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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

#911

Post by unity1001 »

gwright wrote: post #902
unity1001 wrote: post #700

Earlier quoted context omitted.

> 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 contr…

> 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".

That was a capitalist business in which the depositors were LENDERS of that business with the understanding that the business would use their money for profit making activities and give them an interest rate and other returns in the process. Along with whatever investment scheme the bank was providing for its clients.

Those depositors could have chosen any bank in the US, and most of them have the power to choose any bank in the planet. But they chose SVB for what it provided. It was a business decision. They chose the highest yields by choosing this risky bank.

And now that the risk taking caused a crash and burn, the rest of the public who did not take those risks cannot pay for the sunken bank or its mega depositors. They all took risks, its their burden to bear. Profits cannot be privatized and risk socialized instead.

> 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".

Precisely. And the limit is $250,000. The government is responsible with bailing out that amount by law. Not the rest. Doing otherwise not only bails out risk taking depositors who took a risk while keeping all the profits - it also reduces SVB's liabilities and risk and props up its value. Its an indirect bank bailout too.

Laws and regulations that protect the players in an economy come from socialism. Not capitalism. In capitalism, 'buyer beware' is the rule and those who take risk and screw it up are left to sink with their bad choice. You live in a social democracy created by imposing socialist practices on capitalism.

If the laws said that "Up to $1 billion of each depositor account can be bailed out", yes, it could have been done. But it doesnt say that. And any such bail out of such mega deposits by using public money is a middle finger given to everyone who did not take such risks.

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

#912

Post by onenukecourse »

koolba wrote: post #307
jliptzin wrote: post #285

Earlier quoted context omitted.

It is completely insane to allow innocent depositors to lose their money especially when the government clearly would have no problem coming up with the funds to backstop depositors since this is an isolated incident. This bank being located in a tech hotspot is incidental and I am sure some non-techies are swept up in this as well. Imagine a 70 year old woman who just lost her husband and sold her house to downsize…

> Imagine a 70 year old woman who just lost her husband and sold her house to downsize to an apartment. She has $1 million in her SVB account and plans to live off the interest in her retirement. Should this 70 year old widow take a $750k haircut because she hasn’t spent the last few years brushing up on SBV 10-k filings and calling up SBV’s board of directors to ask them how they plan to manage interest rate risk? M…

I don't think that's how the FDIC insurance works. I was under the impression that the 250k is after liquidation, the last resort. Anyway, SVB was really leveraged so I'm not sure how much of their asset book value is recoverable.

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

#913

Post by s1artibartfast »

sbaiddn wrote: post #713
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…

Your company is the equity holder. You loosing last months paycheck is no different than what happens in the rest of the country any time an employer declares insolvency. Also, I don't think people in SV appreciate how much rancor and resentment their behavior has generated in the last fifteen years.

I dont understand the hate against SV/ tech bros. What did they ever do to anyone else?

Is it purely jealousy, or do people feel harmed?

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

#914

Post by nemothekid »

grej wrote: 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…

>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.

I think it's a little insulting to assume these people just don't understand the system. I think you have to nearly totally politically ignorant to not understand why people would feel this way. I don't know how you don't see the irony of complaining that ex-McKinsey founders shouldn't have to do due diligence on their bank, but that 18 year olds "know what they signed up for" and should have known that student loans were un-bankruptable. Many of the VCs who are now going hat in hand to Yellen are the same who opposed any sort of socialization. Why wouldn't that cause resentment?

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

#915

Post by roenxi »

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…

There have been losses. The order of people who have to feel the pain for that is:

1. Decision makers (the equity holders).

2. Active enablers (eg, certain creditors, possibly management).

3. Passive enablers (eg, other creditors, the startups who held money in the bank).

4. Bystanders (eg, taxpayers).

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

#916

Post by ALittleLight »

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 think it's common to take people you disagree with and put them in a mental bucket labeled "other". Then, you can see people opposed to all government intervention, bucket them as other, and see people who think depositors deserve to be made whole, and conclude that there is some hypocrisy going on with the latter position, because different people you disagreed with thought different things.

