill advised for any company to keep funds above and beyond that necessary for day to day transactions all at one financial institution when it is quite easy to spread the excess funds across many banks/types of accounts. That is especially true when said funds far exceed those covered by standard deposit insurance.

Many brokerages offer their clients the option to spread their free cash across a large number of banks to minimize risk. Excess cash could also be invested in 4-week Treasury bills, again held at more than one fiduciary agent.

Re: Urgent: Sign the petition now

#682

Post by JohnFen »

skwirl wrote: post #643
somsak2 wrote: post #611

Earlier quoted context omitted.

You can both hold the opinion that we should actually bail the depositors out but also regard the fact that they exhibited a serious lack of due diligence at the same time. They are not mutually exclusive. I think you're assuming that simply because people are critical of the lack of risk controls at these companies, they also necessarily mean to say that they all deserve to be wiped out.

I don't think many people are qualified to assess the risk of a bank, and I don't think it's reasonable to expect founders to be able to do this. It's a bit like expecting people to inspect bridges before they drive over them (or companies to inspect the bridges that lead to their office buildings). We expect regulators to keep basic infrastructure working - be it financial or physical. As I said above, the State of…

> I don't think many people are qualified to assess the risk of a bank, and I don't think it's reasonable to expect founders to be able to do this.

That's not what anyone is expecting them to do. At all.

What's reasonable to expect is that they know that any uninsured deposit comes with a chance that it will be lost, and that they take steps to limit their risk to acceptable levels -- just like every other risk businesses take.

None of this is esoteric knowledge. Even as an individual opening a bank account, you are informed of the risk in the contract you sign.

Re: Urgent: Sign the petition now

#683

Post by JohnFen »

somsak2 wrote: post #616
jmull wrote: post #433

Most startups fail. Propping these companies up now with government money (that is, our money) will just make the failures cost more, ultimately. What we're really talking about here is bailing out investors who, of course, knowingly took these high risk flyers. (BTW, the rising interest rates affects everything about this kind of investment. All kinds of things that made sense in the era of free money are going to s…

I really doubt that when these startups put money into a bank account they were "knowingly taking a high risk."

They weren't knowingly taking a high risk, because the risk wasn't high. But they were knowingly taking a risk, and this time the dice rolled up unfavorably.

That's the nature of risk. Even low risk things go bad, just not as often.

Re: Urgent: Sign the petition now

#684

Post by AH4oFVbPT4f8 »

garry wrote: post #144
axlee wrote: post #97

Earlier quoted context omitted.

110% agree. At some point, risk HAS to be treated as what it is, risk, rather than just "another way to do things". We have so many banks treating risk as what it is, and pricing for it, well these people decided to go to another bank to get funding, well deal with it. It's not like the average citizen has this luxury.

The equity holders and management of SVB are likely to be wiped. In the petition we specifically call this out: we are not asking for their risks to be "socialized." Depositors have a reasonable expectation that when they choose a bank (especially a publicly traded bank that is regulated) that their deposits are safe. If this is not true, then most people will only bank with the largest banks. That's not a good situa…

Depositors have a reasonable expectation up to 250k, after that they (the depositor) also assumed the risk. ...We're asking for regulations to prevent this from happening again...., then why campaign to have those regulations eased or removed just a few years ago?

Re: Urgent: Sign the petition now

#685

Post by mikeho1999 »

garry wrote: post #144
axlee wrote: post #97

Earlier quoted context omitted.

110% agree. At some point, risk HAS to be treated as what it is, risk, rather than just "another way to do things". We have so many banks treating risk as what it is, and pricing for it, well these people decided to go to another bank to get funding, well deal with it. It's not like the average citizen has this luxury.

The equity holders and management of SVB are likely to be wiped. In the petition we specifically call this out: we are not asking for their risks to be "socialized." Depositors have a reasonable expectation that when they choose a bank (especially a publicly traded bank that is regulated) that their deposits are safe. If this is not true, then most people will only bank with the largest banks. That's not a good situa…

> Depositors have a reasonable expectation that when they choose a bank (especially a publicly traded bank that is regulated) that their deposits are safe

@garry, while it may be a reasonable expectation, it's always been very clear and _explicit_ that it's not a guarantee beyond $250k (or $500k).

What's more troublesome is that VCs and Y! have portfolio companies that either didn't understand this and/or didn't take the time to shore up their exposure to this otherwise very easily, manageable risk.

Open additional accounts, utilize CDARS, etc. -- there are so, so, so many incredibly simple, straightforward ways your portfolio companies could've mitigated this.

And yes, I agree with you -- the risk _was_ negligible. But it was risk nonetheless. And the fact that the mitigation options are _so_ simple but that your portfolio companies didn't do this really brings into question their ability to manage cash / risk management in general.

