Yellen says government will help SVB depositors but rules out bailout • Hacker News Board

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

#761

Post by mlyle » Sun, Mar 12, 2023, 5:56 PM UTC

thecus wrote: post #708

kentonv wrote: post #473

Earlier quoted context omitted.

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.

If you're running a $3m payroll, odds are you have a lot more than $3m in cash.

Sure, smaller transactions in flight will always be at risk.

> 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.

It moved from $100,000 to $250,000 15 years ago.

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

#762

Post by MrMan » Sun, Mar 12, 2023, 5:56 PM UTC

idopmstuff wrote: post #617

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…

Nailed it. If people get whatever short term vengeance they're looking for, the contagion will cause a whole lot of collateral damage to people who aren't in tech.

that's a lie. and if there is contagion it won't be stemmed by bailing you as a depositor out, we will need that money elsewhere to shore up the system. good luck to you

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

#763

Post by tolmasky » Sun, Mar 12, 2023, 5:56 PM UTC

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.

Besides the trivially obvious recognition that people other than engineers work at companies (cooks, janitors, HR, etc.), realize also that, for example, Etsy’s sellers may be affected since the account used to pay them was at SVB. Of course, I’m sure someone here will explain that obviously some lady selling bowls in Michigan should have done due diligence on her platform’s bank of choice to make sure that they didn’t have any maturity risk. Anything short of that really just fundamentally represents business incompetence and deserves to be wiped out since Peter Thiel decided to cause a run at the bank two layers removed from her. But that will teach the correct lessons and punish the right people! Clearly Thiel should be rewarded for prudently advising everyone to remove all funds, while janitors and craftspeople on Etsy alike will finally learn the importance of marking to market treasuries.

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

#764

Post by teawrecks » Sun, Mar 12, 2023, 5:56 PM UTC

unity1001 wrote: post #725

ianai wrote: post #281

Earlier quoted context omitted.

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 li…

This statement doesn't make sense to me:

> 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.

In the first sentence you say there is no risk being taken by a group, and in the second sentence you imply there is a risk being taken that a group should not be bailed out of. Could you elaborate? What non-risk taking risky group are you taking about here?

Are you arguing that the depositors were also risk takers here? What were their options to mitigate that risk besides not use a bank?

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

#765

Post by hn_throwaway_99 » Sun, Mar 12, 2023, 5:56 PM UTC

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…

Hallelujah, parent's comment is a straw man. I've been vehement against taxpayer money being used to make depositors whole, but nobody is saying they shouldn't be paid out of the assets of the bank.

I'd also be in favor of the feds helping to orchestrate a bailout by getting purchased by another bank/banks, or doing whatever it takes to get depositors access to as much of their money as quickly as possible.

But all this does is incentivize "if you're going to blow up, make sure you threaten the whole economy so you can use hostage tactics to get a payout." The feds wouldn't be doing shit if this were some small bank with no contagion risk.

And the political cronyism of this, on both sides, is nauseating. There was a tweet thread by a startup founder from Ohio, basically making the argument "I'm a small business owner from middle America Ohio, not some fat cat Silicon Valley tech bro." To be clear, absolutely nothing against her for posting this (on the contrary, she actually sounded pretty amazing with how she founded her business), but it sucks that she has to play this "Hey, I'm in your tribe too, I'm not a member of that evil other tribe" in order to curry favor with the political class to get a bailout.

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

#766

Post by acdha » Sun, Mar 12, 2023, 5:56 PM UTC

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…

> Did you ever try getting a taxi in any US city besides Manhattan — not even the rest of NYC — before Uber? It was expensive, frustrating, and completely lacking in integrity.

Yes, lots of times and you’re overstating it substantially. The only reason Uber was cheaper was that they were heavily subsidizing each ride. Once they stopped that, amazingly, prices rose to match or exceed cab fares.

The specific area where Uber was better was that many cab companies would illegally refuse service to black neighborhoods. Uber deserves credit for breaking that but these days I’m hearing more anecdotes about drivers skipping pickups so I’m not sure that’s permanent.

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

#767

Post by [deleted] » Sun, Mar 12, 2023, 5:57 PM UTC

mlyle wrote: post #659

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…

> Plenty of startups fit that bill and will nonetheless be impacted by SVB’s failure Startups are going to get most of their deposits back-- perhaps all if there's an acquisition. If SVB is not acquired, I hope the FDIC is able to get a substantial dividend quickly so that they can keep operating and that everyone works to keep disruption low. But I don't think the federal government needs to make depositors whole be…

[deleted]

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

#768

Post by NotACop182 » Sun, Mar 12, 2023, 5:57 PM UTC

tsunamifury wrote: post #644

NotACop182 wrote: post #549

Earlier quoted context omitted.

By design the feds wanted to increase unemployment and salaries. Problem solved? I'm not trying to be mean or condesending. But who would / should the unemployed / wages come from? What sector?

It turns out that you can make everyone unemployed and it won’t fix the supply/labor shortage created by a lack of immigration and supply chain disruptions. The fed is using a hammer to fix a chipped vase because it’s all they know what to do.

I strongly agree. The feds do not have the tool set to fix the problem on inflation. 50% of inflation is opportunity by companies testing new price points.

We are in a pickle I don't think we are ready for what's to come in the future. I feel there will be a lot of pain in the future for the “little guy”

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

#769

Post by mlyle » Sun, Mar 12, 2023, 5:58 PM UTC

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…

> But not long ago, a $2.5-millionaire opening 10 different bank accounts to stay under FDIC limits would have been called paranoid.

Maybe I'm paranoid. But I have a few accounts. Not enough to make everything FDIC insured, but enough to get more insurance and mitigate risk.

And my most recent startup used IntraFi's product to get diversification and more insurance.

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

#770

Post by hgsgm » Sun, Mar 12, 2023, 5:58 PM UTC

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.

They could have deposited the funds at a bank that charged a fee to hold it instead of FTXing it.