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

#917

Post by prewett »

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…

I'm beginning to wonder if a lot of the posters to these kind of thins are just young. When I was 25 I thought I had well-reasoned and insightful opinions, and I certainly had forceful opinions. But I had no depth of knowledge in things like finance and politics, and thus, had no way of knowing how much I didn't know. A few years ago I watched Ian Shapiro's lectures on "Politics in the Modern World" (a course from Yale, developed from a request to help explain the rise of Trump). I realized that I thought I had insightful opinions, but really it was just rubbish because I had no understanding of political science, recent history, or even different forms of government and their different failings.

I also felt differently about money when I was 25, because obviously I didn't have any. There was no way I could have any, because I had only been working for a few years (and junior devs were paid a lot less in those days). It seems like it would have been easy to be jealous of rich people at 25. Or just jealous of startup-employees who, judging by HN posts (/s), are all making 400k/year. In fact, I think some HN posts have claimed junior dev salaries more than what I was making after 20 years in the industry, which I could see might lead to some jealousy. Particularly if combined with a lack of perspective.

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

#918

Post by thephyber »

lotsofpulp wrote: post #372
nerdponx wrote: post #289

Earlier quoted context omitted.

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…

Suppose an immigrant is starting a restaurant, and has to pay up front to some suppliers that have been in business for 40 years for kitchen equipment. And the supplier goes out of business, and the money is gone. And the immigrant has no more time or money to hire a lawyer to submit a claim to recover it. Is there a federal bailout waiting for the immigrant? Or the immigrant’s employees who might also be family memb…

What if the restaurant employs 5 people? 500 people? 50,000? 5,000,000 people?

Sometimes it actually pays to evaluate breaking a policy if the harm of following it is larger than the harm of coming up with a different decision. How much does the US Treasury expect to lose in tax revenue if SVB’s customers are stuck with frozen accounts or the assets are sold at too steep of a discount just to get them resolved quickly?

The use of bailout here seems to be using a tainted term to spread taint to the victim. The restauranteur is a depositor. His assets can be very nearly made while so long as there is no fire sale on the bank assets. The “bailout” is really just providing sufficient liquidity to keep the bank working. It’s only insolvent so long as it has short term liquidity issues.

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

#919

Post by walnutclosefarm »

paganel wrote: post #104
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…

> For the Feds to put up that money as part of a deal to sell SVBs portfolio intact to another bank, makes good sense to me Honest question: why? I.e. why can't the capitalists invested in this business absorb the reasonable haircut? (I assume it's "reasonable" based on the information we have been provided with until now). Depositors (especially those holding more than 250k) were also investors, they were getting ba…

I make a clear distinction between depositors and investors. The holders of the bank's capital - it's equity and and subordinate bond debt, are at-risk investors, and should, as I said in my original post, take a 100% haircut (assuming the bank in fact has fewer assets than liabilities.) But a depositor - who probably was earning negligible interest for parking their cash in the bank - has a reasonable expectation that their deposit is safe in a regulated bank. And the government has an interest in assuring bank customers across the country that ordinary deposits are safe in regulated banks that are adequately capitalized.

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

#920

Post by gnulinux »

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…

> Appropriate them, and leave small and mid businesses hanged to dry?

Yes this is exactly what I support should happen. The remaining assets can of course be used towards depositors (even beyond $250k FDIC insure). But beyond that, tough luck. In our American systems thousands, millions of people and small businesses fail and the answer is "tough luck". Their failure is too small for anyone to care. But when big banks fail government helps them, which is how this is seen as. If you have more than $250k in a bank account sitting somewhere, you're objective not destitute and you objectively do not need tax money to help you out any further. So, yes "tough luck".

This is not depositors fault, but it's also not tax payers fault. A bailout is a bailout. If depositors are bailed out, it is still a bailout.

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