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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

#781

Post by ivalm »

dangero wrote: post #575
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…

This bank run happened based on fear of the scenario we are now in. No bank can withstand a bank run due to fractional reserve ratios. If the depositors lose big then that will increase this fear going forward. In other words, if all depositors are covered there is no longer a substantial fear of a bank run elsewhere. That’s how it stops it from happening again.

Realistically, this bank run occurred because the depositors were highly correlated. Other banks do not have such a correlated depositor base.

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

#782

Post by teawrecks »

MomoXenosaga wrote: post #44
roseway4 wrote: post #34

Earlier quoted context omitted.

Yes, in the case of large retail banks, the government did help. In 2008, the federal government purchased stock in several banks in order to recapitalize them. One could argue this was a starker example of moral hazard than letting the bank fail, but making depositors whole.

Which is why you should always bank at a "too big to fail" institution. Why America has 4000 banks is beyond me. In my country they all consolidated in the 60s and 70s into a half a dozen giants.

Wait so, you're in favor of the bank being bailed out here?

The phrase "too big to fail" doesn't mean it's impossible for it to fail; that's not a thing. It means the govt/public feeling obligated to bail it out when it does fail because the public thinks they're so dependent on it that they're worse off of they let it fail.

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

#783

Post by ivalm »

madamelic wrote: post #512
prepend wrote: post #444

Earlier quoted context omitted.

> just don’t understand why folks on the internet are so passionate about the depositors being hit by this. I think most of America can’t even imagine having over $250k in an account. So people with this much wealth asking for a bailout is literally rich people asking for coverage because they did something dumb (banked with a bad bank, didn’t account for risk, didn’t insure, didn’t manage funds). It’s not hate so mu…

> So people with this much wealth asking for a bailout is literally rich people asking for coverage because they did something dumb Not people. Businesses. SVB, to my knowledge, mostly consisted of businesses with some well-off individuals mixed in. If we want to punish rich people for the crime of being rich, SVB is likely a bad battlefield because zero-ing out its customers will almost entirely hurt employees who a…

Depositors aren’t being zeroed out, they will just maybe take a haircut. I do hope FDIC finds a way to unfreeze at least meaningful fraction by tomorrow so payroll/etc can be met.

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

#784

Post by closeparen »

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…

This is confused in many ways. The only people who care about “mass surveillance” are tech insiders. It’s incoherent to be mad about fake business models and too much money being made at the same time - if startups are stupid then VCs are losing their shirts (and if we hate them, then we should help them do it even bigger and faster). If Silicon Valley is an engine of runaway wealth inequality then objectively speaking, the business model works. Making things people want generates profit, which is always and inherently evil according to communists, and enriches investors/executives/employees faster than the average person, which according to anyone who is committed to “income inequality is bad” also makes the world worse.

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

#785

Post by a13n »

jmull wrote: post #260
walnutclosefarm wrote: post #98

I think Yellen is signalling the right approach, frankly. First, the balance between the bank's assets (its loans and the investments it made with depositors money, plus the bank's capital) and its liabilities, is such that SVB has enough holdings to cover nearly all of its deposits. The banks capital (that is its equity, and subordinated debt) should all go toward making depositors whole. That's what bank capital is…

If you're volunteering to give or invest a few billion into the SVB receivership deal, then go right ahead. Please leave me and my tax dollars out of it. I'm not just hard-hearted, BTW. Unlimited depositor insurance is an awful idea.

You and your tax dollars depend on the USD being strong, and global trust in US banks. It's a worthwhile investment for taxpayers to make depositors whole to maintain that trust.

Capitalist society runs on free markets and good regulation. We let SVB bypass good regulation here, and that's our painful learning lesson that needs to be paid for.

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

#786

Post by ZachPruckowski »

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…

> 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

The FDIC has publicly said there will be an advance dividend and I don't see why it wouldn't be substantial, given that there's going to be a LOT of recovery unless SVB has big non-public problems.

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

#787

Post by [deleted] »

prepend wrote: post #444
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…

> just don’t understand why folks on the internet are so passionate about the depositors being hit by this. I think most of America can’t even imagine having over $250k in an account. So people with this much wealth asking for a bailout is literally rich people asking for coverage because they did something dumb (banked with a bad bank, didn’t account for risk, didn’t insure, didn’t manage funds). It’s not hate so mu…

[deleted]

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

#788

Post by teawrecks »

version_five wrote: post #200

As others have said, if depositors are bailed out, it's a bailout. Pretending that changing the definition makes a difference is childish. Whatever the government decides to do, this makes the VC and startup industry look really weak and entitled, and knocks them down from risk takers building the future to the same status as a bunch of bankers looking for a handout. There was an opportunity here for VCs with lots of…

Banking isn't intended to be a risk, though. That's literally the point of FDIC insurance.

Idk why I'm even bothering making an argument when your opening argument is ad hominem.

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

#789

Post by computing »

version_five wrote: post #200

As others have said, if depositors are bailed out, it's a bailout. Pretending that changing the definition makes a difference is childish. Whatever the government decides to do, this makes the VC and startup industry look really weak and entitled, and knocks them down from risk takers building the future to the same status as a bunch of bankers looking for a handout. There was an opportunity here for VCs with lots of…

have you read the financials of the banks you bank with? have you read the source code of every app/other software that you use?

Interesting new world folks are suggesting here, where depositors can't trust the highly regulated banks they bank with.

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

#790

Post by stillbourne »

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…

Isn't you company responsible to insure its own assets above the FDIC deposit limit? I guess personal responsibility only applies to poor people not corporations.
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