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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

#741

Post by azinman2 »

shadowgovt wrote: post #692
reb wrote: post #580

Earlier quoted context omitted.

Plenty of startups fit that bill and will nonetheless be impacted by SVB’s failure, while the most pointless businesses surf by on their founders’ access to inherited wealth and political power. Any revenge on them will be short-lived and will have serious, lasting consequences for middle class workers throughout the industry. For anyone reading this who doesn’t already know: startups aren’t all snotty trust fund kid…

No, but the median salary for a software engineer is still 120k, a little under double the median salary across all industries. It's hard to dredge up deep, deep wells of sympathy for folks who were already playing the salary game at double the value of half the players. One can't escape the sense that if they've done the kind of budgeting that a regular American does, they will be fine.

You know that not only startups use SVB right? Farmers and wineries do as well. And either way this is the economic engine of America - in its accounts lays the next trillions of dollars of GDP. It is unbelievably stupid to not find a way to make them whole for a black swan event.

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

#742

Post by sbaiddn »

The irony as a fly-over-American is great. We are constantly and sanctimoniously told we have to move from our cities and towns to the Coastal regions. When toxic chemicals are spilled we're ignored, or worse - mocked. We're told we're financial burdens on the country.

But what we see is both coasts gambling with low interest rate money, getting rich off of fee leaching, and, when the gravy train slows down, causing a financial meltdown within 15 years of each other.

Don't kid yourselves. The tech boom was largely low interest rate fueled and, for many of your companies, a mirage.

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

#743

Post by gruez »

sbaiddn wrote: post #712
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…

Dont confuse the issue. No one has a problem with creditors getting as much of their money as possible by selling assets. The problem is that SVB's book value of assets is far smaller than the debts. Imagine their value on a firesale. the creditors then take a haircut. It's basic bankruptcy. What people oppose is taxpayers absorbing the losses beyond $250 000 as promised, and there's a very good reason for this: its…

>What people oppose is taxpayers absorbing the losses beyond $250 000 as promised, and there's a very good reason for this: its another example of privatizing profits and socializing losses. In other words, it encourages risky behavior because they're gambling with the house's money.

But by not bailing them out, you're punishing the depositors, which I wouldn't exactly characterize as "gambling with the house's money".

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

#744

Post by hgsgm »

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…

> And the amounts of money made with companies hat have no real business is just astonishing.

Maybe they wasted investor money on salaries. Oh no! And certainly no reason to steal the money they didn't waste.

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

#745

Post by hermannj314 »

initplus wrote: post #675
hermannj314 wrote: post #435

1. Executives of SVB receiving bonuses. 2. Depositors that withdrew their money 100%. 3. Depositors that will fall under FDIC and made whole by this. 4. Depositors that will receive X% of deposits (likely under 100%) 5. Debt and equity with SVB 6. American taxpayer. OK, I think every possible permutation of who owes who money has been explained in this thread. I personally would like to see a legal mechanism where gr…

The way to prevent bank runs is to prevent banks from becoming insolvent in the first place. Making it illegal to take funds out of an insolvent bank is not the answer.

I think you can do both.

However, when/if a bank becomes insolvent, it seems archaic that one depositor should get 100 cents on the dollar and another 80 on the dollar instead of each 90 (assuming equal accounts, etc.) Your place in line shouldn't really matter, these aren't Taylor Swift tickets.

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

#746

Post by gruez »

bentlegen wrote: post #278
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…

The C-suite paid themselves millions of dollars via bonuses and stock sales right before insolvency. Executives got paid. What’s to stop future bankers from running the same playbook? (We can debate that this the stock sale was premeditated/signaled months in advance, but the stock had already declined 80% from its 2021 peak and they surely knew about the tough liquidity position months ago — external observers drew…

>The C-suite paid themselves millions of dollars via bonuses and stock sales right before insolvency.

This is highly misleading. The bonuses were calculated/awarded from last year. The stock sales were pre-scheduled.

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

#747

Post by rmilk »

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…

I get what you’re saying, but how many well-intentioned startups have imploded and ran out of money the day before payday due to some unlikely risk? Lots (I was in 1-2 of them). Should we also try to salvage them?

“Well-reputed bank” is not the same as zero risk money management. Look at the fine print of every one of those business checking accounts and you see there is clearly some risk, including loss of capital if you’re over the $250k limit. Everyone who has a retirement account in money markets at a “well-reputed bank” knows about this risk, so how can we let the CFO slide on finance risk management that was clearly their most important responsibility? Business continuity insurance, lines of credit, investor infusion, etc. Debt sales, etc. There are ways to get around an unexpected cash crunch.

But there’s no excuse for not knowing the risk and expecting a $1M checking account to work like your personal checking account. This was the CFOs job at every one of the companies that is now in a crunch.

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

#748

Post by idopmstuff »

aeternum wrote: post #730
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…

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…

I absolutely agree the FDIC limit should go way up.

> The disagreement if there is one is the 250k+, why should there be an exception just because these are tech startups?

That's not what I'm suggesting, nor is it what I think most people who think depositors should be made whole are suggesting. In basically any bank run scenario in which depositors had behaved reasonably (which is like 99% of companies putting their money in banks), I would support depositors being made whole. Regardless of the specifics of the situation, I think the upside of maintaining our collective faith that bank deposits are safe is much larger than the downside of whatever needs to be done to achieve that.

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

#749

Post by logichurts »

idopmstuff wrote: post #558
tsimionescu wrote: post #416

Earlier quoted context omitted.

First of all, even if the company you work for goes bankrupt, you're very likely to still receive your salary, as debts to workers are the highest priority in any bankruptcy case. So the risk to workers' livelihoods is being way overblown. Of course, if a substantial amount of your compensation was company stock, you may lose a lot on that, but that is par for the course with stock. Second of all, the purpose of havi…

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…

You know in advance what the FDIC insured limit is. Just like any other insurance policy. You can't cry about it after and expect special treatment.

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

#750

Post by iancmceachern »

wslh wrote: post #733
iancmceachern wrote: post #689

Earlier quoted context omitted.

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…

> It was VC money, that's money intentionally being gambled in high risk endeavors. 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.

It does. SVB is preferred by startups because they do things that other banks won't, riskier things. It's not the same as any old bank.
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