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Bill Ackman: The gov't has about 48h to fix a-soon-to-be-irreversible mistake

56 points by jasondavies 4y ago

danbmil99 4y ago
that's a lot more than 288 characters
- penguin_booze 4y ago
  Yeah, I was wondering the same. I'm not a T user. Is there no character limit now?
daydream 4y ago
My guess: SVB collapse took everyone including the FDIC by surprise. It has unfolded very quickly. Bill Ackman makes the point that the FDIC/government should have realized their exposure and been monitoring them much more closely. This is likely a valid point.
- luckylion 4y ago
  Is that not true for pretty much every collapse in the history of collapses? If everyone saw it coming from far away, it wouldn't be a sudden collapse, it would be slow and controlled demolition or they'd undertake repairs way before anything was falling apart. It's the nature of these collapses that you don't see them coming, everything looks fine one minute and the house vanishes the next. Should the government always guarantee everything with no limits, because "they should have seen it coming and should have done something a long time before it collapsed"?
  - treis 4y ago
    No, it's unusual. Usually the FDIC is ahead enough to do a planned takeover on a Friday with the aim of re-opening Monday morning. This might be the first honest to goodness bank run we've seen since the FDIC was created.
  - mixdup 4y ago
    No, this collapse is pretty rare. Typically they seize the bank after it closes on a Friday, have a buyer lined up in a secret auction conducted before the seizure, and on Monday the bank re-opens as a branch of the acquiring bank. It usually happens this way because the FDIC and state regulators usually do see it coming from a mile away Out of over 550 seizures since 2000, only 31 did not operate under this pattern SVB was closed at noon in the middle of the day and there was no one to acquire the assets and deposits. This happened very quickly and obviously got out of control faster than anyone realized
    - luckylion 4y ago
      Thanks, I'm still not convinced something that happens in ~5% of cases is the exception to get rid of the rules, but that adds some context and perspective.
      - daydream 4y ago
        Upthread you wrote: >Should the government always guarantee everything with no limits, because "they should have seen it coming and should have done something a long time before it collapsed"? I never said anything about guaranteeing everything with no limits. I don't believe that is reasonable. Maybe you are reacting to something Bill Ackman wrote in his tweet? If the FDIC/gov had been monitoring them much closer it opens up the set of potential solutions way wider than "government closes your bank in the afternoon on Friday because you wouldn't have made it to the end of day." Maybe this actually was happening and there were reasons events unfolded this way. Maybe it wasn't. It seems like it wasn't.
PLenz 4y ago
Let me sum this up for you, "Privatize the profits and socialize the costs"
- Laaas 4y ago
  This would only be the case if the company didn't benefit society at large. These companies pay taxes, drive the economy and innovation, and help the USA be the superpower it is. Mostly privatize the profit and slightly socialize the costs.
  - henriquez 4y ago
    Trickle up economics 101
    - cscurmudgeon 4y ago
      The US has been doing trickle 360 degrees economics. Up is also a direction.
  - throwaway173738 4y ago
    I’m not sure I believe your assertion that the companies in question “pay taxes.” If you operate at a loss you get to deduct that loss. And there are lots of loopholes every company used to avoid paying their fair share. Unless you mean the employer share of the payroll taxes, which are paid on behalf of each employee and in my opinion don’t count. The fact is that it’s really important to do due diligence on any institution that you’re putting more than six figures into. I would expect any “sophisticated investor” to understand the risks to the degree that they would be able to make an informed decision.
    - Laaas 4y ago
      Why do payroll taxes not count? Employees are able to provide the value because there is an employer that enables them to.
