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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

#491

Post by mrobins »

m3kw9 wrote: post #395
obventio56 wrote: post #181

Earlier quoted context omitted.

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?

It’s not about the bank it’s about the depositors. The bank is still going to zero.

It’s a valid Q how saving depositors impacts CFO risk analysis. Hopefully no matter what the outcome this scares everyone into diversification.

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

#492

Post by drdrek »

version_five wrote: post #200

As others have said, if depositors are bailed out, it's a bailout. Pretending that changing the definition makes a difference is childish. Whatever the government decides to do, this makes the VC and startup industry look really weak and entitled, and knocks them down from risk takers building the future to the same status as a bunch of bankers looking for a handout. There was an opportunity here for VCs with lots of…

Its too much to expect from VCs, they are each trying to maximize their gain. Creating consensus and cooperation is very hard, especially in bad times. It's exactly why governments exist, In some cases a web of self interested parties will produce horrible results and central authority can be more effective.

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

#493

Post by shjake »

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?

Because the bank has more than enough assets to payback at least 70-80%. Are you suggesting that money should be appropriated by someone just to teach them a lesson?

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

#494

Post by martythemaniak »

spamizbad wrote: post #271
martythemaniak wrote: post #166

Earlier quoted context omitted.

This whole saga has exposed the shocking financial illiteracy in this industry. There are laws and procedures about how to handle the situation. Banks fail all the time and the FDIC disposes of them all the time. Depositors will get their insured money on monday. The FDIC will then dispose of all the banks assets and return the proceeds to its creditors, that is depositors. Calling for the government to guarantee all…

I think there’s a shocking lack of political literacy at work here because any action that could be perceived as a bailout by a layperson will be an albatross around the neck of any politician that supports such measures. Several of the VCs who spent Q4 of last year gloating about layoffs are now saying the sky is falling - so they aren’t exactly a sympathetic group. You can belly-ache about populism or whatever but…

Yep, the politics of this are terrible as well. Tech leaders like Sacks have spent years trolling people and making themselves as odious as possible and now they're crying for a bailout, while still being as odious as possible and blaming the government for this.

But apart from the politics, even something as simple as Garry Tan calling for the government to guarantee all deposits is simply calling for the government to break its own laws.

https://twitter.com/garrytan/status/1634630941334470656?cxt=...

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

#495

Post by postexitus »

AmericanOP wrote: post #468
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…

Before people get too excited about letting it all burn, I recommend everyone watch this talk by an economist on the 2008 recovery: https://www.youtube.com/watch?v=RrFSO62p0jk Spoiler alert (18:30): It was entrepreneurship that turned the economy around. Not fed policy. SVB put their deposits in US Treasury Bonds. Commonly regarded as the safest investment vehicle there is. Then the fed raised interest rates, complet…

US Treasury Bonds are one of the safest investment vehicles, IF you match the interest and maturity to your liabilities. You cannot go and buy bonds that will mature and give you 1% per annum in 10 years when you have a debtor awaiting payment in 90 days. That's the huge risk mismanagement SVB did.

Having said that, I don't think startups will suffer big time - but they were the ones also who created the bankrun fueled by VC panic. However mismanaged SVB was, given enough time they had enough resources to turn this around.

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

#496

Post by tsimionescu »

i_love_cookies wrote: post #449
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…

Well I'm not getting paid the entire team was essentily furloughed (~25 ppl) No idea what's going to happen with insurance since some people were expecting I'm generally treating it as being laid off with no severance and looking elsewhere

I'm sad to hear that, but by all accounts you should be able to receive your salary on Monday, when at least $250k should become available to your employer (though hopefully significantly more).

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

#497

Post by SkyPuncher »

hanoz wrote: post #124
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…

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.

> 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?

The insured amount is absolutely guaranteed. However, it's still standard for a failed bank to make it's depositors whole.

I don't have sources, but data I've seen indicates of the nearly 600 bank failures since 2000, few, if any, have resulted in a loss of deposits.

----

Put another way. Most employees don't have contractual obligations to receive severance. However, it's culturally expected that businesses performing layoffs will offer severance. Those who don't risk people not coming to work for them.\

Same situation in the US. The USD and it's banking system is seen as incredibly stable and robust. When chinks start to form, it raises concern and people might start looking to bank in other currencies.

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

#498

Post by machina_ex_deus »

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…

Let's stop pretending this bank was an arbitrary choice. This bank was corrupt, it took overblown risks by design for years including even lobbying for lax regulation.

The VCs whose money those startups are built upon, have connections to this bank. This entire back acted like some VC venture, with explicit design of taking the risk of zero return.

0 dollars should be given to depositors. Absolutely zero. These griefters learned how to use the common people as meat shields. It's the CFO of Lehman brothers. Let the VCs who supported this lose their investments and be forced to raise money now. If those businesses are worth something, investors will buy them. Let the VCs who gave bad advice be wiped clean from the investment. Their choices led to this.

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

#500

Post by JumpinJack_Cash »

oh_sigh wrote: post #479
JumpinJack_Cash wrote: post #421

Earlier quoted context omitted.

> > 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…

No one is asking anyone to feel sorry for them. They got punched in the nose, and they just don't want to be punched in the nose again.

At the expense of taxpayers. That is the crux of the argument.

People are stressing the 250k FDIC requirement which is Federal and thus equal for everybody and it's one of the very few things that is equal for everybody across the land regardless of you living in Mobile, AL or San Jose, CA.

People are against the extra-insurance/safery-net/bailout being awarded to everything based in NYC and SF because everything in NYC and SF is supposedly too big and too important to fail. In this case it's not even failure but a minor inconvenience because as it stands the money is there, it's only tied up.

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