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Urgent: Sign the petition now

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Re: Urgent: Sign the petition now

#701

Post by JohnFen »

erik_seaberg wrote: post #647
JohnFen wrote: post #640

Earlier quoted context omitted.

There are a number of mechanisms besides the FDIC that are commonly used for depositors of this scale. You can even buy your own insurance, if nothing else.

From whom? A search for "bank failure private insurance" kept talking about FDIC and sometimes SIPC.

CDARS is one system. A whole bunch of different systems have been mentioned scattered throughout these comments. But the bottom line is that if you really need to know what the options are, you really need to talk to a financial advisor with expertise in this level of business. They'll know what all the options are.

This is a rather specialized and technical area of finance, and like most technical areas, I imagine it's hard to search for unless you know the magic terms and jargon to search for.

Re: Urgent: Sign the petition now

#702

Post by JohnFen »

skwirl wrote: post #657
JohnFen wrote: post #637

Earlier quoted context omitted.

You're taking a risk with those banks if you exceed the insurance limits, too.

I'm not, because I know the federal regulators have strict requirements for these banks and will bail them out if they did somehow fail for being a "systemically important bank." I'm not qualified to evaluate the soundness of a bank, and neither are the rating agencies (as 2008 showed), so I'm going to go with the banks I know the federal government will backstop.

> so I'm going to go with the banks I know the federal government will backstop.

Sure, there's nothing wrong with that. It's still a nonzero risk, of course.

But it's also not necessary. You don't have to assess the soundness of the bank yourself, really. You can bank with pretty much any random bank and get the same level of safety. You just have to actively manage your risk, is all.

Re: Urgent: Sign the petition now

#703

Post by ashwagary »

jlmorton wrote: post #160
axlee wrote: post #127

Earlier quoted context omitted.

There was nothing arbitrary about that choice. This bank promised better deals BECAUSE they were not careful enough about the risk it entailed. That was their competitive advantage, and they made bank for it. Well, tough luck, now it's not anymore: it has nothing to do with being a large bank or a small bank, it has to do with healthy business practices.

Sorry, I'm not sure if you're confused, but these are simple bank accounts. There was no high interest yield. The average interest yield was a fraction of a percent. No one was chasing any yield. No one was taking any risks. It's a bank account. Are you suggesting tens of thousands of small business customers need to do due dilligence on the investment practices of their banks? And what about all the other regional b…

> "Are you suggesting tens of thousands of small business customers need to do due dilligence on the investment practices of their banks?"

Yes, this exactly why millions of people, not just businesses, avoid banks like Bank of America and Wells Fargo. They review how they have historically operated and what risks they passed on to their customers.

Re: Urgent: Sign the petition now

#704

Post by dmix »

JeremyNT wrote: post #676
dmix wrote: post #658

Earlier quoted context omitted.

Funny how everyone loves this idea but it only ever hurts small companies. I don't think gov is the solution here and YC asking is a bad look but let's contextualized the "socialized losses" of American companies in 2008. It 100% benefited bigco and the consequence of "too big to fail" was policy that destroyed a hundred smaller banks and further reduced the banking market to 5 mega players. Market corrections are no…

> Funny how everyone loves this idea but it only ever hurts small companies. Why does size matter? These VC funded "small companies" are so sketchy that they needed their own special bank to manage the risk, and now their special bank just failed. It's not the government's job to protect the weird VC funded moonshot "business model."

So because traditional banks do not understand these non-traditional businesses they are "sketchy". That's a bit of a stretch. I've worked for two different companies with serious income in the 10s of millions who are still paying their salaries/taxes a decade later that were treated with disdain by traditional banks. One of which used SVB for that exact reason. Neither raised VC.

Nothing about SVB's failure had to do with tech startups. It's entirely because their executives gambled on a giant ball of mortgage debt with the worst timing. And now tech companies are paying the consequence. Much like how everyone else did in 2008.

It's trendy to blame VCs and the tech 'bubble' but this isn't the time. And I should reiterate I don't agree gov should be excusing the bankers behavior to save tech startups.

Re: Urgent: Sign the petition now

#705

Post by IncRnd »

DennisP wrote: post #700
IncRnd wrote: post #618

Earlier quoted context omitted.

