Yellen says government will help SVB depositors but rules out bailout • Hacker News Board

Re: Yellen says government will help SVB depositors but rules out bailout

#171

Post by CPLX » Sun, Mar 12, 2023, 2:43 PM UTC

manuelabeledo wrote: post #132

I see a lot of unexpected saltiness and clear misconceptions in any thread about SVB. “Depositors shouldn’t get anything beyond the insured $250,000”. Then what do we do with the billions in remaining assets? Appropriate them, and leave small and mid businesses hanged to dry? “This is a bailout”. It would be if shareholders were to get their money back, which doesn’t seem likely. The government will use the bank asse…

Perhaps I can address your point about “generic screeching” against the tech world, by noting that the criticism here is often specific and direct. Not generic.

The usual suspects have been trying to frame it in terms of the regular old startup workers that will be affected.

But what about these entrepreneurs, the taxi drivers who were completely fucked by the onslaught of Uber and Lyft using financial engineering to lose money on each ride and undercut their livelihood:

https://www.nytimes.com/2019/12/23/nyregion/nyc-taxi-suicide...

Or these ones, who saw VC funded delivery services stealing their tips:

https://www.nbcnews.com/business/business-news/why-instacart...

And so on. We would also like to see social media held accountable for the harms done to children and communities and for our existing laws against anti-competitive behavior and collusion to be enforced against search and software platforms.

The chutzpah of the Silicon Valley influencer crowd over this weekend has become seriously fucking unbearable. My feeds are full of sociopathic libertarians calling for government to make sure they never suffer any consequences for their failure to adequately manage risk?

Many of the people expressing this frustration are in favor of having the government heavily involved in preventing this kind of thing and helping if it ends up happening.

But if we’re going to regulate let’s fucking regulate.

To the tech people unhappy with screeching my reply is that there is nothing special about your humanity here. Your lives aren’t more important than the lives of the children of employees at the Carrier plant in Indianapolis, or the workers at the Amazon faculty on Staten Island.

If your values system only applies to you and your friends it’s not much of a values system.

Re: Yellen says government will help SVB depositors but rules out bailout

#172

Post by Cyph0n » Sun, Mar 12, 2023, 2:43 PM UTC

fullshark wrote: post #164

manuelabeledo wrote: post #132

I see a lot of unexpected saltiness and clear misconceptions in any thread about SVB. “Depositors shouldn’t get anything beyond the insured $250,000”. Then what do we do with the billions in remaining assets? Appropriate them, and leave small and mid businesses hanged to dry? “This is a bailout”. It would be if shareholders were to get their money back, which doesn’t seem likely. The government will use the bank asse…

The reason is because there are countless scenarios in the US economic system, where people/businesses fail cause of no fault of their own, but they are told tough luck that's the free market at work cause these people are simply unconnected or their failure is deemed unimportant. It's why the finanical bailouts left a bitter taste for anyone paying attention, and why gov't action here is immediately scoffed at.

Exactly. Rules for thee but not for me.

Re: Yellen says government will help SVB depositors but rules out bailout

#173

Post by [deleted] » Sun, Mar 12, 2023, 2:43 PM UTC

gitfan86 wrote: post #89

remote_phone wrote: post #54

The truth is VCs are terrified their investments in their startups are going to go to 0. That’s why the biggest most vocal people are VCs talking about this. So they are framing the “we need to make depositors whole” as if they care about small business when really they are just talking their own book. The real solution is that VCs should give a loan to all their startups so that they can make payroll. Isn’t that the…

Exactly, none of them are pointing out what percentage of the money that is currently tied up was going to be sent out as payroll for people making under 100k/year over the next 30 days. If the Fed came out and said "We have reviewed all the depositors and their situations and we are funding 100% of payroll and basic operating costs needs for the next 90 days" The VCs would immediately come up with another reason why…

[deleted]

