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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

#601

Post by manuelabeledo »

joseftexas wrote: post #453
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…

Depositors are consider investors in banks. 250K and below will be insured by Feds. Anything above will be considered like civil forfeiture that will be given to debts with higher seniority. Salary and bonuses of staff will take the highest seniority. Then secured loans. Depositors will likely get a portion of their remaining money just before shareholders. This is very well established principle. You can go checkout…

> Depositors are consider investors in banks.

This is nowhere near the truth.

If it was, then actual shareholders would recover at least $250,000 from their investment. As it stands, shareholders are poised to recover pretty much nothing.

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

#602

Post by Bluecobra »

postexitus wrote: post #495
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…

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 fuel…

This needs to be sticked at top. It’s not that hard to build a Treasury ladder with three month bills. This is not complicated and you don’t need to be Warren Buffett to figure this out.

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

#603

Post by matheusmoreira »

idopmstuff wrote: post #565
jjulius wrote: post #551

Earlier quoted context omitted.

It's this. I would also like to point out that it's perfectly okay to simultaneously take pleasure in an industry being culled of precisely what you described, while also feeling bad for some of those who may lose their jobs as a result. Ain't nuance neat?

> I would also like to point out that it's perfectly okay to simultaneously take pleasure in an industry being culled of precisely what you described, while also feeling bad for some of those who may lose their jobs as a result. Ain't nuance neat? Absolutely. What's surprising to me is the absolute lack of that nuance on HN. It's all just BURN IT ALL TO THE GROUND over the last few days.

Yes. We're absolutely not interested in seeing the US government bail out banks yet again, especially not banks that just happened to get fucked by their "safe investment strategy". I really have no idea why you are surprised.

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

#604

Post by zdragnar »

tome wrote: post #507
ohgodplsno wrote: post #420

Earlier quoted context omitted.

[flagged]

This comment sounds very harsh on first reading but I'm having trouble finding anything actually incorrect about it ... I just pray this doesn't hit the wider economy.

It overlooks everyone who is just starting out, everyone employed at these companies that isn't making techbro salary like the receptionists, custodial staff, QA, workers on visas, whatever.

Simple fantasies for simple minds, no different than lazy racism or any other form of bigotry.

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

#605

Post by namuol »

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’s like those millionaires who wept because they lost money with Madoff and they wanted the payout for all their earnings they had “made” over the years.

Are you genuinely making this comparison or projecting what this looks like to the average American?

The people who will be hit hardest by this aren't "dumb" depositors of SVB, they're employees and businesses that "banked with a bad bank".

Blame the cowardice of the VCs that triggered the bank run and the arrogance of the bankers at SVB, blame to a lesser extent the businesses that banked with SVB maybe, but don't tell me "serve's 'em right" for the employees who face furlough or layoffs.

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

#606

Post by flappyeagle »

hedora wrote: post #555
WanderPanda wrote: post #531

Earlier quoted context omitted.

If your startup doesn't survive having only 50% in the bank account for one week and then 80-90% in the following weeks (appears to be the most likely outcome without any government money) it likely isn't viable to begin with (in a normal, non-zero interest environment). I think the believe that startups have to always be on the brink of bankruptcy is misleading because it worked in the last decade of endless money a…

This is a strange strawman argument. The GP and parent comment you responded to are specifically referring to this sentiment: > “Depositors shouldn’t get anything beyond the insured $250,000”. What startup normally only has $500,000 in the bank? Anyway, cashflow can matter a lot. For instance, people that sell stuff on etsy might not be paid on time because of this. That creates a lot of customer uncertainty. Also, I…

The person you’re replying to is referring to a well-founded rumor that depositors will receive 50% of the uninsured deposits beyond the 250k minimum this coming week and that SVB has assets worth at least 80% of all deposits, which will be recovered in time.

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

#607

Post by pbourke »

idopmstuff wrote: post #560
duxup wrote: post #534

Earlier quoted context omitted.

> I'm pretty baffled to see so much of this on HN. HN comment quality, thoughtfulness, and etc seems to drop off with higher visibility…. and sadly generally too. The more visible the more comments resemble Reddit or the god awful knee jerk hot takes you get in local newspaper comment sections :( It’s a bummer as I’ve enjoyed the generally high comment quality on HN for a long time.

I agree with you on this, but I'm thinking more as a matter of perspective. HN is just not a place where I expect to see vicious, anti-tech backlash given the demographics.

Perhaps it’s an anti-SV backlash? Seems misguided as a lot of the places that you’ll want to work at 5-10 years from now are probably depositors at SVB. I think we all have an interest in a trustworthy financial system so rooting for depositors to get wiped out seems particularly short sighted.

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

#608

Post by StopHammoTime »

This is a simple liquidity problem. SVB had the treasury bills and loan book to cover all the deposits. They just couldn’t access any of that money.

The FDIC should take on the bills and loans, and pay out the cash now. They will collect the entire balance eventually and they have the benefit of time and I imagine they’re authorised to hold assets like this long-term (or do a cash swap with the fed, they have plenty of long term bonds what’s another $100B). I have always assumed this is what the whole point of the FDIC and similar schemes in other countries. They foot the bill immediately and then spend time fixing up the mess but eventually reclaim it all back. It’s a bit like if you’re not at fault for an accident - the insurer pays you out now and then they deal with the at-fault driver and you’re not involved in that process afterwards in most cases.

According to the press release, SVB had $206B in assets and $176B in deposits. The math is simple: everyone should get their money back. There may even be some money left over for investors.

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

#609

Post by epistasis »

rqtwteye wrote: post #540
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…

I think the backlash against tech comes from many years of tech celebrating themselves and being celebrated as “disrupters” for a lot of bullshit startups. And the amounts of money made with companies hat have no real business is just astonishing. It would be nice if it went back to focusing on creating sustainable businesses that make useful products that benefit their users and aren’t just another vehicle for mass…

I think this mostly comes from the PayPal mafia sort of attitude: libertarian when it helps me, bail me out when it helps me, start a bank run when it helps me.

There was a time when tech did seem like a better business movement. Certainly better than the financial sectors, or heavy industry, or pharma. But then we let Thiel and Musk become the face, with Sachs and Calacsnais (or however you spell his name) become their media toadies, and we got fucked on the PR front.

We need to reject these guys a bit harder. Thiel's bank run was unnecessary. He should have picked up the phone and got the numbers from SVB instead of destroying an institution that's so helpful for small founders. Founders are now more dependent on Thiel and his ilk, and less independent.

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

#610

Post by hedora »

JumpinJack_Cash wrote: post #500
oh_sigh wrote: post #479

Earlier quoted context omitted.

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…

First of all, the FDIC has always arranged to make depositors whole when banks failed. This is why there weren’t massive runs on bank checking and savings accounts in 2008.

Second, CA gets the least back in federal spending per dollar of taxes paid, and NY is close:

https://worldpopulationreview.com/state-rankings/federal-spe...

Pre pandemic, only 11 states were turning a profit:

https://howmuch.net/articles/federal-budget-receipts-and-exp...

The regions most upset about federal safety nets are also the ones that benefit the most from them.

Third, it is not a minor inconvenience when $10M’s of investor money from a fundraising round gets permanently lowered to $250K (no “bailout”) or if a startup stops making payroll for 2 years (upper bound of the time range the FDIC has proposed).

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