Urgent: Sign the petition now • Hacker News Board

Re: Urgent: Sign the petition now

#821

Post by trogdor » Sun, Mar 12, 2023, 5:31 PM UTC

scarface74 wrote: post #409

rahimnathwani wrote: post #185

Earlier quoted context omitted.

The possibility of changing the rules of the game once it's started can create moral hazard. For example, if people believe that the govt will use taxpayers' money to reimburse funds that were not FDIC protected, then they won't be careful about picking their bank. And it's a lot of money (e.g. 30% loss on $200bn is about $600 per US resident household). But I'm conflicted, because: - the federal administration doesn…

While I saw first hand what happened in 2008 and afterwards I said “fuck it” and let my three underwater properties that were combined worth a quarter million less than I owed go and did “strategic defaults”, I can’t imagine running a business and having my funds spread across enough banks to meet the $250K protected amount and still try to run payroll and meet all of my other obligations.

You don’t have to do any of that. You can purchase insurance for excess deposits.

Re: Urgent: Sign the petition now

#822

Post by trogdor » Sun, Mar 12, 2023, 5:34 PM UTC

dlubarov wrote: post #816

oarabbus_ wrote: post #728

Earlier quoted context omitted.

So then it sounds like they probably had 10-15 banks (entirely reasonable for them to be expected to open this many accounts at unique banks, given their business model) which is a far cry from the 1200 OP complained about. If your entire business model revolves around moving multiple billions of dollars via an asset-backed stablecoin model, it's reasonable to expect you to have dozens of bank accounts, in at least 3…

I'm not sure any private insurance exists that can cover a $42m deposit?

It does. In the context of the financial services and reinsurance industries, $42 million is not an enormous amount of money.

Re: Urgent: Sign the petition now

#823

Post by IncRnd » Sun, Mar 12, 2023, 5:35 PM UTC

DennisP wrote: post #768

IncRnd wrote: post #705

Earlier quoted context omitted.

You can purchase DIF, when the account is at a participating bank. SVB chose not to participate in that non-FDIC program. However, SVB knew all about the program, even commenting on FDIC rule changes for it over a decade ago. [1] Ultimately, people will have to accept that SVB wasn't as trustworthy of a guardian as some other banks. It appears that people were pushed into using SVB, because it was part of the VC ecos…

I mentioned DIF above, and as I said there, it's not third-party insurance that you can go purchase. What you can do is get certain accounts that automatically include it for free: https://www.difxs.com/DIF/Home.aspx Here is the complete list of DIF-covered banks: https://www.difxs.com/DIF/DIFmemberbanks.aspx It's a short list, they're small banks, and they all have addresses in Massachusetts. Wells Fargo and Bank of…

If you have an account in need of insurance in excess of the FDIC limits, you can speak with your CFO about depositor bonds or contact the appropriate party about any of the other methods in the links that were posted in this thread.

Re: Urgent: Sign the petition now

#824

Post by trogdor » Sun, Mar 12, 2023, 5:36 PM UTC

muzz wrote: post #712

standapart wrote: post #661

Earlier quoted context omitted.

When the smoke has cleared, it would be interesting to quantify whether this event affected a (statically significant) higher percentage of YC offspring than other incubator offspring. Could be a selling point for alternative incubators in the future. Perhaps being a part of YC puts you at greater risk from these events. Draw your own conclusion about the reason why.

The comments from head of YC alone might be that selling point If bank regulators move swiftly and ensure orderly withdrawals, his comments will go down in history as crying wolf, and that's putting it lightly

I think they are a bad look regardless.

Re: Urgent: Sign the petition now

#825

Post by trogdor » Sun, Mar 12, 2023, 5:42 PM UTC

berniedurfee wrote: post #788

garry wrote: post #144

Earlier quoted context omitted.

The equity holders and management of SVB are likely to be wiped. In the petition we specifically call this out: we are not asking for their risks to be "socialized." Depositors have a reasonable expectation that when they choose a bank (especially a publicly traded bank that is regulated) that their deposits are safe. If this is not true, then most people will only bank with the largest banks. That's not a good situa…

In hindsight, were there actions that depositors could have taken to reduce the risk? Was there any level of due diligence that could have warned people off of SVB?

