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Yellen says government will help SVB depositors but rules out bailout

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

#421

Post by JumpinJack_Cash »

idopmstuff wrote: post #339
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'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…

> > I've worked at startups for my whole career

HN has grown a lot and there are much more people who are not necessarily from SV.

In the real world, if you live in SF, work in startups doing what you like, get paid well, not trapped in 9-5 etc.

That's elite and nobody will ever feel sorry for you. As a general rule every guy should always expect nobody to feel sorry for them, but this particular set of circumstances and the area of the country where they unfolded scream 'millionaires problems' to those roaming in the interwebz.

And now HN is part of the interwebz.

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

#422

Post by grugagag »

kemiller wrote: post #415
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.

Many were restricted by covenant with their investors to only use SVB.

Id like to hear more about that.

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

#423

Post by bradleyjg »

softwaredoug wrote: post #402
bradleyjg wrote: post #316

Earlier quoted context omitted.

It’s generally not very controversial financial policy that prevents a financial contagion like 1929. A law was put in place in 1933 with a limit. If it didn’t have a limit, we wouldn’t be having this discussion. Where were all these billionaires and VCs any time prior to this calling for uncapped FDIC insurance? This is special pleading.

It’s not about “billionaires” (who don’t keep billions of cash sitting in one bank) but the company with a few million that needs to make payroll and pay vendors. SVB is in receivership where depositors place very highly. Banking policy is not just about insurance. That’s just one tool.

Billionaires and VCs are going on Twitter and demanding a make whole government bailout. Is this the first time they are hearing about how the FDIC works?

I don’t think anyone is opposed to the system playing out like it’s supposed to.

The FDIC pays out $250k on Monday plus pro rata whatever cash is on hand. Then it starts selling assets. The treasuries and MBSs they can probably sell within days, those have very liquid markets. That will allow them to make another pro rata distribution. The loan book will take longer. But as long as public money isn’t used, no one will call it bailout.

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

#424

Post by bradleyjg »

benjaminsky2 wrote: post #221
bradleyjg wrote: post #121

Earlier quoted context omitted.

Sure we taxpayers can toss in a few billion. In exchange, VCs can give up the carried interest loophole and founders can give up 83b elections. Deal?

Founders aren’t the only ones who can make an 83b election. Regular employees can do so too if they’re allowed early exercise.

And founders aren’t the only ones that will benefit from a bailout.

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

#425

Post by lambo4bkfast »

fwlr wrote: post #366
daniel-thompson wrote: post #336

Earlier quoted context omitted.

> they conspired to perform a huge bank run Individual depositors don't need to conspire to reach the conclusion that in a bank run scenario, it is virtually always in each depositor's own best interest to withdraw their money.

With the “conspiring”, I am referring to reports of VCs mass-emailing their investees to move everything out of SVB right now.

The VC's obligation is to their startups... Its a completely rational decision to get your money out of SVB once you know others are thinking the exact same.

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

#426

Post by colinprince »

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…

SVB sought - and received! - reduced scrutiny of the institution, alluding to the “low risk profile of our activities and business model”

https://www.theguardian.com/business/2023/mar/11/silicon-val...

https://archive.is/aSx6E

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

#427

Post by madamelic »

Edmond wrote: post #246
avianlyric wrote: post #188

Earlier quoted context omitted.

> The reason SVB is in receivership is because they don't actually have the ability to make all their depositors whole. No, SVB is in receivership because they can make their depositors whole right now . They have most of the assets, it’s just that liquidating them immediately would result in losses far greater than SVB can afford, but that’s what a bank run demands. The feds can take over, make depositors whole now…

A fundamental component of finance valuations and rules is time. Saying that the fed should stretch out the timeline of asset sales so as to ensure they mature into their valuations doesn't align with how things work. Time value of money is a thing, if we consider even moderate inflation for instance, the cash you can get today is worth less in the future. In order words if SVB assets are worth $100 today, it makes n…

> it makes no sense for me to hand them $100 in cash today while I wait a decade for their bonds to mature, just so I can sell them for $100 again.

I know the Fed and Treasury are different entities but holding a bunch of bonds to essentially themselves is the best case scenario. They would hold both ends of the transaction: the money from the bonds and the bonds themselves (obviously ignoring the fact the liquid money is likely 'at work' somewhere else).

The risk at that point to the Fed is limited to only the US financial system failing entirely. 'They' can afford to hold the bonds even in perpetuity because they have no real responsibilities to anyone beyond providing stability.

I am not an economist but the risk of either asking for the cash from the Treasury or otherwise doing 'money-magic' to transform the bonds into liquid cash should be basically zero. They would just be fronting themselves money at a 0% interest rate, no one else would be exposed to that 'loan'.

Someone else smarter in economics may have to step into explain why this is wrong or bad.

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

#428

Post by JumpCrisscross »

idopmstuff wrote: post #339
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'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…

> because our CEO used a well-reputed bank

That didn’t have an investment grade rating, where $250k comes out of taxpayer coffers Monday morning, and where everyone has unemployment insurance? Yes.

The assets of the bank should go to your company first. But the public purse should not be opened.

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

#429

Post by belter »

kemiller wrote: post #415
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.

Many were restricted by covenant with their investors to only use SVB.

Because it was providing loans to the VCs and they saw it convenient, to force their startups there. High risk for High reward...

"The rise and stunning fall of Silicon Valley Bank" - https://www.axios.com/2023/03/11/silicon-valley-bank-rip

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

#430

Post by JumpCrisscross »

peter422 wrote: post #396
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.

What bank do you use? When was the last time you went over their deposit base and asset allocation?

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

Sweep account and credit rating. First is a one-time option. Second, an occasional check.

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