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SVB does not deserve a bailout. They DID NOT hedge interest rate risk at all

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Re: SVB does not deserve a bailout. They DID NOT hedge interest rate risk at all

#31
post #30
post #29

SVB is not getting a bailout. It is dead. Its share price is $0 and all shareholders are walking away with nothing. The government's decision on whether to bail out its depositors or not isn't going to be (and shouldn't be) based on how well the bank was run, especially given that it was fully compliant with all regulations.

Depositors knowingly took the risk of having such large deposits there. They made this decision and should face the consequences of it, not the taxpayers.

The collapse of the regional banking sector across the country and possibly silicon valley as a whole is going to affect regular taxpayers a lot more than a few billions in temporary spending by the federal government. Doubly so because most of the funds are in risk free securities that can be easily liquidated over time. Remember that SVB is one in a long list of small to mid sized banks that made such investments in the last couple of years and now have to realize losses because of it. If left unchecked plenty more banks are going to have runs next week. The government's job is not to sit by and say "I told you so!" but do the best it can to prevent the iceberg from tipping. People forget that taxpayers made a profit on TARP bailouts and prevented the collapse of the banking system and the economy in doing so.

Re: SVB does not deserve a bailout. They DID NOT hedge interest rate risk at all

#32
post #31
post #30

Earlier quoted context omitted.

Depositors knowingly took the risk of having such large deposits there. They made this decision and should face the consequences of it, not the taxpayers.

The collapse of the regional banking sector across the country and possibly silicon valley as a whole is going to affect regular taxpayers a lot more than a few billions in temporary spending by the federal government. Doubly so because most of the funds are in risk free securities that can be easily liquidated over time. Remember that SVB is one in a long list of small to mid sized banks that made such investments i…

Nope. This is a commonly used scare tactic.

Tan's proposed bailout is nothing like TARP

Re: SVB does not deserve a bailout. They DID NOT hedge interest rate risk at all

#33

Earlier quoted context omitted.

You don’t have to use a bank. Cash is one option, and perhaps someday soon a self managed/federal CBDC. You can also put your cash into money market funds that invest in T-Bills, which is what anybody with some common sense and a large amount of money should do. But in this world entities that offer you a return on your money will still exist, e.g. banks. If I can register my cash and you pay me x% per year, that’s b…

>If you take a big chunk of credit creation and issuance out of service, the economy is likely to regress fairly significantly. Similarly, ceasing steroid use will reduce muscle mass.

Imagine trying to buy a house without a loan. Or start a business without cash up front.

We can move to a world without credit, but standard of living for people will drop significantly. Look at what happened when they tightened lending standards into a recession in the 1930s.

The key is to find the right balance in regulations to make the system robust

Re: SVB does not deserve a bailout. They DID NOT hedge interest rate risk at all

#34
post #31
post #30

Earlier quoted context omitted.

Depositors knowingly took the risk of having such large deposits there. They made this decision and should face the consequences of it, not the taxpayers.

The collapse of the regional banking sector across the country and possibly silicon valley as a whole is going to affect regular taxpayers a lot more than a few billions in temporary spending by the federal government. Doubly so because most of the funds are in risk free securities that can be easily liquidated over time. Remember that SVB is one in a long list of small to mid sized banks that made such investments i…

If the securities can be easily liquidated then there's really no economic loss for these guys going under. The real economic cost of a bank run is the early liquidation of good firms. If all these small and medium banks just have to sell their liquid treasuries or MBS portfolios then no big deal. Whatever working capital they're providing is pretty straightforward for some other financial institution to provide. The rest is just transfers from one party to another, no need to intervene.

Re: SVB does not deserve a bailout. They DID NOT hedge interest rate risk at all

#35

Earlier quoted context omitted.

The root cause of all of this is that the US is so corrupt that a large bank was able to exempt itself from international banking standards. So it really is “the rest of us” who are to blame, by passively accepting corruption and feckless regulators. Taxpayers should pay the bill, it might incentivize them to get off their ass for once.

> Taxpayers should pay the bill, it might incentivize them to get off their ass for once like they did in 2008? I would rather pay off student loans

What happened in 2008? I was very young then so I don’t know.

Re: SVB does not deserve a bailout. They DID NOT hedge interest rate risk at all

#36
post #32
post #31

Earlier quoted context omitted.

The collapse of the regional banking sector across the country and possibly silicon valley as a whole is going to affect regular taxpayers a lot more than a few billions in temporary spending by the federal government. Doubly so because most of the funds are in risk free securities that can be easily liquidated over time. Remember that SVB is one in a long list of small to mid sized banks that made such investments i…

Nope. This is a commonly used scare tactic. Tan's proposed bailout is nothing like TARP

What is the difference between the two?

Re: SVB does not deserve a bailout. They DID NOT hedge interest rate risk at all

#37

What's the point in having banks anyway. Why let the people in the bank earn anything if they are risking money that isn't theirs and that the government will pay back anyway if they fail. If banks are rescued from this, the only logical conclusion is that all banks should just cease to exist. Why should they get to play with what is effectively taxpayer's money, since that is where the risk will be paid from if they…

> If banks are rescued from this, the only logical conclusion is that all banks should just cease to exist. Why should they get to play with what is effectively taxpayer's money, since that is where the risk will be paid from if they lose?

How it usually works is, when a bank fails and is "rescued", the shareholders (owners) who "get to play" with the money get nothing. The ones who are "rescued" are usually some/most of the debt holders. Letting debt holders also shoulder some of the costs is worth considering, but the authorities generally believe it's too risky (the risk being a huge amount of debt holders pulling their money and/or demanding much higher interests which raises general borrowing costs).

Re: SVB does not deserve a bailout. They DID NOT hedge interest rate risk at all

#38
post #2

I wish people would distinguish between "SVB does not deserve a bailout" as in "let it fail" vs as in "wipe out the shareholders and bond holders, but, sure, bail out the depositors"

Exactly. SVB has ceased to exist. The bank is not being bailed out. The depositors are. You know, the normal people who’s only error keeping money in a bank.

Re: SVB does not deserve a bailout. They DID NOT hedge interest rate risk at all

#39

Earlier quoted context omitted.

> Taxpayers should pay the bill, it might incentivize them to get off their ass for once like they did in 2008? I would rather pay off student loans

What happened in 2008? I was very young then so I don’t know.

The Global Financial Crisis.

https://en.wikipedia.org/wiki/2007%E2%80%932008_financial_cr...

Re: SVB does not deserve a bailout. They DID NOT hedge interest rate risk at all

#40
post #37

What's the point in having banks anyway. Why let the people in the bank earn anything if they are risking money that isn't theirs and that the government will pay back anyway if they fail. If banks are rescued from this, the only logical conclusion is that all banks should just cease to exist. Why should they get to play with what is effectively taxpayer's money, since that is where the risk will be paid from if they…

> If banks are rescued from this, the only logical conclusion is that all banks should just cease to exist. Why should they get to play with what is effectively taxpayer's money, since that is where the risk will be paid from if they lose? How it usually works is, when a bank fails and is "rescued", the shareholders (owners) who "get to play" with the money get nothing. The ones who are "rescued" are usually some/mos…

But isn’t resetting the shareholders to zero exactly the problem? If we’re keeping score, the shareholders should owe the government exactly how much money was used to make the debt holders whole, right?
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