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

#301

Post by stephen_g » Sun, Mar 12, 2023, 3:11 PM UTC

bentlegen wrote: post #278

gerad wrote: post #199

Earlier quoted context omitted.

I just don’t understand why folks on the internet are so passionate about the depositors being hit by this. In terms of avoiding moral hazard they are about as far down the list as possible, and bankruptcy law supports that. First stock holders get wiped out (common then preferred), then debt holders (folks who have lent money to SVB won’t get their money back), only then would it hit depositors - and in the case of…

The C-suite paid themselves millions of dollars via bonuses and stock sales right before insolvency. Executives got paid. What’s to stop future bankers from running the same playbook? (We can debate that this the stock sale was premeditated/signaled months in advance, but the stock had already declined 80% from its 2021 peak and they surely knew about the tough liquidity position months ago — external observers drew…

Hopefully those might be able to be clawed back?

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

#302

Post by [deleted] » Sun, Mar 12, 2023, 3:12 PM UTC

macintux wrote: post #158

sambull wrote: post #135

Earlier quoted context omitted.

They also lobbied to become more vulnerable. Greg Becker the CEO worked to get regulations removed that helped them get in this position by removing public liquidity stress test reports and reduce the frequency of liquidity stress tests.

That's fine, punish the bank and change the regulations. Depositors had nothing to do with that.

[deleted]

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

#303

Post by alostpuppy » Sun, Mar 12, 2023, 3:12 PM UTC

bentlegen wrote: post #278

gerad wrote: post #199

Earlier quoted context omitted.

I just don’t understand why folks on the internet are so passionate about the depositors being hit by this. In terms of avoiding moral hazard they are about as far down the list as possible, and bankruptcy law supports that. First stock holders get wiped out (common then preferred), then debt holders (folks who have lent money to SVB won’t get their money back), only then would it hit depositors - and in the case of…

The C-suite paid themselves millions of dollars via bonuses and stock sales right before insolvency. Executives got paid. What’s to stop future bankers from running the same playbook? (We can debate that this the stock sale was premeditated/signaled months in advance, but the stock had already declined 80% from its 2021 peak and they surely knew about the tough liquidity position months ago — external observers drew…

Can that be clawed back?

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

#304

Post by yeahsure22 » Sun, Mar 12, 2023, 3:12 PM UTC

gerad wrote: post #199

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…

I just don’t understand why folks on the internet are so passionate about the depositors being hit by this. In terms of avoiding moral hazard they are about as far down the list as possible, and bankruptcy law supports that. First stock holders get wiped out (common then preferred), then debt holders (folks who have lent money to SVB won’t get their money back), only then would it hit depositors - and in the case of…

Why do the rules keep changing after the game has been played? And why does it seem to always favor people who are already wealthy beyond imagination? The rules were 250k insured. If you had excess deposits, additional coverage could easily be purchased.

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

#305

Post by ouid » Sun, Mar 12, 2023, 3:12 PM UTC

rayiner wrote: post #231

gerad wrote: post #199

Earlier quoted context omitted.

I just don’t understand why folks on the internet are so passionate about the depositors being hit by this. In terms of avoiding moral hazard they are about as far down the list as possible, and bankruptcy law supports that. First stock holders get wiped out (common then preferred), then debt holders (folks who have lent money to SVB won’t get their money back), only then would it hit depositors - and in the case of…

Why shouldn’t depositors learn a lesson that they should get additional insurance beyond the $250,000?

Being at the top of the line in bankruptcy proceedings is the law. So they shouldn't be generally subject to lessons from the government that go beyond that...

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

#306

Post by Denvercoder9 » Sun, Mar 12, 2023, 3:12 PM UTC

drgath wrote: post #233

koolba wrote: post #153

Earlier quoted context omitted.

