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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

#631

Post by berkle4455 »

StopHammoTime wrote: post #608

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…

$206B in assets that were being recognized for their original, not current, valuation. That’s the entire problem. HTM vs AFS.

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

#632

Post by grej »

Seeing all of the “screw them, they are VC’s & tech bros, they took a risk they own it” sentiment on Twitter makes me sad. It’s a hard realization of how little clue so many people have about so much of the way the financial system works, and who would actually be impacted by these losses.

Also seeing finance bro hot takes like, oh those companies took the risk and should have done due diligence on the bank. SIVB was given an investment grade rating by both Moody’s and Standard and Poor. What due diligence are founders scrambling to find product market fit supposed to do in their spare time that is somehow beyond those organizations?

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

#633

Post by pbourke »

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?

Would you suggest that every small business in the US with working capital over the FDIC limits do something like this? It would be a massive waste of resources. FDIC insurance exists to stabilize this part of the financial system.

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

#634

Post by CPLX »

nhod wrote: post #544
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…

Regarding the VC-fueled "onslaught" on the regular old taxi drivers, perhaps you are too young to remember what life was like before Uber and Lyft? Before those companies gave literally millions of people around the world the ability to just up and have a job, with very little hassle? Which obviously has its own issues. But then wait. Zoom out. The former system did too. The new companies disrupted the absurd, custom…

One day someone may come on this message board and say:

Perhaps you are too young to remember what life was like before SVB failed? Before banks were made to be more responsible with depositor money so people wouldn't be hurt, and before the sociopathic fake-libertarian culture of Silicon Valley elites was finally dead and buried along with a few of their Tahoe cabins and a couple companies that advanced innovation by tricking people into ordering food from existing restaurants on fake websites?

I remember, they will say, how there was a bank that was so dominated by cronyism and collusion that they were forcing companies all from one very narrow sector to keep large uninsured balances in one bank while they bet all that money on long-dated securities for some inexplicable reason.

Remember how the bank got people to go along with this insane plan by giving the people with fiduciary responsibility for these company treasury decisions mortgages, even when the banking market in general had deemed them too high risk?

Wow that was crazy. Anyways they died. This is the nature of disruption. Entrepreneurs have a negative experience with an entrenched crony-driven legacy industry, have a lightbulb moment, and then build banks that don't do shit like that.

So the quaint pastoral notion of the innocent startups and VC podcast hosts being obliterated by the terrible negligent actions of the government is just wrong. They knew they were mispricing risk and they just didn't fix it. Even after their bank failed they sought -- are still seeking? -- to defend the status quo rather than realize a justified loss and create a better and safer banking experience.

I look forward to reading these comments in the future.

Just for reference I've been building on the web since about 1994. It's a lovely perspective that makes it much easier to realize just how fundamentally full of shit all these guys are on this topic today.

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

#635

Post by tsunamifury »

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…

This is the second completely detached from reality statement you have made. The US government requires that banks spend 90% of their deposits on tbonds so that they can continue to fund the process of money creation.

The strategy is mandated by regulation post 2008. The mistake svb made was buying 10 year instead of 3 month. Hard to explain that one other than the fed said inflation would be transitory and it wasn’t.

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

#636

Post by flappyeagle »

epistasis wrote: post #609
rqtwteye wrote: post #540

Earlier quoted context omitted.

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 th…

> or however you spell his name

Sacks is spelled with a CK.

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

#637

Post by jmuguy »

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…

Something tells me you don't understand the difference between the bank, its shareholders, and its account holders. Unless you just think its peachy that a bunch of businesses lose everything because their bank made some actually not all that risky investments and some people got spooked. This isn't 2008.

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

#638

Post by avianlyric »

bradleyjg wrote: post #274
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…

This is not a typical liquidity squeeze. The scenario you are talking about is where liquidating some assets all at once would crash the market and so to capture the value a sale needs to be made over time. The treasury and agency mbs markets are plenty deep enough to handle this liquidation. The issue is that the value of the holdings have dropped. That’s a solvency issue.

I’m boldly assuming that interest rates will change in the future. There’s no denying that SVB have fucked up, but equally it’s possible they would have survived if a bank run hadn’t occurred, and they had sufficient time to unwind their bonds, and raise needed capital to cover their inevitable losses.

Or maybe they would have managed to limp on long enough for interest rates to drop just low enough for their bonds to recover enough value to be sold without bank ending losses.

But who knows. There was a bank run, facilitated by VCs, which ironically, is now going to really hurt the very VCs that fanned the flames. Now we get to see how SVB gets unwound, who gets fucked, and who ends up picking up the tab.

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

#639

Post by dpweb »

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…

It’s from the hubris and excesses of recent SV culture.

And most Americans have no conception of being able to have 250k in a checking account.

The vengeance attitude can be taken too far however but as depositors are ultimately made 80-100% whole seems a reasonable outcome.

Bottom line uninsured means uninsured. Read your contracts. Although shouldn’t be angry if they can be made whole.

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

#640

Post by matheusmoreira »

gerad wrote: post #199
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 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…

Simply because "depositing" money at a bank is not supposed to be a safe operation. You're lending money to the bank. There is risk involved. If the government made it look like there's no risk, then someone is paying to offset that risk. I don't want to be the one paying for it.
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