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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

#711

Post by mind-blight »

matheusmoreira wrote: post #554
AmericanOP wrote: post #468

Earlier quoted context omitted.

Before people get too excited about letting it all burn, I recommend everyone watch this talk by an economist on the 2008 recovery: https://www.youtube.com/watch?v=RrFSO62p0jk Spoiler alert (18:30): It was entrepreneurship that turned the economy around. Not fed policy. SVB put their deposits in US Treasury Bonds. Commonly regarded as the safest investment vehicle there is. Then the fed raised interest rates, complet…

So what you're saying is the bank made investments based on a whole lot of assumptions. These assumptions were quickly invalidated by US policy changes and then the bank lost everything. Yes, absolutely let it all burn. They risked it all on their "strategy" and lost. Why should they get bailed out in literally any way? I don't see the government showing up to bail me out when my "strategy" gets me liquidated, why th…

There are hundreds of billions in assets owned by SVB. The accounts with grocery assets likely contain companies that will be future unicorns.

What is there to burn? A large bank will likely purchase the assets/debts outright, the shareholders will get screwed, and the depositors likely be made whole. There's no bailout in that scenario

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

#712

Post by sbaiddn »

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…

Dont confuse the issue. No one has a problem with creditors getting as much of their money as possible by selling assets. The problem is that SVB's book value of assets is far smaller than the debts. Imagine their value on a firesale.

the creditors then take a haircut. It's basic bankruptcy.

What people oppose is taxpayers absorbing the losses beyond $250 000 as promised, and there's a very good reason for this: its another example of privatizing profits and socializing losses. In other words, it encourages risky behavior because they're gambling with the house's money.

Some argue, and they have an excellent point that if SVB's creditors aren't bailed out it could trigger a contagion. Thats a formidable risk. However, we already did mass banking sector bailout less than 15 years ago and it turns out all it did was incentivize irresponsible behavior.

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

#713

Post by sbaiddn »

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…

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.

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

#714

Post by nerdponx »

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…

> Is there a federal bailout waiting for the immigrant? Or the immigrant’s employees who might also be family members?

Why shouldn't there be? As long as they weren't utterly reckless up to some reasonable standard, IMO they should be. This has the same empty tenor as arguments against student debt relief on whatabout/fairness grounds.

> The purpose is to show we are playing by the same rules. And that somehow, it is not always the poorer, the more uneducated, the ones born to the wrong parents who do not get bailed out.

Two wrongs don't make a right. I get that you're bitter. So am I. Doesn't mean we need to fuck over a bunch of people who are not at all at fault and possibly trigger systemic economic problems, contagion, recession, etc.

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

#715

Post by wpietri »

shadowgovt wrote: post #692
reb wrote: post #580

Earlier quoted context omitted.

Plenty of startups fit that bill and will nonetheless be impacted by SVB’s failure, while the most pointless businesses surf by on their founders’ access to inherited wealth and political power. Any revenge on them will be short-lived and will have serious, lasting consequences for middle class workers throughout the industry. For anyone reading this who doesn’t already know: startups aren’t all snotty trust fund kid…

No, but the median salary for a software engineer is still 120k, a little under double the median salary across all industries. It's hard to dredge up deep, deep wells of sympathy for folks who were already playing the salary game at double the value of half the players. One can't escape the sense that if they've done the kind of budgeting that a regular American does, they will be fine.

Especially for the startup end of things, where we are aiming to disrupt other businesses.

Should we have a strong safety net, so that people who lose their jobs due to market disruptions or executive mismanagement do not suffer? Absolutely. And if it's currently inadequate, by all means let's improve it.

But I think it's wrong to try to protect jobs through government subsidies to industries where execs made bad choices. Which is exactly what a lot of people are apparently asking for when they're asking for depositors to get retroactive free deposit insurance here.

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

#716

Post by theGnuMe »

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…

Yes it sucks but rules are rules. Existential risk management.

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

#717

Post by nerdponx »

lolinder wrote: post #508
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…

> You can't fault depositors for not doing thorough diligence on a 40-year-old bank with a good reputation The 40-year-old bank with a good reputation was offering deals that were too good to be true, like 4.5% APR on a savings account (other high yield savings accounts are at 3.5% right now, and those are online banks that achieve those rates by having minimal overhead). Naive startup founders aside, the VCs should…

So blame the VCs, but I don't see why of startup founders and their employees should suffer for doing what their investors told them to do.

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

#718

Post by dumpsterlid »

startupsfail wrote: post #645
epistasis wrote: post #609

Earlier quoted context omitted.

I think this mostly comes from the PayPal mafia sort of attitude: libertarian when it helps me, bail me out when it helps me, start a bank run when it helps me. There was a time when tech did seem like a better business movement. Certainly better than the financial sectors, or heavy industry, or pharma. But then we let Thiel and Musk become the face, with Sachs and Calacsnais (or however you spell his name) become th…

Yes, it seems that the antisocial defectors are going to win in the short term and may have more power in the long term. Any suggestions onto how to inject some discipline and long-term thinking into this?

Having more people with leftwing/progressive politics involved and less libertarians would help.

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

#719

Post by nerdponx »

iancmceachern wrote: post #689
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…

The issue is it wasn't pension money. It was VC money, that's money intentionally being gambled in high risk endeavors. It's not right for thr tax payers to bail out rich VCs who gambles their money. On the flip side, I also have worked in startups much of my career, and think I and people like me should be paid for our work. I think we should help the startups out, bail them out, but without helping the VCs. I think…

That's just spiteful. I would rather keep the startups in business than punish the VCs by making them lose money on their current investments.
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