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

#831

Post by dehrmann » Sun, Mar 12, 2023, 6:56 PM UTC

tsimionescu wrote: post #416

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…

First of all, even if the company you work for goes bankrupt, you're very likely to still receive your salary, as debts to workers are the highest priority in any bankruptcy case. So the risk to workers' livelihoods is being way overblown. Of course, if a substantial amount of your compensation was company stock, you may lose a lot on that, but that is par for the course with stock. Second of all, the purpose of havi…

> So the risk to workers' livelihoods is being way overblown.

If the company you work for suddenly goes bankrupt, you're much more concerned about finding yourself unemployed in a not-great tech job market than collecting your last paycheck.

Don't forget how systemic this is. If your company goes bankrupt, it's likely a lot of similar tech companies also went bankrupt.

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

#832

Post by dragonwriter » Sun, Mar 12, 2023, 6:57 PM UTC

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…

> “This is a bailout”. It would be if shareholders were to get their money back

It would be a bailout of SVB shareholders if shareholders got their money back. But its a bailout of someone in any case.

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

#833

Post by [deleted] » Sun, Mar 12, 2023, 6:59 PM UTC

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…

[deleted]

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

#834

Post by foobiekr » Sun, Mar 12, 2023, 7:01 PM UTC

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…

The problem is that the valley culture wants it both ways. It is a largely libertarian, rules-breaking environment. They want to ignore laws and decry regulations while at the same time having the government step in and bail them out whenever anything goes against them.

I, too, have worked for startups much of my life. Sometimes you show up for work one day and the doors are locked because the place is done. It is part of the deal. There are lots of reasons this can occur - hey, we just couldn't close another round, the economy hit a speed bump, etc. 2008 happened. Worldcom and Cable and Wireless just declared bankruptcy and they were our lead customers. etc. It is part of the startup cycle.

If something like this this had managed to kill AirBnb, Uber and Lyft before they did the damage they did, the world would be better off.

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

#835

Post by manquer » Sun, Mar 12, 2023, 7:03 PM UTC

roland35 wrote: post #532

deepsquirrelnet wrote: post #347

Earlier quoted context omitted.

Even as an individual with not a lot of money, I think this is prudent. When you give your money to a bank, they effectively give you back an IOU. And while most of the time they can make good on it, sometimes the investments they make with your money are risky, short sighted, or just unlucky. In any case, don’t put yourself into jeopardy by not having other options.

Exactly! My personal finances are nowhere near as sophisticated as even a small start-up, but I make sure I have multiple sources of cash and credit just in case I lose access to one for whatever reason temporary or permanent (bank failure, fraud, forget password, etc). It isn't too difficult: open up a second savings account, apply for an extra credit card, open a HELOC if available. I have to believe there is some…

It isn’t too difficult for you as individual to open an account anywhere .

Startups don’t have that luxury it was and still pretty difficult to do banking as an early stage startup . There is a reason why there are only 2-3 banks specialized in this sector and everyone banked with them.

If you were a small startup keeping your money in SVB was the safest thing you could have done till last week. They were the largest by far and all your VCs recommended them and probably introduced you to them so you could open an account .

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

#836

Post by dehrmann » Sun, Mar 12, 2023, 7:07 PM UTC

SMAAART wrote: post #672

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 second your point and add: what's at stake here is not just SVB's customers, but the reputation of the entire US Banking system. The shareholders should lose all of their investment, that is a no-brainer, but the depositors should not lose 1 penny, and their funds be available on Monday morning. Here's an overlooked deadline: 6:00 PM EST, that is when Sydney (Australia)'s stock market opens. If that opens a lot low…

> but the reputation of the entire US Banking system

Agreed. Advanced economies work because there are things you can take for granted, and you gain efficiencies from that. There are plenty of countries where the currency collapses every decade and banks don't work well. None one looks up to them, no one aspires to start a business there, and they're not leaders in anything other than maybe a commodity. They're places smart people leave.

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

#837

Post by foobiekr » Sun, Mar 12, 2023, 7:07 PM UTC

newaccount2023 wrote: post #403

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…

> I just don’t understand why folks on the internet are so passionate about the depositors being hit by this The rest of America hates Silicon Valley like they hate Wall Street

This is true and basically deserved.

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

#838

Post by bnralt » Sun, Mar 12, 2023, 7:08 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…

To further this, a lot of people (see Sam Altman, for example[1]) are saying the federal government should give depositors all of their money bank, and don't seem to care at all about what this would mean in the long run. Is the FDIC now insuring all deposits in the U.S. for an unlimited amount? What would the implications of that be?

Maybe there should be changes made to help protect depositors more, but instead of a collected and rational conversation about how we'll treat deposits going forward we're getting glib "just give these people there money back, they don't deserve this" responses. Of course these things are tragedies, but the degree to which the federal government assists people in these situations is a complex discussion, and we have to come up with a consistent approach.

People are asking about salty response, but this kind of cavalier attitude toward the financial system from supposedly serious thought leaders is a bit alarming.

[1] https://twitter.com/sama/status/1634958179657449475

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

#839

Post by yibg » Sun, Mar 12, 2023, 7:11 PM UTC

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…

One thing I don’t get. People are making a few claims:

1) anything beyond 250k is a known risk, you should’ve spread the money around.

2) why should tax payers be on the hook for more than the 250k amount? The companies took the risk and lost.

But if everyone spread their money around and kept each account less than 250k. Then in effect isn’t everyone insured for everything anyways?

Imagine there is a service that seamlessly took your total amount and spread it between various accounts for you to keep each account balance less than 250k. Now the totality of bank deposits are in effect all 100% insured. How is this now different from insuring all deposits regardless of size besides adding a middleman?

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

#840

Post by dehrmann » Sun, Mar 12, 2023, 7:11 PM UTC

iancmceachern wrote: post #689

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…

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…

> The issue is it wasn't pension money. It was VC money...

You're going to shit yourself when you learn who some of the LPs are.