- abzolv 4y ago
jmclnx 4y ago
If he gets what he wants, I guess if you are rich you get no risk. What about all the people who lost what to them was a lot of money in 2008, did the Gov protect them ? I do not think so. All this shows is who runs the US, not the voters but the people who has a big stake in Wall Street. What should be done, the execs of SVC pays up for not paying attention to to what the Fed was doing. There was another story about SVC execs selling their stock before the issue became known. Will they get in trouble, I doubt it but you can be sure they will still get their large bonus. EDIT: added https://news.ycombinator.com/item?id=35104396 https://news.ycombinator.com/item?id=35104396
- DennisP 4y ago
  This is not about protecting investors in SVC. It's about protecting people who deposited money in an SVC bank account. If you have less than $250K in a bank account, then all of it is automatically protected by law. So yes, all the regular people got similar protection in 2008.
  - treis 4y ago
    And more broadly, protecting the other banks in a similar situation from their own runs. I think there's a reasonable argument to be made that it'd be cheaper in the long run to stop the contagion at SVB instead of watching another dozen banks collapse.
    - swatcoder 4y ago
      Maybe in the medium run. In the long run, you just establish that it's okay to make higher risk bets than you can afford to recover from because the government is too skittish to let any domino fall. That's the road to increasingly wild volatility, not a reliable economy.
      - DennisP 4y ago
        Bailing out depositors is not the same as bailing out the bank. The bank should go out of business, but that doesn't mean depositors have to lose their funds.
fullshark 4y ago
This guy lost all credibility re: this stuff after his meltdown on CNBC
ModernMech 4y ago
Haven’t been on Twitter in a while. The giant run on paragraph format is definitely a huge step down compared to the tweet thread. Yikes.
- devmor 4y ago
  To be fair, you absolutely can use paragraphs when doing this. The tweeter just didn't bother.
  - rektide 4y ago
    It'd still be worse to me than a thread. I'd rather see specific reactions to pieces, rather than all replies & reactions being muddled together.
mixdup 4y ago
Wonder what Bill Ackman's stance is on student loan forgiveness
groestl 4y ago
Let companies fail, but take care of the people that relied on them, if necessary. That should be the principle of a free market, if you insist on keeping it free.
- jsutton 4y ago
  Companies shouldn't fail just because their bank lost their money. That's ridiculous and not at all the principle of a free market.
  - groestl 4y ago
    Well, mitigating counterparty risk should be priced into goods, so yes, it's the free market.
  - antibasilisk 4y ago
    banks are a part of the market, why should they be exempt from market conditions?
- krapp 4y ago
  >That should be the principle of a free market, if you insist on keeping it free. In a free market when companies and banks go down people are just fucked. This is why we don't (and shouldn't) have a free market.
  - groestl 4y ago
    I agree. I'm ordoliberal, as I recently learned.
drachdesigns 4y ago
Always wonder what trades people have on when they start talking like this.
simonster 4y ago
If the government is going to guarantee 100% of deposits de facto but not de jure, that seems weird. Perhaps FDIC should guarantee 100% of deposits, but then banking regulations should be designed with that in mind.
- mixdup 4y ago
  Exactly. The rules here are well known. If you can't take the hit of your bank failing, no matter how rare you think it may be, you should protect yourself against it Every single CFO and company treasurer knows what the FDIC is and what the limits are. If your one bank collapsing means you can't make payroll, you failed as the financial guide of your company That said, if we as a society want to protect all deposits that's actually not a terrible idea. We just have to accept what that means, that banks are going to be even more boring institutions than they are, and we have to structure our regulations to make that a feasible arrangement Dramatically changing the rules of the game in the middle of the play because we don't like the (known ahead of time) outcome of the existing rules is silly and means we basically have no rules
  - x0x0 4y ago
    > Every single CFO and company treasurer knows what the FDIC is and what the limits are. That's a hell of an operational ask for a 2 person startup with (for example, looking at the site we're on) $500k. I suppose I could take $4m and break that up into 16 different banks, but 16 kyc convos, 16 logins, etc... what a waste of time and energy.
