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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

#701

Post by matheusmoreira »

theRealMe wrote: post #642
matheusmoreira wrote: post #591

Earlier quoted context omitted.

It's likely startups only exist to begin with due to low federal interest rates. It is obvious that if those rates are low investors will look elsewhere. Startups are one of those elsewheres. Now that rates are on the way up, there's no need for investors to risk their money on startups anymore. So startups no longer have one of the pre-conditions for their existence. Namely, free investor money literally pouring in…

This is the exact lack of nuance that OP is talking about. Do you understand what is actually happening here? A bank is going under and potentially taking a ton of startups with it, not because of any poor decisions or lack of legit business model by the startups. It’s purely due to an internal implementation detail of the (until now) we’ll respected bank that holds their money. I swear if it was called “generic bank…

> Do you understand what is actually happening here?

Do you have an actual argument that falsifies what I've said? I'm all about owning up to my mistakes but right now I have no reason to believe I'm being stupid. I thought stuff like this was going to happen the second I saw the Fed raising interest rates to combat inflation. Looks like time proved me right.

> A bank is going under and potentially taking a ton of startups with it, not because of any poor decisions or lack of legit business model by the startups. It’s purely due to an internal implementation detail of the (until now) we’ll respected bank that holds their money.

Yeah sure. A "minor implementation detail" of the bank... Honestly, this isn't even the real issue at play here.

It's really simple to me. People put their money in the bank. The bank couldn't bear to watch the pile of money just sitting there. So it "invested" the money. Then it lost the money. Then they went under. Now everybody is losing their minds and the bank is getting liquidated in an attempt to make everybody whole again.

I'm sorry but I just don't feel any sympathy at all. It's not the first time a bank fails but people never learn not to trust them.

> I swear if it was called “generic bank” instead of “Silicon Valley Bank”, we wouldn’t be seeing all of these knee-jerk “good because they’re bad” responses.

Nope. I say the exact same thing every single time some bank-like institution fails: we warned you. When it's some crypto exchange, everybody here on HN gets a kick out of it. Now that it's some startup's bank, I'm supposed to feel sorry for them? No.

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

#702

Post by christophilus »

ak_111 wrote: post #370

The only comic thing in this entire tragedy is watching the fanatics who have been relentlessly preaching to others such dictums as “move quick and break things” and “only the paranoid survive”, extolling the virtues of “creative destruction” and repeating ad infinitum the Reagan quote "The top 9 most terrifying words in the English Language are: I'm from the government, and I'm here to help" cry out for government i…

I tend to be libertarian, but there are reasonable roles for government, and regulating banks and life insurers by forcing them to contribute to something like the FDIC and the state insurance commission (or whatever that life insurance thing is called) is legitimate even to most conservatives.

Stepping in to smooth out systemic problems is another valid function— like Reagan did with the air traffic controllers, like the FDIC does with bank failures, etc.

Anyway, I don’t think folks are asking for a handout. They’re just asking the FDIC to do their jobs more quickly than usual because so many businesses are tied up here. This is the reason there is an FDIC in the first place. I don’t think it’s unreasonable to ask them to smooth the process out to help meet payroll. None of this requires handouts— just proper management and metering out of the assets under consideration.

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

#703

Post by kelseyfrog »

whimsicalism wrote: post #622
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 it has to do with Nietzschean slave morality and a media angered by losing advertising revenue to strong competitors. The media is literally competitor in the attention economy, of course they will attack their biggest foes.

Nietzsche over Marx, really? Why skip?

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

#704

Post by shadowgovt »

flappyeagle wrote: post #630
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?

This isn’t nuanced. It’s confused. If startups were going under because it turns out that they were pointless and there was no market, and they ran out of runway… then sure. But this is their house catching on fire and all of their money just vanishing through no fault of their own. It doesn’t distinguish between good startups and dumb ones, real businesses and nonsense — how could you root for this beyond pettiness?

It's more a demonstration that their house was always built on other people's largesse, and at the whim of those who hold the real power in the system (the money to invest) their opportunities can evaporate. A bank run doesn't happen without individuals deciding to go bearish and concluding that their own big-money dreams are really worth more than whether strangers they haven't met get a paycheck tomorrow. Something we've seen a lot of as of late it seems.

Maybe building an entire society on a drastically slanted gap between the wealthiest and the least wealthy is actually super unstable and prone to failure?

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

#705

Post by stanleydrew »

tome wrote: post #673
stanleydrew wrote: post #247

Earlier quoted context omitted.

