731–740 of 1001 posts
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Second biggest bank failure in the history of the US requires exceptions to be made due to the sheer volume of companies and assets involved here. We don’t want to erode global trust in US banks and dollars do we?
Maybe the banks shouldn't be able to lobby for relaxing the regulations without which situations like these arise.
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…
I am curious, though, as to whether or not this general ignorance is new, or if it’s just that I’ve become more aware of it over the years.
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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 issue is it wasn't pension money. It was VC money, that's money intentionally being gambled in high risk endeavors. It's not right for thr tax payers to bail out rich VCs who gambles their money. On the flip side, I also have worked in startups much of my career, and think I and people like me should be paid for our work. I think we should help the startups out, bail them out, but without helping the VCs. I think…
The high risk endeavor does not have anything to do with the bank where you deposit the money raised. Here, it does not matter if the source of money is a VC or another.
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Because there was a systemic risks. You let one bank collapse, OK. If the collapse causes other banks to collapse then it's bad. When WalMart, Costco can't transfer money to fill shelves, people go hungry. When people can't get their wages, they go hungry.
Then the laws need to change and a solution for the future must be made. We can't keep bending the rules when the laws don't work out for this one entity but when the little guy is in the same position he’s on his own. We need a system that's fair across the board. Increase fdic insurance add optional insurance options. Call it a day.
And then don't mix the two.
Basically the (idealized) Democratic Socialism of the Nordic governments.
Food for thought:
David Graeber in Debt: The First 5,000 Years asks if Capitalism might be intrinsically unmanageable, so therefore prone to collapse. He notes that every economy in history experienced a debt crisis, requiring intervention (eg revaluing currency, revolution).
More recently, Katarina Pistor wrote The Code of Capital, which documents the modern economy built on top of our shared legal fiction of property. Here's a pretty good interview. https://the-ezra-klein-show.simplecast.com/episodes/katharin...
FYI, I'm not an economist, so I'm not aware of anyone making the specific case that Capitalism is chaotic and so therefore will eventually collapse (aka chaos theory).
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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?
You don't want wealthy people and companies thinking their money isn't 100% safe in a top 20 US bank.
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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 issue is it wasn't pension money. It was VC money, that's money intentionally being gambled in high risk endeavors. It's not right for thr tax payers to bail out rich VCs who gambles their money. On the flip side, I also have worked in startups much of my career, and think I and people like me should be paid for our work. I think we should help the startups out, bail them out, but without helping the VCs. I think…
Putting your startup's funds in a FDIC insured bank isn't exactly "gambling".
Eh, the depositors aren’t totally blameless here. On Thursday they conspired to perform a huge bank run on SVB, on Friday they succeeded, and on Saturday they were demanding the government and taxpayers make them whole by Monday. They deserve to get their money back and they eventually will once SVB’s assets are liquidated. But that’s not good enough, they want it now , and they won’t hesitate to make you pay for the…
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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.
I understand the "difference" fine. I just refuse to believe there actually is a difference. They're all the same to me: people who lent their money to the bank so it could be invested and pay them dividends.
> 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.
Why, that's exactly what I think. Looks like that "not at all that risky investment" didn't bring the outcome everyone expected. Oops. Looks like the free market screwed them over again. Such is life.
I suppose it's fine if they manage to liquidate the bank's assets and recover some of it. If they really insist on recovering it all, maybe they should liquidate the bank manager's personal property as well. As long as they don't see even one cent of taxpayer money, it's moral.
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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 st…
There are two key things that I think you're misunderstanding:
1) the bank didn't lose the money. A lot of it is locked up in long-term securities that would have to be sold at a loss to access the money now. But, at maturity, all of the money would be paid back. The money is there, but it's illiquid. A bank with the same investment but more liquid assets would have no problem
2) The investors are going to get screwed, and the depositors will likely be made most of the way whole. This is without a government bailout. Given that the assets are there, I'd be surprised if a big bank didn't gobble them up for the goodwill of future tech unicorns.
I'd be upset if there was an investor bailout. I'd question why we needed a depositor bailout. I don't think either are necessary or going to happen
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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.
Though, there do exist meta-banks that split funds across multiple other bank accounts in order to achieve higher FDIC limits. Maybe we'll start seeing more of these.
Otherwise, I think the FDIC needs to revise the rules.