    - mixdup 4y ago
      >what a waste of time and energy There are services that do this for you. And, maybe it's a risk you're willing to take. Startups are inherently very risky ventures, so out of all the other risks being taken your bank failing is probably low on the risk register in comparison. I think it's ridiculous for established public companies like Roku to get caught flat-footed here, though At the end of the day it's a known risk, and if you're going to play in the game, you know the rules going into it
charles_f 4y ago
And here I was thinking that the best thing one can do for the economy is to let the market run freely and without any intervention from that pesky government who's always trying to regulate things it doesn't comprehend
pclmulqdq 4y ago
I guess someone lost a lot of money here... Really, though, the Biden admin is going to do a bailout if they can. SVB is the bank for some of their biggest donors (including bill ackman).
greatpostman 4y ago
This is a classic case of rich people taking risk with capital, and when they fail, society shoulders the losses. Over and over again. We are socializing the losses of controllers of capital. If there were real consequences to their wealth they wouldn’t act this way. And I’m not just talking about SVB
- DennisP 4y ago
  It's not, because it's not about protecting the people who took the risks. Their business failed and it's not getting bailed out. The tweet, which admittedly is long and lacks paragraphs, is about protecting people who simply deposited money in a bank account. That's not supposed to be a risky endeavor.
  - deleted 4y ago
    [deleted]
  - prpl 4y ago
    Depositing anything over the $250k limit is a risk, but one that is standard operating procedure. The reality is that every startup/VC was happy to absorb that risk for benefits previously described. They, in fact, should have hedged their exposure at the very least.
    - chipsa 4y ago
      I’ve got 100 employees that need to get paid this month, and they need to get paid $7500. How can I not have more than $250k without having to do really complicated stuff that will make my accountant hate life? A quarter mil is a lot for a person. It’s not a lot for a business, and businesses were most of SVB’s clientele by asset amount.
      - pclmulqdq 4y ago
        Don't split into accounts at a $250k limit, but have 2 accounts with working capital in different banks. This is the same principle as having servers in 2 different datacenters. SVB's clients will not lose all their money - their assets can cover most of it. You mostly just need the second bank to cover the period in which you may not be able to access your money.
bradleyjg 4y ago
How much of his personal fortune is Bill Ackman putting up to guarantee deposits?
mustache_kimono 4y ago
Let me get this clear: Is Ackman arguing that there was some sort of implied guarantee, beyond the $250K insurance limit, that the federal government would never let anyone lose money if held in an account at a federally insured bank? Because WTF. This is precisely moral hazard. The rich can't lose money... in Silicon Valley of all places.
- pclmulqdq 4y ago
  Generally, the FDIC will go over $250k if the bank has the assets for it - the guarantee is $250k, but you could be made mostly whole. People online in the banking sphere are suggesting that SVB accounts may be getting a 20-30% haircut (except those at $250k or under, which are not going to lose anything). Bill Ackman wants them to insure every dollar held at SVB, but not necessarily make a rule to always do this. He only wants his own bank accounts insured, not other peoples'. Edit: Clarifying - the FDIC doesn't pay anyone to get to a balance over $250k, but they are the ones who administer the bank when it is in bankruptcy, and they use the bank's assets to cover depositors' interests first. In some bank failures, the FDIC ends up spending almost nothing on the insurance because the assets end up covering the accounts completely.
