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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

#771

Post by pfannkuchen »

sbaiddn wrote: post #742

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…

I'm sympathetic to the tech mirage view generally. One piece I don't quite understand though, is why did tech so disproportionately gain from low interest rates when compared to other industries?

Is it just because the friction of starting a non-physical business is so much lower? I'm not quite satisfied with that as an explanation, because that provides a competitive advantage to tech vs other industries regardless of interest rate levels.

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

#772

Post by rmilk »

throw0101c wrote: post #664
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…

> […] because our CEO used a well-reputed bank? I'm just a Regular Joe, and I have saving and chequing accounts at two banks in case there's an account discrepancy / disagreement with one, I still have some funds I can pay bills with until things get sorted out. Stuff happens: * https://en.wikipedia.org/wiki/2012_RBS_Group_computer_system... I also have a couple of hundred dollars worth of cash (e.g, in case of power…

Exactly this point. Every single offering brochure on those business checking accounts notes the FDIC limit. If they’re interest checking accounts, they are money market backed and clearly state no guaranteed return rate or even guarantee of capital. Heck, even my not savvy mother knows to keep her money market retirement accounts in different banks just like you describe.

How can we possibly allow the CFO of these companies to get away with not managing finance risk, no matter how small. That was their only job, to manage finance risk. No business continuity insurance? Lines of credit with other banks? Convertible instruments that could be sold on Monday AM to raise cash? So many other ways a CFO can manage cash and risk but did not.

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

#773

Post by akira2501 »

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…

There's a marketing angle to calling yourself "Silicon Valley Bank."

This is just the ugly side of that marketing playing out.

Meanwhile, the FDIC is required to do whatever is less costly to the FDIC insurance fund. There really isn't a lot of choice in the matter from the government's perspective.

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

#774

Post by steve76 »

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…

[dead]

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

#775

Post by nthngtshr »

wpietri wrote: post #679
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…

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…

So how did you manage your treasury when you were running your businesses? Did you split it 10 ways? Did you buy t bills?

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

#776

Post by ivalm »

gerad wrote: post #199
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 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…

Depositors are senior creditors. Junior creditors should be wiped first, but if there isn’t enough money to pay senior creditors then it makes sense they will get back less than par.

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

#777

Post by steve76 »

ordinaryradical wrote: post #616
ohgodplsno wrote: post #420

Earlier quoted context omitted.

[flagged]

I’m getting paid below market rate, I’m the sole provider, and I have two children in preschool. So while you chortle over “tech bros,” I’m looking at the end of my family’s healthcare and financial stability. When everyone around you looks like an asshole, you might be the asshole.

[dead]

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

#778

Post by atomicnumber3 »

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…

It's been awful. Everyone on Reddit is so hopelessly confused about the issue that they can't even complain about it right.

"No bailouts!"

Nobody has been (seriously) talking about them. Shareholders in SVB are toast 100%. Debtors too probably.

"We should nationalize banks that fail!"

That's basically what receivership is. We just don't call it nationalizing because the government just wants to make depositors whole and then get their hands out of the pie.

"We need more (or less) regulation!"

The FDIC stepping in right now - where it appears the bank is solvent but can't satisfy liquidity requirements - is exactly when it should. SVB as a business failed but (it appears) depositors are being made whole by the sale of the banks assets. The system appears to have worked while also not cutting the bank prematurely (nobody seems to be complaining that SVB wasnt in major trouble).

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

#779

Post by ivalm »

KptMarchewa wrote: post #536
WkndTriathlete wrote: post #526

Earlier quoted context omitted.

> If depositors aren’t protected, then it’s going to have a lot of downstream impacts If depositors with deposits above the FDIC insurance limit _are_ protected then there will be nothing stopping this from happening repeatedly in the future. Depositors that exceed the FDIC insurance limit should be taking a haircut so they learn to do better risk analysis of their bank or purchase auxiliary deposit insurance on thei…

>If depositors with deposits above the FDIC insurance limit _are_ protected then there will be nothing stopping this from happening repeatedly in the future. The fact that is stopping this - is the fact that only people who are earning money on risky strategies - shareholders - are being wiped the first. Depositors are NOT investors and do not earn a premium on successful risky bank strategies.

Depositors are (senior) creditors and take on credit risk. Similar to bond holders.

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

#780

Post by oska »

paulpauper wrote: post #584
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…

Because of secondary effects. It's not like SVB failure is limited to just depositors and start-ups. Which means way more damage than just the nominal amount lost.

You need failures to 'ripple through the economy'

Removing these ripples brings greater risk, which is artificial stability and moral hazard

And taking your analogy further, show me one body of water in nature that doesn't have ripples and waves on its surface (that vary in magnitude)

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