So then to ask for taxpayer money to bail out companies who didn't take the time, thought or energy to minimize exposure to this is what I think most people on this thread are pushing back on.

> We're asking for depositors to be made whole and for regulation to prevent this from happening to depositors in the future.

In fact, depositors can _already_ prevent this from happening from themselves.

Re: Urgent: Sign the petition now

#686

Post by beezle »

SkyMarshal wrote: post #274
garry wrote: post #144

Earlier quoted context omitted.

The equity holders and management of SVB are likely to be wiped. In the petition we specifically call this out: we are not asking for their risks to be "socialized." Depositors have a reasonable expectation that when they choose a bank (especially a publicly traded bank that is regulated) that their deposits are safe. If this is not true, then most people will only bank with the largest banks. That's not a good situa…

It honestly seems like the best solution here is for a large bank like JP Morgan or Goldman to acquire SVB over the weekend and guarantee their deposits. SVB isn’t insolvent if their debt assets can be held to term, but the duration mismatch in assets and liabilities, and declining value of some of those assets due to interest rate increases, caused a liquidity shortfall and panic. But of all the types of financial p…

I think it quite likely that if there is any haircut at all it will be quite small and that is honestly a price that should be paid by the large depositors for failing to consider the many risks of keeping all their free cash at one institution.

Re: Urgent: Sign the petition now

#687

Post by JohnFen »

peteforde wrote: post #515
hinata08 wrote: post #269

St00pid question : I don't understand what kind of accounts these start-ups have. Are they like the mandatory checking accounts for the day-to-day management ? That should indeed be bailed out immediately, to unfreeze their processes. Or is that investment? I don't care if investors loose money for once. And how can a bank 'loose' money from checking accounts, without anyone profiteering or getting the money for frie…

Not a stupid question. Good to ask what you don't know. Yes, we're talking about startups with their operating capital frozen and struggling. Many of the commenters here appear to be confusing bank depositors with bank investors. If you started a startup, it's very likely that your funds would be frozen. > And how can a bank 'loose' money from checking accounts As usual, it's complicated. Banks have always used the m…

> Unfortunately, they don't teach this stuff in high school.

They sure did when I was in high school. When did that change?

Re: Urgent: Sign the petition now

#688

Post by JohnFen »

josalhor wrote: post #250

Everyone here seems pretty negative about the petition based on the title that says "YC Is Asking for a Bailout", when actually the content of the post is quite different: > Small business depositors at Silicon Valley Bank should be made whole. Regulators need to conduct a backstop of depositors. We are not asking for a bank bailout. With emphasis on that "We are not asking for a bank bailout". They are also asking f…

If they aren't asking for a bailout, what are they asking for? Just saying "We are not asking for a bank bailout" doesn't make it so.

Re: Urgent: Sign the petition now

#689

Post by skwirl »

JohnFen wrote: post #682
skwirl wrote: post #643

Earlier quoted context omitted.

I don't think many people are qualified to assess the risk of a bank, and I don't think it's reasonable to expect founders to be able to do this. It's a bit like expecting people to inspect bridges before they drive over them (or companies to inspect the bridges that lead to their office buildings). We expect regulators to keep basic infrastructure working - be it financial or physical. As I said above, the State of…

> I don't think many people are qualified to assess the risk of a bank, and I don't think it's reasonable to expect founders to be able to do this. That's not what anyone is expecting them to do. At all. What's reasonable to expect is that they know that any uninsured deposit comes with a chance that it will be lost, and that they take steps to limit their risk to acceptable levels -- just like every other risk busin…

FDIC insurance limits are set to protect individuals. $250k is nothing for a business. Roku would have needed 8000 bank accounts to hold their cash at 250k per account. You are basically telling businesses to not use the banking system outside of the too big to fail banks that we know the government will backstop. If this is the message, we should all run on any bank other than the top 4.

By the way, the FDIC tries to recover everything, even though it isn’t promised. They are going to need to to keep faith in the banking system. And your $250k “insurance” isn’t even guaranteed because the FDIC is funded by member fees and can only cover a small amount of losses.

Re: Urgent: Sign the petition now

#690

Post by somsak2 »

dehrmann wrote: post #623
somsak2 wrote: post #601

Earlier quoted context omitted.

Is it suddenly so unpopular? Can you link me to think pieces / opinions that have been published in the last few years that are arguing for increased deposit insurance for businesses? I don't recall hearing about this ever before. If you wanted such a high cap, you'd need to increase the deposit insurance premiums much further to cover for it. The banks were already unhappy about the most recent 2 basis point increas…

> I don't recall hearing about this ever before. That's like saying you don't remember hearing about CDOs as a potential problem in 2006. This is the second-largest bank failure in the US, and it disproportionately hits one industry. This just isn't a problem we're used to thinking about.

Exactly. If there was no strong opinion previously, it can't have become "suddenly unpopular."
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