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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

#941

Post by cactusplant7374 »

lambo4bkfast wrote: post #934
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?

> What responsibility did a SVB depositor have in SVB's decision to purchase billions of MBS in 2021?

Was this decision public and announced in a regulatory filing?

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

#942

Post by colinmorelli »

chipgap98 wrote: post #64
mrcwinn wrote: post #26

Good. Investors like Ackman and Cuban seem so concerned about payroll for tech workers. The truth is that the vast majority of this cash was dry powder for acquisitions, staying liquid for new new investments, fresh VC money for advertising. Isn’t it these same folks who remind us all the time that most startups fail? Why bail out an entire bank when 99% of its startup depositors wouldn’t have made it anyway? If anyt…

> The truth is that the vast majority of this cash was dry powder for acquisitions, staying liquid for new new investments, fresh VC money for advertising Any sources for this? This seems like an opinion with nothing backing it up. > Isn’t it these same folks who remind us all the time that most startups fail? There is a big difference between a single startup being able to fail at any time and many of them failing a…

There's also a big difference between a startup failing because it doesn't deliver a product that people want and will pay for, and a startup failing because of "random chance" (in quotes because I can't prove that bank choice is a random distribution among startups, but it's not clear that it's a proxy for quality of founder or company)

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

#943

Post by shrimpx »

sithlord wrote: post #7

This actually makes a ton of sense, lets not forget that a bailout in this term is really pointing towards saving the bank itself, and its shareholders. There is inherent risk in equity investments, and it likely should have to suffer for its poor decisions. But when it comes to depositors, I think it makes a lot of sense to make them whole, especially in the case of SVB where the bank likely has pretty close to enou…

This is an implicit argument for de-privatizing banking. There is inherent risk of losing your uninsured money when you lend it to a private company. If all deposits were to be fully insured we’re talking public banking, or much worse, private for-profit banking that is fully de-risked by taxpayers, incentivizing execs to make arbitrarily risky decisions and, basically, freely take however much money they want from tax coffers.

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

#944

Post by treis »

idopmstuff wrote: post #558
tsimionescu wrote: post #416

Earlier quoted context omitted.

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…

I'll probably get my next paycheck or two, but I'll lose my job. You're pretty clearly saying here that I should lose my job, along with many other people, because of the bank at which my company's cash is stored. > Perhaps they shouldn't keep money in the bank in the first place, but find other uses for them. I work at a small startup that's raised five million dollars. Not a huge amount of money, but obviously losi…

This is a red herring though. Your company isn't losing 4.75 million. They're likely going to lose 0-10% of that.

The actual question is should tax payers give a company that has ~4.5 million in cash and is worth some multiple of that some free money? And that should be an emphatic no.

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

#945

Post by kortilla »

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…

I think that sentiment is directed against a strawman that doesn’t really exist. The reality is that startups with “no real business” just fail after burning through investor cash and nobody gets anything.

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

#946

Post by kortilla »

beebmam wrote: post #937
rqtwteye wrote: post #540

Earlier quoted context omitted.

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?

Because it’s a heck of a lot easier to do nothing and complain about people who do “try hard”.

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

#947

Post by smcnc »

I’m personally fine with US gov backstopping depositors (but leaving equity unbacked) for the specific case of SVB, but the ultimate question remains: if the US government insures unsecured deposits over $250k (even if no practical risk with long term assets on balance sheet as collateral), doesn’t this in effect create a precedent of no upper limit to FDIC insurance moving forward? So now taxpayers are on the hook for all bank deposits (thus, creating potential for more reckless behavior by regional bank CEO/CFO/CIOs). Isn’t that somewhat dangerous?

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

#948

Post by Apocryphon »

lazyeye wrote: post #881
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…

Think of in terms of the same sneering contempt we've seen from Silicon Valley towards middle America. Except the idea that Silicon Valley taxpayers should contribute to bailing out anyone else would have been seen as laughable, middle America hasn't been earning multiples of Silicon Valley, and middle America hasn't been censoring everybody else, or monetising privacy abuse/destruction of youth mental health on a sc…

“Learn to weld”, is a refrain I’ve heard.

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

#949

Post by shrimpx »

lambo4bkfast wrote: post #934
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?

If the depositor wasn’t ok with that (presumably public) decision they should have pulled out then. Or pulled out when treasury rates started ticking up and the writing was on the wall. Alternatively, they should have bought private insurance for their money or structured their money in multiple banks.

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

#950

Post by brutal_chaos_ »

People may want to reconsider what a reputation actually is, because it seems SVB was not a good bank despite its reputation. I'm guessing they marketed to dumb money; people who won't look past some marketing and attached names (e.g. Peter Thiel) and assume all is good.

In general, I think more due diligence is needed, even with a good reputation. (e.g. look into lobbying efforts. if they are lobbying for weakened rules, they may be violating/doing something illegitimate already a la FTX).

Enron was reputable, for example. Different situation, i know, but the point is reputation is great, due diligence is better (i don't know what good DD would be in the Enron case, perhaps the fact they pushed a 100% buy in would be one of many red flags, for example).

I do think workers should be paid, btw. However, the c-level team/s that made the choice to bank with SVB aught to lose out because it was their bet that tanked the company (or otherwise hurt it financially).

Tis are my admittedly outside/naïve perspective.

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