Yes. They could have purchased insurance for their excess deposits. Other large businesses do this as a matter of course.

Re: Urgent: Sign the petition now

#826

Post by trogdor » Sun, Mar 12, 2023, 5:47 PM UTC

garry wrote: post #167

axlee wrote: post #127

Earlier quoted context omitted.

There was nothing arbitrary about that choice. This bank promised better deals BECAUSE they were not careful enough about the risk it entailed. That was their competitive advantage, and they made bank for it. Well, tough luck, now it's not anymore: it has nothing to do with being a large bank or a small bank, it has to do with healthy business practices.

Many startups chose SVB because they were the ones willing to open a bank account for them at all. I remember going to a branch of Bank of America to open a bank account for Posterous and not being able to.

>I remember going to a branch of Bank of America to open a bank account for Posterous and not being able to.

I believe you, but this doesn’t make any sense to me. I have opened multiple business accounts at Bank of America. It’s just paperwork. If you have a dollar and a legal entity, you can open a bank account for that entity.

What was the issue?

Re: Urgent: Sign the petition now

#827

Post by trogdor » Sun, Mar 12, 2023, 5:50 PM UTC

Mystery-Machine wrote: post #384

lolinder wrote: post #331

Earlier quoted context omitted.

> everyone has to sit down and evaluate their banks balance sheet before trying to do business with them? No, if you're not keeping more than $250k in the account, you don't have to do the homework. If you're keeping more than $250k in the account, you can afford to pay someone $1k to do a bit of due diligence.

$250k is nothing for a company. It's 1 engineer salary. And, no, it's not $1k. It's more like $10k-$20k per month, plus all the overhead of having your money in multiple bank accounts and shuffling it all around just to never hit the $250k limit. Just my 2 cents on this strawman part of discussion.

You can purchase insurance for excess deposits. Businesses that have to keep large amounts of cash on hand routinely do this.

Re: Urgent: Sign the petition now

#828

Post by trogdor » Sun, Mar 12, 2023, 5:53 PM UTC

muzz wrote: post #725

geodel wrote: post #663

Earlier quoted context omitted.

With the way things are going, don't be surprised if some silicon valley innovator come with insurance product that can be purchased after the fact . With marketing like "Come, Disrupt the Insurance Industry" it might just work out fine

The first sentence is basically what Tan is proposing

Minus the “purchased” part. He just wants it.

Re: Urgent: Sign the petition now

#829

Post by trogdor » Sun, Mar 12, 2023, 5:59 PM UTC

kelnos wrote: post #413

skwirl wrote: post #123

Earlier quoted context omitted.

>No, you should insulate yourself from that risk, either by spreading out your cash between multiple institutions, or obtaining deposit insurance beyond the government's, or (most likely) both. Why would I do that when I can bank with a too-big-to-fail bank like JP Morgan Chase, Citibank, Wells Fargo, or Bank of America?

If you can, then do that. "Bank with too-big-to-fail bank" is a rational choice that you could make while doing a risk assessment. Unfortunately, many small companies and first-time founders can't get a business account at one of the big banks. Hence: SVB. I don't think this means we should automatically bail them out, though.

>Unfortunately, many small companies and first-time founders can't get a business account at one of the big banks.

Why? I opened my first business account at Bank of America moments after I created the legal entity.

Opening a business bank account is straightforward. Unless there is a KYC issue, you can do it all online in minutes.

Re: Urgent: Sign the petition now

#830

Post by dlubarov » Sun, Mar 12, 2023, 6:02 PM UTC

trogdor wrote: post #822

dlubarov wrote: post #816

Earlier quoted context omitted.

I'm not sure any private insurance exists that can cover a $42m deposit?

It does. In the context of the financial services and reinsurance industries, $42 million is not an enormous amount of money.

Sorry I meant $42b, which is the amount of USDC collateral held by Circle.