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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

#931

Post by fwlr »

jzb wrote: post #855
fwlr wrote: post #148

Eh, the depositors aren’t totally blameless here. On Thursday they conspired to perform a huge bank run on SVB, on Friday they succeeded, and on Saturday they were demanding the government and taxpayers make them whole by Monday. They deserve to get their money back and they eventually will once SVB’s assets are liquidated. But that’s not good enough, they want it now , and they won’t hesitate to make you pay for the…

Some of the depositors, not all. My employer didn’t conspire about anything. When and how much money is returned is going to make the difference between life and death for some of these companies. And the difference between having a job and healthcare or not for a lot of people. Don’t forget that this is happening to depositors / companies after weathering a pandemic and in a really shitty economies where things are…

I’m sympathetic. I was in the hospitality industry during COVID, I watched a company that employs 60 people struggle to make payroll while 90% of their business was legally barred from operating for months on end with no clue when it would end. I saw managers and fellow employees giving each other loans, I paid for a coworker’s car repairs. I am not wishing this on you.

By this evening you’ll know if a sale has gone through; if so, everything is back to normal. Otherwise, the FDIC has 250k waiting for your employer on Monday morning, guaranteed. Even if that’s not a week’s payroll, for all but the largest companies that’s enough to get employees by for a week.

The money isn’t gone, just locked up in securities. By the end of the week some percentage of the account will be released - I’ve heard predictions of 80%, 60%, 50%, but even if it’s 20% that is still enough for almost any place to run close to full payroll and operating costs for a month. By the end of the month you’ll have 50-80% back, and you’re back to normality. Maybe the last 20% takes a year. It can wait. This isn’t the end! It’s scary, but it is not the end.

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

#932

Post by lisasays »

omginternets wrote: post #825
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…

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.

Multiple sources attest to the contrary - very consistently a "bailout" is taken to refer to any kind of financial assistance provided to a failing institution (not just to the shareholders). For example, Investopedia:

    What Is A Bailout?

    A bailout is when a business, an individual, or a government provides money and/or resources (also known as a capital injection) to a failing company. These actions help to prevent the consequences of that business's potential downfall which may include bankruptcy and default on its financial obligations.
All the major English dictionaries, and Wikipedia will tell you same thing.

To call this action anything other than "bailout" is to mince words, plain and simple.

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

#933

Post by lambo4bkfast »

nodemaker wrote: post #179
macintux wrote: post #144

Earlier quoted context omitted.

Because businesses need to be able to pay their employees, because the banking system as a whole relies on trust to function. And because we're not really bailing out depositors. The FDIC is just doing its best to make sure depositors take precedence over bank shareholders, which is as it should be. Sure, you could let Roku lose a half billion dollars, but it's not their fault SVB couldn't meet its obligations. They…

Businesses need to pay their employees from the money they have not from taxpayer money. If a business loses that money because their banking partner lost the money, taxpayers have no obligation to help (beyond the 250k)

Taxpayers do have an obligation to ensure that I do not view my checking account as a risky loan to the bank... It is not a positive outcome for taxpayers if they no longer view their deposits as safe. $250k is also a ridiculously low insurance amount for any company with a non-trivial number of employees.

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

#934

Post by lambo4bkfast »

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…

Bailout implies that the individual/business being made whole *should* have made decisions to prevent the situation from occurring in the first place. What responsibility did a SVB depositor have in SVB's decision to purchase billions of MBS in 2021?

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

#935

Post by zerocrates »

paulpauper wrote: post #556
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, which doesn’t seem likely. The government will use the bank assets to make customers, not owners, whole. Except shareholders suffered massive or total losses in 2008, such as AIG or Washington Mutual, despite it being a bailout. A bailout means all depositors are made whole, not the shareholders.

WaMu was not a bailout, it was allowed to fail.

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

#936

Post by epvgwwqe »

Positions that claim depositors in SVB should not be made whole must be missing a whole lot of context.

There is a sequence of screwups here by the government and then by SVB which led to this, and it makes zero sense to have that impact depositors who manage the critical innovation infrastructure of the US.

The backdrop that led to this includes the government printing way too much money, which induced a ridiculous bull run and coupled with supply chocks caused high inflation. The Fed failed to react quickly enough partly for political reasons, eventually leading to a jarring about-face with the sharpest interest rate increases in decades.

Meanwhile the bull run led to an increase in deposits to SVB, which SVB needed to put to work and bought an outsized low yield 10 year bond which plummeted in value once interest rates spiked. This was indeed a poor decision by SVB and along with the drop in new deposits from the interest rate-induced VC slowdown pretty much sealed their fate.

Once SVB share price dropped 50%, depositors acted rationally to pull their uninsured funds. It wouldn't have mattered whether VCs chimed in or not, the bank run would happen regardless in a matter of days (there were plenty of red flags that the price drop exposed widely).

If experts in finance/banking didn't see this coming, why would small business depositors be expected to? If diversifying across regional and "too big to fail" banks were such an obvious issue it would have been baked into every VC funding agreement, but it wasn't (but I'm sure it will be from hereon).

Which startups/VCs bank with SVB is basically an arbitrary choice (in fact the standard one), so what would be the point of punishing large swaths of the critical innovation industry that happened to do something considered as the industry standard? Making depositors whole is not a bailout, it's a backstop for the inevitable crack in the economy that the aggressive/clumsy Fed induced.

If this doesn't get resolved immediately, the US can pretty much say goodbye to any form of long term dominance, economic, military or otherwise.

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

#937

Post by beebmam »

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…

Simply put, I think this kind of attitude is based in economic resentment. There's a whole part of the US that hasn't seen much benefit from the unbelievably successful startup world.

I remember when people used to go build something useful themselves instead of complaining about the success of others. Why don't we try to get back to that kind of culture?

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

#938

Post by lisasays »

jzb wrote: post #855
fwlr wrote: post #148

Eh, the depositors aren’t totally blameless here. On Thursday they conspired to perform a huge bank run on SVB, on Friday they succeeded, and on Saturday they were demanding the government and taxpayers make them whole by Monday. They deserve to get their money back and they eventually will once SVB’s assets are liquidated. But that’s not good enough, they want it now , and they won’t hesitate to make you pay for the…

Some of the depositors, not all. My employer didn’t conspire about anything. When and how much money is returned is going to make the difference between life and death for some of these companies. And the difference between having a job and healthcare or not for a lot of people. Don’t forget that this is happening to depositors / companies after weathering a pandemic and in a really shitty economies where things are…

My employer didn’t conspire about anything.

They didn't "conspire", per se. But they failed to do due diligence on the nature of the financial institution they were relying upon.

Or even to think, for a minute, about fussy terminology like "FDIC insured" actually means.

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

#939

Post by nemo44x »

almog wrote: post #905
nemo44x wrote: post #876

Earlier quoted context omitted.

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.

I’m not saying the SVB management is not to blame. Their business should go to 0. I’m just saying that the gov policy and erratic Fed policy caused this. The Fed is creating a lot of problems right now. They’re going to kill the patient trying to kill the cancer.

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

#940

Post by louloulou »

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 company I work for should lose most of its money because our CEO used a well-reputed bank

Why should I lose my money because I bought the stock of "a well-reputed bank"?

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