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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

#901

Post by nemothekid »

christophilus wrote: post #702
ak_111 wrote: post #370

The only comic thing in this entire tragedy is watching the fanatics who have been relentlessly preaching to others such dictums as “move quick and break things” and “only the paranoid survive”, extolling the virtues of “creative destruction” and repeating ad infinitum the Reagan quote "The top 9 most terrifying words in the English Language are: I'm from the government, and I'm here to help" cry out for government i…

I tend to be libertarian, but there are reasonable roles for government, and regulating banks and life insurers by forcing them to contribute to something like the FDIC and the state insurance commission (or whatever that life insurance thing is called) is legitimate even to most conservatives. Stepping in to smooth out systemic problems is another valid function— like Reagan did with the air traffic controllers, lik…

>Stepping in to smooth out systemic problems is another valid function

Whether you consider this problem "systemic" is political. Note that the FDIC insurance is not the point of contention here - it's whether depositors should be made hold especially if SVB's HTM securities are insolvent.

I could easily make an argument why student loan debt is a systemic issue in the united states - the government's guarantee of the loans as well as making them impossible to clear via bankruptcy has created both infinite demand (leading to higher tuition prices) and reckless loaning (due to the government essentially guaranteeing the loans). Why is this "systemic" issue unreasonable, while SVB is?

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

#902

Post by gwright »

unity1001 wrote: post #700
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…

> make customers, not owners, whole Framing bailout with a different word like 'make whole' does not make it not a bailout. The bank played with those people's deposits and screwed it up. Rescuing all the deposits would just exonerate the bank of all its wrongdoing and set a bad precedent. "There are no repercussions for bad business management". Per capitalist philosophy, the bank should sink, along with whatever de…

> Per capitalist philosophy, the bank should sink, along with whatever deposit was in there - "Buyer beware".

Why do you think that? There is no axiom of "capitalist philosophy" that says "when one party screws up all parties must maximally feel the pain".

There is a framework for unwinding these sorts of things. Depositor agreements as well as the relevant regulations and laws regarding business agreements and contracts are all part of the "capitalist philosophy".

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

#903

Post by ak_111 »

foobiekr wrote: post #850
ak_111 wrote: post #370

The only comic thing in this entire tragedy is watching the fanatics who have been relentlessly preaching to others such dictums as “move quick and break things” and “only the paranoid survive”, extolling the virtues of “creative destruction” and repeating ad infinitum the Reagan quote "The top 9 most terrifying words in the English Language are: I'm from the government, and I'm here to help" cry out for government i…

That, the documented comments by short sellers for months about it being a trainwreck, the last minute bonuses and the dumping of stock on retail investors by insiders. It's like all of the tech misbehavior packaged neatly up into one story.

The worst is the bosses of SVB playing a role in lobbying for more relaxed banking regulations.

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

#904

Post by prewett »

hgsgm wrote: post #755
dpweb wrote: post #639

Earlier quoted context omitted.

It’s from the hubris and excesses of recent SV culture. And most Americans have no conception of being able to have 250k in a checking account. The vengeance attitude can be taken too far however but as depositors are ultimately made 80-100% whole seems a reasonable outcome. Bottom line uninsured means uninsured. Read your contracts. Although shouldn’t be angry if they can be made whole.

Most Americans work for a company that does in fact have $250K in a checking account like SVB...

GP's point was that they have no conception of that, so it affects how they think about things, and their proposed solutions. The fact that the situation they have no conception of happens frequently, even near them, means that their proposed solutions are likely to be inapplicable.

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

#905

Post by almog »

nemo44x wrote: post #876
ak_111 wrote: post #370

The only comic thing in this entire tragedy is watching the fanatics who have been relentlessly preaching to others such dictums as “move quick and break things” and “only the paranoid survive”, extolling the virtues of “creative destruction” and repeating ad infinitum the Reagan quote "The top 9 most terrifying words in the English Language are: I'm from the government, and I'm here to help" cry out for government i…

The government and its institutions (The Fed) had a big part in this though. They flooded the market with cash, sold a bunch of bonds with low interest rates (lowest ever) to tons of banks that had to figure out how to manage that cash and did so by buying “the safest investment”, and then that same institution jacked up interest rates to the highest in 20 years over the course of 10 months. So no, if the government…

They had plenty of time to hedge against that risk — the Fed since almost a year now has been "higher for longer".

Believing and pumping the Fed pivot narrative and by doing so betting wagainst the Fed is what failed them.

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

#906

Post by handsclean »

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…

It comes from the way lower class Americans are treated. The hardship that might be ahead for some otherwise extremely rich and privileged people is actually far less than befalls tens of millions of lower class Americans every single day, and choosing a “move fast and break things” bank is actually a far less “unfair” reason than, say, the circumstances of your birth. The vicious, lifelong message from mainstream society to those most in need has always been “nobody owes anybody anything, that would be socialism”. That’s why those people are angry to see people far better off receive help just because “not doing it would be unfair and hurt them”.

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

#907

Post by christophilus »

nemothekid wrote: post #901
christophilus wrote: post #702

Earlier quoted context omitted.

I tend to be libertarian, but there are reasonable roles for government, and regulating banks and life insurers by forcing them to contribute to something like the FDIC and the state insurance commission (or whatever that life insurance thing is called) is legitimate even to most conservatives. Stepping in to smooth out systemic problems is another valid function— like Reagan did with the air traffic controllers, lik…

> Stepping in to smooth out systemic problems is another valid function Whether you consider this problem "systemic" is political. Note that the FDIC insurance is not the point of contention here - it's whether depositors should be made hold especially if SVB's HTM securities are insolvent. I could easily make an argument why student loan debt is a systemic issue in the united states - the government's guarantee of t…

I don’t think depositors should be made whole if it can’t be done by a combination of managing the bank’s assets, and sale of depositors to other banks.

So, if you’re saying neither the Fed nor the treasury nor the tax payers should bail out depositors, then I agree with you.

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

#908

Post by omginternets »

mixdup wrote: post #878
omginternets wrote: post #825

Earlier quoted context omitted.

Respectfully, I think you are the one playing with definitions. “Bailout” refers to shareholders. It refers to bailing out the institution, not it’s depositors. We can talk about a depositor bailout if you want, but let’s not pretend it’s the same thing, not pretend it’s what the term “bailout” commonly refers to.

We’re changing the (very well) known rules in the middle of a crisis and acting like we didn’t know what happened could happen, when we did. This is a bailout

Yeah, that's (still) not what "bailout" means.

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

#909

Post by thephyber »

lotsofpulp wrote: post #388
nightpool wrote: post #288

Earlier quoted context omitted.

Yes, but "worth" is a complicated concept here. What's probably going to happen is that a big bank like JPMorgan is going to buy the remaining assets at 100% book value, and the depositors are going to be made whole out of that. That's not their current market value if sold at fire-sale prices, but banks have the time horizons to hold those assets to maturity and not worry so much about their market value. The stabil…

> The stability of the US banking infrastructure is worth more to JPMorgan then haggling over a few billion dollars of lower rates bonds I wonder why the leaders at JPM did have not announced this yet, to say they are paying 100% book value. Seems like it would let everyone go back to enjoying their weekend, including Yellen and numerous other prominent people.

Your attitude is flippant and ignores massive risk. Was it meant to be sarcastic?

Due diligence. Risk. Opportunity costs.

JP Morgan is probably re-evaluating their own assets right now with the assumption that what happened to SVB might happen to them also in a few weeks/months.

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

#910

Post by chrisbolt »

yibg wrote: post #839
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 se…

The deposits are spread over a more diversified set of banks and the risk is reduced.
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