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

#581

Post by TigeriusKirk » Sun, Mar 12, 2023, 4:41 PM UTC

matheusmoreira wrote: post #554

AmericanOP wrote: post #468

Earlier quoted context omitted.

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…

So what you're saying is the bank made investments based on a whole lot of assumptions. These assumptions were quickly invalidated by US policy changes and then the bank lost everything. Yes, absolutely let it all burn. They risked it all on their "strategy" and lost. Why should they get bailed out in literally any way? I don't see the government showing up to bail me out when my "strategy" gets me liquidated, why th…

The bank is already gone. It's been wiped out.

The discussion is now about the depositors.

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

#582

Post by 323 » Sun, Mar 12, 2023, 4:42 PM UTC

In 2008, during the global financial crisis, the German government declared that all deposits in all German banks will be guaranteed by the state. No limits. The official limit before was 100k euros:

> “The state guarantees private deposits in Germany,” Finance Ministry spokesman Torsten Albig said. A second ministry spokesman said the guarantee was unlimited.

https://www.reuters.com/article/financial-germany-deposits-i...

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

#583

Post by refulgentis » Sun, Mar 12, 2023, 4:42 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…

This is facile and representative of so much of the internet. Our ears our closed to each other, we cherry pick the weakest arguments, or ones that aren’t made at all.

No one seriously thinks there’s only $250K/client available. People are saying the same thing you are, just gleefully.

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

#584

Post by paulpauper » Sun, Mar 12, 2023, 4:42 PM UTC

matheusmoreira wrote: post #554

AmericanOP wrote: post #468

Earlier quoted context omitted.

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…

So what you're saying is the bank made investments based on a whole lot of assumptions. These assumptions were quickly invalidated by US policy changes and then the bank lost everything. Yes, absolutely let it all burn. They risked it all on their "strategy" and lost. Why should they get bailed out in literally any way? I don't see the government showing up to bail me out when my "strategy" gets me liquidated, why th…

Because of secondary effects. It's not like SVB failure is limited to just depositors and start-ups. Which means way more damage than just the nominal amount lost.

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

#585

Post by nend » Sun, Mar 12, 2023, 4:42 PM UTC

m3kw9 wrote: post #377

daniel-thompson wrote: post #355

Earlier quoted context omitted.

> what's the purpose of saying "FDIC Insured up to $250k" The FDIC guarantees up to $250k, but if additional assets are available beyond that, then those will be paid out to depositors as well. It's a floor, not a ceiling

Upto sounds like a ceiling to me

Yes, the ceiling of the guarantee. If the bank has additional assets to be sold you can still receive more of your deposit back, but the government doesn't guarantee it.

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

#586

Post by baq » Sun, Mar 12, 2023, 4:43 PM UTC

gerad wrote: post #467

tsimionescu wrote: post #438

Earlier quoted context omitted.

> people won’t make payroll, and employees who have no responsibility won’t get paid This gets repeated over and over, but just like depositors have the highest priority to a failed bank's assets, so do employees of any failed company. So, if a company goes bankrupt because it can't access funds stored with a bank, first stockholders would get wiped out, then debt holders, and only then employees (when talking about…

It gets repeated over and over again because if SVB money is locked up for weeks/months while they unwind positions startups won’t be able to make payroll.

Depositors will get 50% this week, the bonds are already sold. The loan book is more… interesting.

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

#587

Post by grugagag » Sun, Mar 12, 2023, 4:43 PM UTC

FartyMcFarter wrote: post #573

idopmstuff wrote: post #558

Earlier quoted context omitted.

I'll probably get my next paycheck or two, but I'll lose my job. You're pretty clearly saying here that I should lose my job, along with many other people, because of the bank at which my company's cash is stored. > Perhaps they shouldn't keep money in the bank in the first place, but find other uses for them. I work at a small startup that's raised five million dollars. Not a huge amount of money, but obviously losi…

I'm not sure your founders are as "extremely" prudent as you claim them to be. For example, couldn't they have spread their funds throughout more banks instead of putting their eggs in one basket?

Apparently they did that on purpose to be better able get a view on the activity of the money they poured in. Someone on a different thread is pointing to the levers VCs had in SVB for this exact purpose.

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

#588

Post by mustache_kimono » Sun, Mar 12, 2023, 4:43 PM UTC

tsimionescu wrote: post #416

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…

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…

> even if the company you work for goes bankrupt, you're very likely to still receive your salary

Spoken like someone who has no experience with bankruptcy. The rule of thumb used to explain this to an unsecured creditors, before this happens, is -- dude, you might get 10 cents on the dollar. Employees are rarely made completely whole.

> as debts to workers are the highest priority in any bankruptcy case

Secured creditors have to get paid first. Then after quite a few other priority claims (attorneys, trustees must be paid, domestic support, etc.) employees are paid.

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

#589

Post by marcopicentini » Sun, Mar 12, 2023, 4:44 PM UTC

If a company would have bought short term bond (6 months) does it would be safe, right?

Even if these bonds are purchased using SVB brokerage account.

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

#590

Post by cheeseblubber » Sun, Mar 12, 2023, 4:44 PM UTC

First of all SVB should be left to fail. We should not privatize profits and socialize losses. We should have much more stringent regulation to prevent this from happening again.

Secondly people are conflating bailing out depositors with bailing out SVB. The bank took all the risk and had all the gains. The depositors did not have anything to gain here besides keeping their money safe. The depositors picked a reputable bank that has been around for 40 years. Their business should not fail because the failure in the bank and the government regulation.

Edit: The ones who are hurting the most are not the VC's startup who told their startups to take their money out. It is those who didn't contribute to this problem. The depositors that didn't want to cause a bank run is the ones that will be hurt most.