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

#481

Post by CPLX » Sun, Mar 12, 2023, 4:01 PM UTC

manuelabeledo wrote: post #389

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…

I find it ironic that you mentioned taxi drivers, since many were initially collateral damage, and then moved onto drive for Uber or Lyft. I would say that medallion holders, those with enough capital to pay the almost million dollars a license was running for around 2010, were the ones getting screwed. And if you ask me, I would compare them to whomever invested in SVB. Those will not get their money back.

Just click the link, that's exactly who the article is about. In those specific cases they aren't moving on to Uber and Lyft because they're dead.

They didn't have enough capital for the medallions in hand of course, these were mostly immigrant strivers who worked and toiled and deeply tapped their entire network of friends and family for down payments and were heavily leveraged for the rest.

Then Silicon Valley VC's purposefully made it impossible for them to compete using a massive wash of cheap capital.

What's that you say? The free market is tough, and they should have been able to adequately understand the risks? What can you do if they put their money into something and it didn't pan out right? The game has rules right? No take backs.

Oh.

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

#482

Post by JackFr » Sun, Mar 12, 2023, 4:01 PM UTC

mixologic wrote: post #441

tsimionescu wrote: post #416

Earlier quoted context omitted.

First of all, even if the company you work for goes bankrupt, you're very likely to still receive your salary, as debts to workers are the highest priority in any bankruptcy case. So the risk to workers' livelihoods is being way overblown. Of course, if a substantial amount of your compensation was company stock, you may lose a lot on that, but that is par for the course with stock. Second of all, the purpose of havi…

You get your last paycheck, sure, but you still lose your job which is definitely a threat to workers lively hoods. It's even more of a threat if the whole sector you're employed in suffers simultaneously, as it becomes difficult to continue to be employed in that sector.

I say as a person who’s been laid off twice and worked for a company that went bankrupt — why is that my problem?

Why should you get my money?

(In the case of the company I worked for which went bankrupt — we were a fintech startup with a truly innovative and fantastic product. Our management made three bad decisions which led to our demise. Two were technical and would have been recoverable, the last was a strategic move which ultimately proved disastrous.)

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

#483

Post by [deleted] » Sun, Mar 12, 2023, 4:02 PM UTC

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?

[deleted]

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

#484

Post by martinald » Sun, Mar 12, 2023, 4:02 PM UTC

tempsy wrote: post #170

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…

can’t people buy private insurance for their deposits above the $250k threshold? if you buy an expensive house or car you generally pay a lot more to insure that asset. not sure why people don’t think of buying insurance on their bank deposits in the same way if you find yourself in a situation where you need to hold much more than $250k in one account for whatever reason. But even if you’re an individual holding mil…

Yes, you can buy it. It's very common at wholesale banking levels (credit default swaps are extremely commonly used to cover counterparty risk). Also credit insurance is available to anyone.

However, the simple option here is to put money into short term govt bonds, there are ETFs like SGOV that make this extremely easy.

Even more ridiculous is that you are getting 4-5% yield on them.

This is what is so crazy about this entire saga - people should not be parking millions upon millions at a bank earning no interest when you could be getting 4-5%+ - regardless of solvency issues.

It is frightening to me people don't seem to understand this. It's absolutely basic money management. It would be more understandable when interest rates were basically 0 and you wouldn't get any yields from bonds. But that isn't the case and hasn't been the case for a long time now.

Now clearly SVB were offering perks for doing this, but say you had $100m parked there, are those perks really worth $5m/year? People should have been asking that. It's a whole team of engineers paid for!

And really offering personal perks to founders contingent on company money doesn't sit completely right with me, unless the founder owns 100% of the equity which most do not. It's one thing offering perks as goodwill but putting convents etc on company money for personal perks is suspect to me.

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

#485

Post by CPLX » Sun, Mar 12, 2023, 4:03 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.

I mean literally nobody is a libertarian by the dictionary definition, there aren't any on the planet. It's just a word people use to describe a value system where governments only help people like them and everyone else gets fucked.

They sure talked a good game though.

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

#486

Post by shjake » Sun, Mar 12, 2023, 4:03 PM UTC

prepend wrote: post #444

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…

> just don’t understand why folks on the internet are so passionate about the depositors being hit by this. I think most of America can’t even imagine having over $250k in an account. So people with this much wealth asking for a bailout is literally rich people asking for coverage because they did something dumb (banked with a bad bank, didn’t account for risk, didn’t insure, didn’t manage funds). It’s not hate so mu…

It seems to be only a question whether they will receive 80-90% or the full 100% though.

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

#487

Post by ttsgeysygd » Sun, Mar 12, 2023, 4:03 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…

FDIC will unfreeze a non trivial amount of depositors funds by Wed or Thursday. They sold a lot of assets Friday. I’m personally not predicting huge job losses. There are lots of war chest sized balances in SVB that it doesn’t matter if they take longer to get made whole. So if they effectively unfreeze say two million per account or 45% whichever is larger on Wed/Thur and then balance in a couple of months I think Job losses will be minimal.

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

#488

Post by jasode » Sun, Mar 12, 2023, 4:03 PM UTC

tome wrote: post #446

mym1990 wrote: post #442

Earlier quoted context omitted.

Where do you propose a company with millions in cash keep that money if not a bank?

My first suggestion would be as T-Bills. I've asked a lot of questions on HN in the past few days about this, and I'm still not sure why it was not standard practice. Why people in position of authority trust bank deposits after 2008 I do not understand.

>My first suggestion would be as T-Bills. [...], and I'm still not sure why it was not standard practice.

Corporations have always split their cash into cash and "almost-cash-equivalent" liquid assets (like Treasury Bills). E.g. one can read any random 10-k corporate filing and there will be a line item for short term assets like "T-bills" because companies like to earn interest on their excess cash. The corporate treasurer is responsible for managing that mix.

But a company still needs working cash in the bank account for payroll and to pay vendors. The smaller startups may have not have enough excess cash to bother with splitting some of it into T-bills.

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

#489

Post by mym1990 » Sun, Mar 12, 2023, 4:03 PM UTC

prepend wrote: post #444

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…

> just don’t understand why folks on the internet are so passionate about the depositors being hit by this. I think most of America can’t even imagine having over $250k in an account. So people with this much wealth asking for a bailout is literally rich people asking for coverage because they did something dumb (banked with a bad bank, didn’t account for risk, didn’t insure, didn’t manage funds). It’s not hate so mu…

People asking for money back from Madoff were investors, which is completely different from depositors asking for their deposits back.

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

#490

Post by JackFr » Sun, Mar 12, 2023, 4:04 PM UTC

tracer17 wrote: post #470

JackFr wrote: post #452

Earlier quoted context omitted.

> But kill a bunch of startups because of their choice of financial institution? I just don't get where that comes from. Because you want to take my money, and your justification for wanting my money is simply “My company made a mistake.”

How is it your money? It's not a taxpayer funded bailout, the FDIC is just going to forcibly liquidate SVB's assets and pay back customers to the extent possible with those proceeds.

I assumed the parent was referring to a government sponsored plan to make SVB depositors whole beyond ordinary FDIC receivership.