Re: Yellen says government will help SVB depositors but rules out bailout

#174

Post by imustbeevil » Sun, Mar 12, 2023, 2:43 PM UTC

koolba wrote: post #153

manuelabeledo wrote: post #132

I see a lot of unexpected saltiness and clear misconceptions in any thread about SVB. “Depositors shouldn’t get anything beyond the insured $250,000”. Then what do we do with the billions in remaining assets? Appropriate them, and leave small and mid businesses hanged to dry? “This is a bailout”. It would be if shareholders were to get their money back, which doesn’t seem likely. The government will use the bank asse…

> Then what do we do with the billions in remaining assets? Appropriate them, and leave small and mid businesses hanged to dry? Easy, pay out $250K per account, then distribute the rest pro rata based upon closing balance from when the fed's took over. If they have to wait because assets need to be liquidated then sucks to be them. I'm sure they can get their money faster if they agree to a haircut. > “This is a bail…

> Money to depositors for amounts greater than $250K is a bail out. They have no right to that money from the Feds.

No. The feds aren't giving anyone fed money, they're selling SVB's assets and giving the people they owe their own money back. There isn't enough money to give everyone 100% back, so they won't be getting 100% back. There's no extra government money making anyone "whole". They're just winding down the assets so they don't all get stolen like FTX.

Re: Yellen says government will help SVB depositors but rules out bailout

#175

Post by bradleyjg » Sun, Mar 12, 2023, 2:43 PM UTC

manuelabeledo wrote: post #132

I see a lot of unexpected saltiness and clear misconceptions in any thread about SVB. “Depositors shouldn’t get anything beyond the insured $250,000”. Then what do we do with the billions in remaining assets? Appropriate them, and leave small and mid businesses hanged to dry? “This is a bailout”. It would be if shareholders were to get their money back, which doesn’t seem likely. The government will use the bank asse…

” Depositors shouldn’t get anything beyond the insured $250,000”. Then what do we do with the billions in remaining assets? Appropriate them, and leave small and mid businesses hanged to dry?

“This is a bailout”. It would be if shareholders were to get their money back, which doesn’t seem likely. The government will use the bank assets to make customers, not owners, whole.

If the bank had sufficient assets to make all depositors whole the FDIC wouldn’t have stepped in. It doesn’t.

I assume, then, you agree uninsured deposits ought to take a haircut proportional to the shortfall?

If so, you have the same position as all the “salty” posters.

Re: Yellen says government will help SVB depositors but rules out bailout

#176

Post by a13n » Sun, Mar 12, 2023, 2:43 PM UTC

koolba wrote: post #153

manuelabeledo wrote: post #132

I see a lot of unexpected saltiness and clear misconceptions in any thread about SVB. “Depositors shouldn’t get anything beyond the insured $250,000”. Then what do we do with the billions in remaining assets? Appropriate them, and leave small and mid businesses hanged to dry? “This is a bailout”. It would be if shareholders were to get their money back, which doesn’t seem likely. The government will use the bank asse…

> Then what do we do with the billions in remaining assets? Appropriate them, and leave small and mid businesses hanged to dry? Easy, pay out $250K per account, then distribute the rest pro rata based upon closing balance from when the fed's took over. If they have to wait because assets need to be liquidated then sucks to be them. I'm sure they can get their money faster if they agree to a haircut. > “This is a bail…

This is short sighted. If the government doesn’t make depositors whole then people and companies all over the world lose trust in US banks and eventually US dollars. This is a federal problem.

It makes sense to make depositors whole, they’re innocent here. It doesn’t make sense to make SVB whole for managing their risk poorly.

Re: Yellen says government will help SVB depositors but rules out bailout

#177

Post by agotterer » Sun, Mar 12, 2023, 2:44 PM UTC

fma wrote: post #117

marvin wrote: post #20

This is exactly the statement that's required, given the confusion and irresponsible politicization of deposit insurance. Shareholders lose 100%, depositors get 100% of their deposits back. It's a simple situation, and the former point (as opposed to the solution during the GFC) counteracts moral hazard.