That's very odd, the entire first page was full of hits for me. What were you searching? Take a look at https://www.forbes.com/advisor/banking/ways-to-insure-excess... . It explains several methods, including extra deposit insurance from CDARS, MaxSafe, Depositors Insurance Fund, etc. It also explains cash management accounts, credit union overflow, using multiple banks, and so forth. I can't help but think a good CF…

Yes, I'm aware that I can put money in multiple accounts, or get an account that spreads the money to multiple accounts for me. None of these are what I was responding to: the suggestion to "purchase 3rd party insurance." The closest in that article is DIF but even that isn't insurance you go and buy, it's another kind of special bank account available at DIF's member banks. As far as I can tell, you can't just go bu…

You can purchase DIF, when the account is at a participating bank. SVB chose not to participate in that non-FDIC program. However, SVB knew all about the program, even commenting on FDIC rule changes for it over a decade ago. [1]

Ultimately, people will have to accept that SVB wasn't as trustworthy of a guardian as some other banks. It appears that people were pushed into using SVB, because it was part of the VC ecosystem.

It's an individual CFO or Founder's decision as to whether to insure deposits or not, but claiming ignorance of the possibility is going to be ignored by a lot of others.

[1] fdic.gov/resources/regulations/federal-register-publications/2010/10c20ad66rates.pdf

Re: Urgent: Sign the petition now

#706

Post by onecommentman »

garry wrote: post #336
UmYeahNo wrote: post #15

When we little guys put our eggs in one basket, or put excessive reliance in business we have no control of we get accused, sometimes implicitly, sometimes explicitly, of being incompetent. That we should've known better. Hmmm.... The cynic in me says this letter is less about bailing out the small companies trying to make payroll and more about the VC's not wanting to lose massive investments.

We're trying to help our founders, and this is a moment where awareness of this problem in DC and in the halls of power matter.

Do you and/or your friends personally have the assets to make SVB whole? If you were proposing to put substantial “skin in the game” (very dated 1980s business-speak) you might receive a more positive reception.

Right now, it is mostly a regional problem, since the “startup industry” did not diversify much outside the Bay Area, or the Pacific Coast. Industries with a broader national reach maintain a broader and deeper lobbying presence in Washington and thus get more Federal attention. Might be a lesson-learned here. Along with the most elemental due diligence in financial risk management.

Re: Urgent: Sign the petition now

#707

Post by ashwagary »

erik_seaberg wrote: post #647
JohnFen wrote: post #640

Earlier quoted context omitted.

There are a number of mechanisms besides the FDIC that are commonly used for depositors of this scale. You can even buy your own insurance, if nothing else.

From whom? A search for "bank failure private insurance" kept talking about FDIC and sometimes SIPC.

>From whom?

Lloyds and AIG will insure just about anything, they'll happily protect $x million or billion for a nominal fee.

Re: Urgent: Sign the petition now

#708

Post by ashwagary »

fallingknife wrote: post #178
nocoiner wrote: post #8

LOL, nope. Not interested in taking another spin on the “privatize gain, socialize loss” merry-go-round. The banks had to be saved in 2008 because they were, like, the financial system. I don’t see why private companies and funds that are much less integral to the functioning of the economy as a whole should be saved by the public fisc. Sorry about your disruption.

I have an idea. The startup depositors are made whole in exchange for the FDIC receiving shares in the company that dilute the VCs in an amount depending on company valuation and balance lost. This way you bail out the small business and make the VCs pay.

It would be safer for all if the FDIC sticks to what it does best and doesn't take on additional risk outside its mandate as a favor to irresponsible businesses.

Re: Urgent: Sign the petition now

#709

Post by ashwagary »

lamontcg wrote: post #339
nocoiner wrote: post #8

LOL, nope. Not interested in taking another spin on the “privatize gain, socialize loss” merry-go-round. The banks had to be saved in 2008 because they were, like, the financial system. I don’t see why private companies and funds that are much less integral to the functioning of the economy as a whole should be saved by the public fisc. Sorry about your disruption.

With this being the top-voted sentiment we are so very, very fucked. In the 2009 crisis the banks got bailed out because we were in the position of very nearly breaking the buck on money market funds. The interconnectedness of the entire financial system meant that we were plausibly looking at a situation where most businesses wouldn't be able to make payroll soon. ATMs could start to not give out cash. The whole sho…

>Honestly starting to think the right idea might be to stock up on food, water, gas and toilet paper like I'm worried about another pandemic and go bury $10k in the backyard.

If you are saying that you should take additional personal steps to protect yourself from downside risks, the answer is yes. It's not a foolish way to live and in the long term, the benefits outweigh the costs, similar to being adequately insured.

Re: Urgent: Sign the petition now

#710

Post by jjtheblunt »

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.

The limits to FDIC have been on physical stickers legibly and purposefully placed all over every bank for decades, and define reasonable expectation clearly, for decades, to all customers.

That reasonable expectation states insurance limits are not unbounded.

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