Joint statement by the Department of the Treasury, Federal Reserve, and FDIC

>If these statements are true, can someone explain how it's possible that despositors are fully protected, far beyond what FDIC insures, without the taxpayer bearing any of the burden?

The shareholders already lost everything and unsecured creditors are about to lose everything. That's still not enough to make all depositors whole though, which is why the statement said the FDIC will be paying for the rest and funding that payment by "a special assessment on banks". Therefore, the simple answer to your question is "all other FDIC insured banks, rather than the taxpayers, are picking up the tab here".

>I have never seen such cognitive dissonance here at HN

The cognitive dissonance is that most sv startups and SVB clients are run by people with very strong right wing economic beliefs. Suddenly when they're affected they're asking for bailouts of the parent institution so that they're not affected because of "too big to fail". This is quite simply capitalism for the poor and socialism for the rich.

Unsurprisingly, the top comment complaining about top comment quality is the worst of them all.

This is one of those cases where the most obvious and mundane answer happens to be correct. The government is attempting to nip an existential threat to the wider banking system in the bud. Everyone who uses said system (read: literally everyone) has an interest in seeing it survive.

I think some folks are rightfully curious how the depositors are being fully protected here, given that FDIC only insures up to $250,000.

But really there should be no limit on FDIC insurance. Depositors should not be categorized as risk takers. Joe Schmoe should never have to concern himself with where he banks, or where his company payroll banks, for that matter. Telling depositors to take responsibility and disperse their funds across as many banks as possible is...silly. These aren't investors in bonds or stocks. These are cash accounts.

Yellen is 100% doing the correct thing here. And the precedent being set makes logical sense.

Our society has created a complex set of rules and regulators to prevent bank runs. That system society created failed to detect a problem in one of the top 20 banks in our country. What other problems is it not detecting? The full backstop to the depositors is because this should have never happened - the system should have prevented it.

An organization with over $250,000 in cash is not an outlandish amount. Employers (obviously), but also municipalities, schools, churches and heck even grocery stores can exceed that limit. While it is reasonable to expect some individuals to have some sense and monitoring of the financial well being of the organizations they are directly affiliated with it is extremely unreasonable to believe that those same individuals are going to be aware of the balance sheet risks of the transitive banking partners of those organizations. People expect that money in the bank today will be there tomorrow.

Who wants to live in a world where everyone is keeping tabs on which organizations are banking where? It's a tremendous waste of time.

People don't want bank failures to be a thing, and if/when they do happen they want the damage limited to the senior leadership and investors of the bank.

If you were responsible for managing over 250,000$ of cash what is an acceptable Treasury operations strategy? Put it in a TBTF bank (still socializing losses). Split it into multiple banking partners - that creates operational risk in addition to extra complexity and overhead.