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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

#811

Earlier quoted context omitted.

You get your last paycheck, sure, but you still lose your job which is definitely a threat to workers lively hoods. It's even more of a threat if the whole sector you're employed in suffers simultaneously, as it becomes difficult to continue to be employed in that sector.

If things get dire enough, the government can intervene to protect workers in various ways (unemployment benefits, emergency housing, government employment - there are many options). No need to prop up the middlemen with free insurance.

Unemployment insurance is already available. California and all the west coast states at least will also give free insurance in many cases. There is little risk to being unemployed especially for a short term while employees slowly get their money back after the asset sales.

I don't really see the big problem here.

Svb still has substantial assets. In the coming weeks, they will be sold and solid portions of the money returned. If companies have to temporarily furlough people, they will still get a reasonable wage that most Americans live on.

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

#812
post #743

Earlier quoted context omitted.

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…

If a bank is giving depositors unparalleled benefits to bank with them [1], alarm bells should ring.

Let me be blunt. The last place I'd do my personal banking is the local bank of a region who's mantra includes: "move fast and break things".

[1] benefits include interest rates above average or offer to finance your start up.

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

#813

Earlier quoted context omitted.

> “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? I think the common sentiment is depositors should not get any more than whatever the remaining assets are worth. And I think the prominent people asking the government to bailout depositors are worried about only getting 75% of…

But why? What purpose does that serve? It's hardly even inflationary, the value was basically destroyed, so the Fed conjuring replacement money doesn't seem like such a bad thing. Shareholders will still be taking a major loss, and they are the ones who ought to be held responsible, so it makes sense. You can't fault depositors for not doing thorough diligence on a 40-year-old bank with a good reputation and it doesn…

The bank became a crypto onramp/offramp and also counted a bunch of web3 stuff to not draw down their deposits.

That we can't let crypto-ponzi involved stuff infect the real system and get bailouts is a general sentiment over this that makes sense. $250,000 per account is what we are mandated to compensate Circle legally and to go beyond is people who stayed out of crypto subsidizing the crypto ponzi scheme ecosystem.

USDC can probably maintain $1 from the crazy amount of slippage from people losing their keys anyway.

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

#814

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…

Before people get too excited about letting it all burn, I recommend everyone watch this talk by an economist on the 2008 recovery: https://www.youtube.com/watch?v=RrFSO62p0jk Spoiler alert (18:30): It was entrepreneurship that turned the economy around. Not fed policy. SVB put their deposits in US Treasury Bonds. Commonly regarded as the safest investment vehicle there is. Then the fed raised interest rates, complet…

> It was entrepreneurship that turned the economy around. Not fed policy.

Then get yourselves out of this mess.

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

#815
post #632

Seeing all of the “screw them, they are VC’s & tech bros, they took a risk they own it” sentiment on Twitter makes me sad. It’s a hard realization of how little clue so many people have about so much of the way the financial system works, and who would actually be impacted by these losses. Also seeing finance bro hot takes like, oh those companies took the risk and should have done due diligence on the bank. SIVB was…

I’ve noticed this tendency for at least a decade. People in general— even highly educated people in the media, government, and academia— are ignorant about economics and finance. There tends to be no nuance in much of the popular takes. I’m still quite ignorant, myself, but at least I can offer a bit more insight than: “capitalism: bad”. I am curious, though, as to whether or not this general ignorance is new, or if…

Now people’s dumb opinions can be heard en masse. They can then even bubble up and get elected into congress. Before there was a muzzle by those who knew better who controlled the media and narrative. You can easily argue that gate kept all kinds of things that shouldn’t have been swept under the rug, but it turns out there’s a lot more dirt than coins under that rug.

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

#817

Earlier quoted context omitted.

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?

This was back when A rounds were much more modest in size. We put it in one of the largest and therefore most highly regulated banks, the ones that now have to meet Basel III standards. If we'd had more money, we would have put it in 2 banks. A solution that would have been enough for almost everybody here, as the main thing causing a risk of not making payroll is the way the FDIC is locking up a good chunk of the uninsured funds while they sell off SVB's assets.

