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

#391

Post by HervalFreire » Sun, Mar 12, 2023, 3:31 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…

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

#392

Post by nasseri » Sun, Mar 12, 2023, 3:31 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?

If the lesson you want corporate depositors to learn is that in the United States, any dollar beyond 250K in an account can evaporate overnight, than be prepared for a lot more bank runs in the immediate future.

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

#393

Post by belter » Sun, Mar 12, 2023, 3:32 PM UTC

DoneWithAllThat wrote: post #386

belter wrote: post #382

Earlier quoted context omitted.

It's coming from the same system that probably led you to work at Startups your whole career. High risk for high reward on a lightly regulated capitalist system. If your CEO or CFO put all the money in one risky bank, it was bad financial management.

It wasn’t a “risky bank”.

Not according to JP Morgan... - https://am.jpmorgan.com/content/dam/jpm-am-aem/global/en/ins...

"The liability issue: extreme reliance on institutional/VC funding rather than traditional retail deposits.

...While capital, wholesale funding and loan to deposit ratios improved for many US banks since 2008, there are exceptions. As shown in the first chart, SIVB was in a league of its own: a high level of loans plus securities as a percentage of deposits, and very low reliance on stickier retail deposits as a share of total deposits. Bottom line: SIVB carved out a distinct and riskier niche than other banks, setting itself up for large potential capital shortfalls in case of rising interest rates, deposit outflows and forced asset sales. [Note: This chart appeared in our 2023 Outlook in a discussion on risks related to deposits, rising rates and quantitative tightening]..."

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

#394

Post by plonk » Sun, Mar 12, 2023, 3:32 PM UTC

yeahsure22 wrote: post #304

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 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.

How were these “the rules?” The FDIC’s job is to make the bank’s customers as close to whole as possible. Where would the bank’s assets go otherwise?

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

#395

Post by m3kw9 » Sun, Mar 12, 2023, 3:32 PM UTC

obventio56 wrote: post #181

fma wrote: post #117

Earlier quoted context omitted.

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…

The 250k is messaging to minimize moral hazard. You want banks and depositors invested in minimizing their own risk. I'd guess hesitancy to immediately declare full guarantee of funds is also due to these concerns (although there may be other reasons as well). The sweet spot here maximizes the appearance of consequences while minimizing actual fallout.

But now banks know is just a bluff?

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

#396

Post by peter422 » Sun, Mar 12, 2023, 3:32 PM UTC

belter wrote: post #382

idopmstuff wrote: post #339

Earlier quoted context omitted.

I'm pretty baffled to see so much of this on HN. Like a whole lot of people here, I've worked at startups for my whole career. People here are effectively suggesting that I shouldn't get my paycheck and that the company I work for should lose most of its money because our CEO used a well-reputed bank? Absolutely wipe out the equityholders of SVB. They deserve nothing, because that's what you should end up with if you…

It's coming from the same system that probably led you to work at Startups your whole career. High risk for high reward on a lightly regulated capitalist system. If your CEO or CFO put all the money in one risky bank, it was bad financial management.

What bank do you use?

When was the last time you went over their deposit base and asset allocation?

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

#397

Post by capableweb » Sun, Mar 12, 2023, 3:32 PM UTC

DoneWithAllThat wrote: post #386

belter wrote: post #382

Earlier quoted context omitted.

It's coming from the same system that probably led you to work at Startups your whole career. High risk for high reward on a lightly regulated capitalist system. If your CEO or CFO put all the money in one risky bank, it was bad financial management.

It wasn’t a “risky bank”.

Everything is pointing towards that it was a risky bank, with a "unusually high reliance on corporate/VC funding".

Maybe SVB themselves downplayed this?

Take https://am.jpmorgan.com/content/dam/jpm-am-aem/global/en/ins... as an example:

> The liabiity issue: extreme reliance on institutional/VC funding rather than traditional retail deposits

> While capital, wholesale funding and loan to deposit ratios improved for many US banks since 2008, there are exceptions. As shown in the first chart, SIVB was in a league of its own: a high level of loans plus securities as a percentage of deposits, and very low reliance on stickier retail deposits as a share of total deposits. Bottom line: SIVB carved out a distinct and riskier niche than other banks, setting itself up for large potential capital shortfalls in case of rising interest rates, deposit outflows and forced asset sales.

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

#398

Post by JumpinJack_Cash » Sun, Mar 12, 2023, 3:32 PM UTC

TechBro8615 wrote: post #379

JumpinJack_Cash wrote: post #364

In the aftermath of SilverGate and SVB demise people are rightfully (from their perspective) rooting for a shake-up at the top of the social pyramid. I don't know if people realize but living in San Francisco and being at the helm of your own company with millions in equity funding is an extreme privilege. Millions of things have to go right in order for that person to be in such position. That is the dream of many i…

For every one privileged founder there are dozens of employees who won't get paid.

And each and everyone of them has a slam-dunk case in a class action lawsuit against the board of the company they were employed.

Not to mention employees didn't have their savings in SVB so their net worth is not at risk, whereas it's the 'net worth' of the company which is at risk because it was all stored in SVB accounts.

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

#399

Post by newaccount2023 » Sun, Mar 12, 2023, 3:34 PM UTC

DoneWithAllThat wrote: post #386

belter wrote: post #382

Earlier quoted context omitted.

It's coming from the same system that probably led you to work at Startups your whole career. High risk for high reward on a lightly regulated capitalist system. If your CEO or CFO put all the money in one risky bank, it was bad financial management.

It wasn’t a “risky bank”.

We have an existence proof to the contrary

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

#400

Post by JJMcJ » Sun, Mar 12, 2023, 3:34 PM UTC

belter wrote: post #382

idopmstuff wrote: post #339

Earlier quoted context omitted.

I'm pretty baffled to see so much of this on HN. Like a whole lot of people here, I've worked at startups for my whole career. People here are effectively suggesting that I shouldn't get my paycheck and that the company I work for should lose most of its money because our CEO used a well-reputed bank? Absolutely wipe out the equityholders of SVB. They deserve nothing, because that's what you should end up with if you…

It's coming from the same system that probably led you to work at Startups your whole career. High risk for high reward on a lightly regulated capitalist system. If your CEO or CFO put all the money in one risky bank, it was bad financial management.

It wasn't risky as long as prime rate stayed super low.

But that rate has been creeping up for months now.

SVB was too small to qualify for risk assessment under the revised banking rules. So they could get away with money in volatile securities that were very interest rate sensitive.

That said, SVB seemed very solid until Thursday morning.