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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

#721

Post by theGnuMe »

mlindner wrote: post #518
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…

There's a middle ground here that few people seem to have. 1. There should be no bailout. 2. The bank had a ton of assets and those assets still belong to the depositors. 3. The depositors shouldn't necessarily be made whole beyond their $250,000 insured amount, but denying them the bank deposits is also wrong. Getting 80 cents on the dollar for their deposits seems completely fine for example, or whatever that numbe…

That's how it actually works. The FDIC administers the asset sale.

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

#722

Post by matheusmoreira »

tsunamifury wrote: post #627
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 a dramatic misunderstanding of those two categories if investing, their motivations, and end goals. It’s like saying an F1 team will now buy family economy cars to race with since their prices are down now. You invest in a startup fund for extremely high risk high reward outcomes. You invest in interest rate bonds etc for guaranteed low outcome. HN has become ridiculous.

You say I'm "ridiculous" and "detached from reality" yet the economy pretty much screeched to a halt when the Fed rased interest rates. The money stopped flowing freely, the massive layoffs began... Now we have literal banks failing. Yeah.

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

#723

Post by PeterisP »

a13n wrote: post #176
koolba wrote: post #153

Earlier quoted context omitted.

> Then what do we do with the billions in remaining assets? Appropriate them, and leave small and mid businesses hanged to dry? Easy, pay out $250K per account, then distribute the rest pro rata based upon closing balance from when the fed's took over. If they have to wait because assets need to be liquidated then sucks to be them. I'm sure they can get their money faster if they agree to a haircut. > “This is a bail…

This is short sighted. If the government doesn’t make depositors whole then people and companies all over the world lose trust in US banks and eventually US dollars. This is a federal problem. It makes sense to make depositors whole, they’re innocent here. It doesn’t make sense to make SVB whole for managing their risk poorly.

Why would doing the exact same thing as many, many previous times - here's a list https://www.fdic.gov/resources/resolutions/bank-failures/fai... - suddenly make people and companies all over the world lose trust in US banks and eventually US dollar, if that didn't happen in all the many previous times when depositors weren't made whole (beyond the limits insured by FDIC) after a bank failed?

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

#724

Post by nerdponx »

sbaiddn wrote: post #713
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…

Your company is the equity holder. You loosing last months paycheck is no different than what happens in the rest of the country any time an employer declares insolvency. Also, I don't think people in SV appreciate how much rancor and resentment their behavior has generated in the last fifteen years.

Plenty of people not in SV, engaging in actual productive enterprise, were also using SVB.

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

#725

Post by unity1001 »

ianai wrote: post #281
fullshark wrote: post #164

Earlier quoted context omitted.

The reason is because there are countless scenarios in the US economic system, where people/businesses fail cause of no fault of their own, but they are told tough luck that's the free market at work cause these people are simply unconnected or their failure is deemed unimportant. It's why the finanical bailouts left a bitter taste for anyone paying attention, and why gov't action here is immediately scoffed at.

Except this is the opposite of what happened in 2008 with bailing out the banks. Then, the banks got public money to remain solvent. Here, the bank is taking the hit and the government is ensuring the depositors get their funds back. In 08 people were kicked out of their homes and banks were propped up with public funds. Here, the depositors are being made whole and the bank is going out of business. The salt is your…

> Here, the depositors are being bailed out

There. Now its correct. Rephrasing something does not change its nature.

The 2008 bailouts were done with that excuse too. They were 'too big to fail', and it would 'affect everyone' so that they were bailed out to 'help' the main street.

> It’s absolutely in the interest of the greater economy to have a functioning banking system backing high risk/high reward activities like Silicon Valley.

It is. And its totally against the interest of the greater economy to bail out those who screw it up by taking great risks. Its against the interest of the greater economy to bail out those who didnt take any risk either. Because it socializes the risk while privatizing the reward. That's why people hate bailouts.

All those startups and wealthy entrepreneurs put their money in the wrong bank. The wrong bank was shown as the best bank through a lot of fallacies, ranging from groupthink to obligations pushed on startups by VCs. Nobody came up and tried to raise awareness about how bad this setup was. Those who tried to do it were unheard. Those most affected from this, the rich VCs, all the SV funds, tech ecosystem top dogs, 'thought leaders', investors, are the ones who created this environment and caused this to happen.

Now, when the cows are coming home, asking for a bailout is socializing the risk while privatizing the profits.

The only exception can be made in the case of the state taking a ginormous amount of ownership of everything that it bailed out and not sell its shares out until it milked its money's worth to cover its bailout amount plus an above-market profit rate from that investment...

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

#726

Post by ScoobleDoodle »

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…

Clarifying the answers to the two misconceptions: 1) “Depositors shouldn’t get anything beyond the insured $250,000” and 2) “This is a bailout”

FDIC pays out the $250,000 insurance to SVB depositor accounts. FDIC recoups those costs from the SVB assets, and then pays out depositor account holders as much % as possible from liquidating the remaining SVB assets. It sounds like the latter will be disbursed in several increments as the assets are liquidated. All of that assuming no buyer by Monday.

If there is anything left after depositors are made while, then that might go to shareholders.

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

#727

Post by matheusmoreira »

tsunamifury wrote: post #635
matheusmoreira wrote: post #554

Earlier quoted context omitted.

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…

> 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.

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.

Got it.

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

#728

Post by nerdponx »

PragmaticPulp wrote: post #680
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…

> 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? Cynicism reigns supreme on social media right now, and HN comments are a type of social media. There is also a deeply engrained “us versus them” mentality baked int…

Why should taxpayers pay for all of it? It's not like SVB had $0 in assets. Liquidation will hopefully cover enough to keep the lights on at smaller companies with uninsured deposits. The big depositors like Roku might lose something.

Lest we forget that even TARP was actually a net profit for taxpayers.

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

#729

Post by iguana_lawyer »

idopmstuff wrote: post #339
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'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 don’t see what’s so hard to understand. Everyone else is one poor decision away from destitution. Why should you get special treatment?

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

#730

Post by aeternum »

idopmstuff wrote: post #339
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'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…

The proper call should be to increase FDIC insurance to 10mil or something then. It is incredibly unfair to be saying that depositors here deserve to be made whole because they are startup companies that somehow matter more to the economy.

Everyone agrees that shareholders and bondholders should we wiped out. Everyone agrees that deposits under 250k can and will be made whole due to FDIC. The disagreement if there is one is the 250k+, why should there be an exception just because these are tech startups?

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