If depositors get 100% back (I assume the government pays the difference between selling SBV assets & the deposits)...then what's the purpose of saying "FDIC Insured up to $250k"? It's a moot then isn't it? I don't need to go through the hassle of distributing my money anymore? Edit: I read the article. Yellen says "“But we are concerned about depositors, and we’re focused on trying to meet their needs.” She says NOT…

Depositors get deposits back because their deposits are wrapped up in SVB assets. Once those assets are liquidated they get what is theirs. This could end up being less that 100% if the assets end up being sold for less than the total deposits.

The FDIC insures that no matter what you are covered for up to $250k. Let’s say the bank had zero assets then all deposits would get their $250k and likely nothing else since there’s no other assets to sell and distribute. This could have been the case if SVB had larger losses or turned out to be cooking the books or something. But that’s not the case here. They have the depositors money, it just happens to be in illiquid assets that they could’t liquidate fast enough to cover the bank run withdrawals.

Re: Yellen says government will help SVB depositors but rules out bailout

#178

Post by nickthegreek » Sun, Mar 12, 2023, 2:44 PM UTC

marckhoury wrote: post #109

jmclnx wrote: post #24

Says nothing real. For instance, will the rule for uninsured deposits be followed ? Or will there be a bailout for people with over $250,000 in deposits ? Seems all it says is "there will be no bailout but there will be a bailout". If people with over 250,000 in deposits are covered, the once again the the rich is allowed to avoid all risks for bad decisions.

> If people with over 250,000 in deposits are covered, the once again the the rich is allowed to avoid all risks for bad decisions. I feel like putting your money in a bank should not be considered an obviously bad decision. The risk profile your bank takes on with your deposits is largely opaque to you, and it’s not feasible to expect every depositor to do due diligence on it. Even if you understood their portfolio…

It is very feasibly for people to split their deposits into multiple accounts. My mother does it and her savings total are a fraction of $250k.

Re: Yellen says government will help SVB depositors but rules out bailout

#179

Post by nodemaker » Sun, Mar 12, 2023, 2:44 PM UTC

macintux wrote: post #144

hanoz wrote: post #124

Earlier quoted context omitted.

Bailing out the owners is obviously completely out of the question, but why bail out the depositors beyond the guarantees they knew they were getting at the time? Funny how language is being used to frame all this. For depositors it's made whole , not bailed out , when of course it's no less a bail out.

Because businesses need to be able to pay their employees, because the banking system as a whole relies on trust to function. And because we're not really bailing out depositors. The FDIC is just doing its best to make sure depositors take precedence over bank shareholders, which is as it should be. Sure, you could let Roku lose a half billion dollars, but it's not their fault SVB couldn't meet its obligations. They…

Businesses need to pay their employees from the money they have not from taxpayer money. If a business loses that money because their banking partner lost the money, taxpayers have no obligation to help (beyond the 250k)

Re: Yellen says government will help SVB depositors but rules out bailout

#180

Post by komali2 » Sun, Mar 12, 2023, 2:44 PM UTC

NotACop182 wrote: post #13

sithlord wrote: post #7

This actually makes a ton of sense, lets not forget that a bailout in this term is really pointing towards saving the bank itself, and its shareholders. There is inherent risk in equity investments, and it likely should have to suffer for its poor decisions. But when it comes to depositors, I think it makes a lot of sense to make them whole, especially in the case of SVB where the bank likely has pretty close to enou…

Did they help depositors that lost money in the last 500+ bank collapses? Why do they get special treatment? The government has laws and rules the depositors are insured up to 250k. Either they liquidate and everyone takes a hair cut. Or they wait till the bonds mature and can pay them out. But the government should not relieve anyone past what is legally available.

This seems to be a core argument for those in opposition to shareholders getting liquidated bank assets vs depositors, but I don't really understand it because it seems to be kind of arbitrary. So there's fdic insurance, that's nice, but why does that mean anything regarding whether depositors or investors should be made whole first? The more important and real question is which option has what outcomes in terms of future investor behavior, or future depositor behavior?

If it's a question of rigid legality that also doesn't make sense to me, because from what I remember from 2008 was the government's legal options were incredibly widespread.