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

#818

Earlier quoted context omitted.

This is the exact lack of nuance that OP is talking about. Do you understand what is actually happening here? A bank is going under and potentially taking a ton of startups with it, not because of any poor decisions or lack of legit business model by the startups. It’s purely due to an internal implementation detail of the (until now) we’ll respected bank that holds their money. I swear if it was called “generic bank…

> Do you understand what is actually happening here? Do you have an actual argument that falsifies what I've said? I'm all about owning up to my mistakes but right now I have no reason to believe I'm being stupid. I thought stuff like this was going to happen the second I saw the Fed raising interest rates to combat inflation. Looks like time proved me right. > A bank is going under and potentially taking a ton of st…

>It's likely startups only exist to begin with due to low federal interest rates. This is true for some startups. Not true for others. There’s some nuance. Painting them altogether loses the nuance.

> It is obvious that if those rates are low investors will look elsewhere. Startups are one of those elsewheres.

I agree.

> Now that rates are on the way up, there's no need for investors to risk their money on startups anymore. So startups no longer have one of the pre-conditions for their existence. Namely, free investor money literally pouring in and paying for all their expenses.

Again, some investors won’t spend as much of their money investing in startups. You talk as if it’s just a single on/off switch. > Such is life in the free market. Looks like the US government disrupted you.

We’re talking about the startups here. The government “disrupted” the bank. And through no fault of their own, the startups get “disrupted” as a second order effect. My main point and the reason that I felt I should respond is this sense that I get from your comment that somehow startups deserved to lose their money because they kept it at the bank. As if that was the morally just conclusion.

> I thought stuff like this was going to happen the second I saw the Fed raising interest rates to combat inflation. Looks like time proved me right.

Yes. Everyone understood that “stuff like this” would happen. I’m positive that you didn’t know that specifically SVB would go under in such fashion. Without using hindsight bias, what should a startup have done with this knowledge that “stuff like this” would happen?

> Yeah sure. A "minor implementation detail" of the bank... Honestly, this isn't even the real issue at play here.

I said “internal” not “minor”. And I mean, yes it is the real issue at play? It’s what caused them to go under? And was absolutely not something that any reasonable person would expect to know about their financial institution…

> It's really simple to me. People put their money in the bank. The bank couldn't bear to watch the pile of money just sitting there. So it "invested" the money. Then it lost the money. Then they went under. Now everybody is losing their minds and the bank is getting liquidated in an attempt to make everybody whole again.

Missing nuance that they invested in something that is seen as about the most safe thing you can invest in, but they DID mess up with the duration. Again, this is something that the bank messed up that no reasonable(non-financial industry) person could have seen coming. Sure, the bank deserves some blame for this, but the people that kept their money there could not have reasonably seen the risk.

> I'm sorry but I just don't feel any sympathy at all. It's not the first time a bank fails but people never learn not to trust them.

“Don’t trust banks”. Ok. Got it. Now what? Without using hindsight bias, what should a startup have done with $10million? Keep it under their mattress? Invest it in something more risky than treasuries?

> Nope. I say the exact same thing every single time some bank-like institution fails: we warned you.

Noted. Now what?

> When it's some crypto exchange, everybody here on HN gets a kick out of it. Now that it's some startup's bank, I'm supposed to feel sorry for them? No.

You’re comparing losing your money by gambling on something with no intrinsic value, in an unregulated market, that was built primarily as a means of subverting oversight, with keeping your money in a highly respected, highly regulated, FDIC insured bank.

That said, I hope people weren’t HAPPY that crypto HOLDERS lost their money.

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

#819

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…

Much of the "schadenfreude" is backlash at special pleading, distortion of facts and word games.

If the tech community reaction was "wow, this sucks, we're going to have to manage a lot of crap" the general reaction would be very sympathetic.

But when the consensus position is "gimme money to cover my mistake", I have to say "no" rather than "geez, that's terrible".

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

#820

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…

> to make customers, not owners, whole

The entire business world could use a hard lesson here

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