> 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…

Have we yet deviated from FDIC rules? I don’t think so, even with what Yellen says. My limited understanding of the situation is that the assets to cover everything is there, they’re just tied up in long-term treasuries. From the FDIC’s site: > As of December 31, 2022, Silicon Valley Bank had approximately $209.0 billion in total assets and about $175.4 billion in total deposits. For simplicities sake, let’s just ass…

> So, what’s next? FDIC finds a buyer for the assets, perhaps a private bank or a a pseudo-government body who has the ability to wait till maturity, and in the meantime, everyone gets all their deposits.

Yes, that's happens in the ideal case. However, due to the rise in interest rates, the market value of SVB's assets is likely lower than $175B at the moment; so it might prove challenging for FDIC to find a buyer for these assets at the required price to give everyone their deposits back. Even well-capitalized entities that have the capital to refund depositors now and the ability to wait till maturity will not pay the face value for these bonds, as they can get a better return by investing that money somewhere else (such as treasuries).

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

#307

Post by koolba » Sun, Mar 12, 2023, 3:13 PM UTC

jliptzin wrote: post #285

koolba wrote: post #153

Earlier quoted context omitted.

> 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…

It is completely insane to allow innocent depositors to lose their money especially when the government clearly would have no problem coming up with the funds to backstop depositors since this is an isolated incident. This bank being located in a tech hotspot is incidental and I am sure some non-techies are swept up in this as well. Imagine a 70 year old woman who just lost her husband and sold her house to downsize…

> Imagine a 70 year old woman who just lost her husband and sold her house to downsize to an apartment. She has $1 million in her SVB account and plans to live off the interest in her retirement. Should this 70 year old widow take a $750k haircut because she hasn’t spent the last few years brushing up on SBV 10-k filings and calling up SBV’s board of directors to ask them how they plan to manage interest rate risk?

Making a sob story about a 70 year old granny doesn’t change the facts.

And she wouldn’t take a $750K haircut. She’d get $250K guaranteed and her share of the remainder which is not going to be zero. Probably much closer to 80+% of the balance above $250K.

> If an enormous earthquake strikes one region causing billions of dollars of damage but you live on the other side of the country do you complain about the federal government spending your tax dollars to help those people rebuild?

If it’s going to be done with funds not allocated or aligned with FEMA then damn straight I’ll complain. Society does not have infinite money. If they want to increase funding for something then we have a process for that.

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

#308

Post by [deleted] » Sun, Mar 12, 2023, 3:13 PM UTC

thinkmassive wrote: post #244

CPLX wrote: post #171

Earlier quoted context omitted.

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…

> 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? Not sure to whom you’re referring, but they’re not libertarians.

[deleted]

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

#309

Post by randerson » Sun, Mar 12, 2023, 3:13 PM UTC

fwlr wrote: post #148

Eh, the depositors aren’t totally blameless here. On Thursday they conspired to perform a huge bank run on SVB, on Friday they succeeded, and on Saturday they were demanding the government and taxpayers make them whole by Monday. They deserve to get their money back and they eventually will once SVB’s assets are liquidated. But that’s not good enough, they want it now , and they won’t hesitate to make you pay for the…

The depositors aren't a monolith. The ones you want to blame aren't the ones whose money went missing.

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

#310

Post by idopmstuff » Sun, Mar 12, 2023, 3:13 PM UTC

bentlegen wrote: post #278

gerad wrote: post #199

Earlier quoted context omitted.

I just don’t understand why folks on the internet are so passionate about the depositors being hit by this. In terms of avoiding moral hazard they are about as far down the list as possible, and bankruptcy law supports that. First stock holders get wiped out (common then preferred), then debt holders (folks who have lent money to SVB won’t get their money back), only then would it hit depositors - and in the case of…

The C-suite paid themselves millions of dollars via bonuses and stock sales right before insolvency. Executives got paid. What’s to stop future bankers from running the same playbook? (We can debate that this the stock sale was premeditated/signaled months in advance, but the stock had already declined 80% from its 2021 peak and they surely knew about the tough liquidity position months ago — external observers drew…

How does making the depositors whole affect any of that, though?