It's a matter of differing expectations. When you purchase stock in a bank, there is a reasonable expectation that your investment could lose value. When you deposit money with a bank (in the United States in 2023), you basically never consider the possibility that you might not get it all back. You can certainly argue that the expectation isn't fair, but I'm pretty confident it's nearly universal.

> When you deposit money with a bank (in the United States in 2023), you basically never consider the possibility that you might not get it all back. This is an assumption which desperately needs to change, in my opinion, otherwise the risk of bank runs will be a think ad infinitum.

Isn't the risk of bank runs increased without this assumption? If we're all consistently attentive and worried that we may not get our bank deposits back, then every minor hiccup at a bank could plausibly cause a run.

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

#706

Post by rmilk »

JackFr wrote: post #482
mixologic wrote: post #441

Earlier quoted context omitted.

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…

Exactly. I got a letter from my last startup Thu at 11pm telling us they had no cash for payroll tomorrow and we were all laid off. Poor planning along with super-lean cash flow broke my employer.

This is no different. For example, how many business checking accounts are backed by money market funds to get a little interest on them? Clearly states in offerings that rates aren’t guaranteed and you could even lose capital. Same with the $250k FDIC limit - clear risk with zero forethought from these employers of hedging it with lines of credit, payroll/business continuity insurance, etc.

Those are things “slow” companies do, not move fast and break things companies do (sarcasm intended - I have worked in R&D in both types multiple times).

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

#707

Post by wpietri »

nullc wrote: post #695
wpietri wrote: post #679

Earlier quoted context omitted.

As a long-time tech person and someone who has started multiple companies, including one venture-backed one, I'm happy to explain why I think uninsured depositholders should not have their losses subsidized by taxpayers. One, anybody with a bank account has heard about the FDIC and the FDIC insurance limits. Presumably anybody smart enough to raise millions of dollars know that if part of something is insured, the re…

> Two, the tech industry, especially the VC-funded end, is forever crowing ... there has been endless puffery and chest-thumping among VCs and tech startups When you find yourself cheering for collective punishment you should know that you are absolutely the bad guy.

I am not in fact arguing for collective punishment. I am arguing for people experiencing the consequences of their choices. The paragraph you quote is about their ardent insistence on being allowed to make those choices without interference.

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

#708

Post by thecus »

kentonv wrote: post #473
fma wrote: post #117

Earlier quoted context omitted.

If depositors get 100% back (I assume the government pays the difference between selling SBV assets & the deposits)...then what's the purpose of saying "FDIC Insured up to $250k"? It's a moot then isn't it? I don't need to go through the hassle of distributing my money anymore? Edit: I read the article. Yellen says "“But we are concerned about depositors, and we’re focused on trying to meet their needs.” She says NOT…

The purpose of the $250k per-person-per-bank limit is to encourage large depositors to spread their money among many banks, which reduces risk for both them and the system. However, it's not clear that this limit is really the ideal design. In the financial crisis 15 years ago, the FDIC in practice guaranteed 100% of deposits. They had to in order to keep people from running all the banks. Since then, we've all been…

So, when you're running a $3mm payroll, how do you do that while keeping money in an FDIC insured state.

FDIC needs to be reformed. I feel like it's been 250k for my entire life lol, at the very least the amount needs to be revisited.

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

#709

Post by jurassic »

roflyear wrote: post #570
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 I lean towards you, but what people are actually suggesting is that these startups shouldn't be bailed out when they went with a bank with super-high promised rates, while they of course knew their deposits over $250k were uninsured.

I haven’t heard anything about high rates being the primary thing drawing people to SVB. The trap seems to have been giving startups access to credit that other banks would not provide, but only if you agree to do all your banking with SVB. That, and also several big VCs that required their portfolio companies to bank there. These things are what herded everyone into the building before it caught fire.

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

#710

Post by thecus »

obventio56 wrote: post #181
fma wrote: post #117

Earlier quoted context omitted.

If depositors get 100% back (I assume the government pays the difference between selling SBV assets & the deposits)...then what's the purpose of saying "FDIC Insured up to $250k"? It's a moot then isn't it? I don't need to go through the hassle of distributing my money anymore? Edit: I read the article. Yellen says "“But we are concerned about depositors, and we’re focused on trying to meet their needs.” She says NOT…

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.

The consequences are the reduction of billions in shareholder value, and we shouldn't be dumb about doing anything that reduces confidence in US banks. SVB shareholders will be down from like 60 bln mkt cap during the pandemic to a good fat 0.
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