  - mixdup 4y ago
    The FDIC doesn't go above the $250k in that case--the assets cover it. I don't think the FDIC has ever paid above and beyond the insured amount to make people whole A lot of times their takeovers end up with people being made whole, but because they transfer the assets and deposits into another, healthy bank, and the FDIC makes up the losses in the assets, but those losses are going to be less than if they had just paid all depositors their $250k
    - havkom 4y ago
      I think sometimes historically FDIC has misjudged the banks asset values and payed out too big an advance for uninsured funds (and then hence had to absorbe the loss themselves upon liquidation)
RockyMcNuts 4y ago
generic billionaire logic: - be richer than God - don't rescue a venerable, functional institution that is modestly, temporarily impaired, partly due to terrible risk management and partly due to a tsunami of cash flowing in and then starting to flow out. (SVB didn't have to buy Treasurys, could have lent overnight, deposited at Fed and taken interest on excess reserves. Instead they stretched for a relatively puny yield pickup and got badly burned.) - don't calm the waters. instead, tell people to take money out - short SVB stock and make a killing - say it's Biden's fault and he has to do something and bail the startup ecosystem out - https://tenor.com/view/the-big-lebowski-youre-not-wrong-just-an-asshole-gif-4575092 https://tenor.com/view/the-big-lebowski-youre-not-wrong-just... Bill Ackman didn't do all these things but as a group that's what people like him and Thiel and Musk 100% did. They want to be disruption chaos monkeys and then have the taxpayers bail them out of a mess they created. Remember than when they go bananas about Biden wanting them to pay similar tax rates to middle class folk.
bambax 4y ago
Matt Levine says essentially the same thing [0]: > There was a run on SVB in part because there hasn’t been a big bank run in a while, and people — venture capitalists, startups — were naturally worried that they might lose their deposits if their bank failed. Then the bank failed. If it turns out to be true that they lose their deposits, there could be more bank runs: Lots of businesses keep uninsured deposits at lots of banks, and if the moral of SVB is “your uninsured transaction-banking deposits can vanish overnight” then those businesses will do a lot more credit analysis, move their money out of weaker banks, and put it at, like, JPMorgan. This could be self-fulfillingly bad for a lot of weaker banks. My assumption is that the FDIC, the Federal Reserve, and the banks who are looking at buying SVB all really don’t want that. But what it means is, there isn't (or there can't be) "uninsured" deposits, because they would cause unacceptable systemic risk. Then the next question is, of course: why should there be insured deposits, why pay the premiums, if in effect all deposits are insured by vertue of the necessity of protecting the system? [0] https://www.bloomberg.com/opinion/articles/2023-03-10/startup-bank-had-a-startup-bank-run https://www.bloomberg.com/opinion/articles/2023-03-10/startu...
- skippyboxedhero 4y ago
  No-one is saying this. Ackman isn't saying this. He says explicitly that depositors outside of FDIC will need to be paid through the sale of assets. What he is saying is that the bank should be recapped (with existing equity essentially wiped out), the govt should put in place a support package to help with the sale of assets (that would likely be profitable for the taxpayer, as in 2008), and the franchise value (which is undoubtedly positive) should be preserved. I do not agree with elements of this but the FDIC system isn't supposed to work proactively. The insurance element of the system is working, they have stopped depositors doing things that will harm the value of the assets, it is working.
deleted 4y ago
[deleted]
drivingmenuts 4y ago
Why are we bailing out the rich people? Again?
- jsutton 4y ago
  We're not, we're bailing out startup companies. You know, the main audience of this social media platform we're on?
  - Ekaros 4y ago
    I don't think anyone involved with those is exactly in poverty. So there is lot more deserving people around the globe.
    - jsutton 4y ago
      We're not talking about poverty. We're simply talking about restoring the bank deposits of early stage companies.
  - BaseballPhysics 4y ago
    Also it's not "bailing out" in this case. SVB has a liquidity problem. What they need is a couple billion short term debt (which they just about got before things blew up) to support cash outflows while they unwind their bond positions. This is not the same as tax payer money going straight into the pockets of creditors ala FDIC insurance.
eqmvii 4y ago
Any kind of bailout for this crash has a big optics problem, because the typically sympathetic depositors to a failed bank are in this case big risk taking startups. Two wildly different groups are in trouble with any bank failure: First, the bank equity holders and senior management. Second, the depositors. In general, I'm sure everyone believes that first group - the risk takers - should be wiped out. Moral hazard etc. etc. etc. But that second group is usually really sympathetic! These are just bank deposits. You don't WANT people to have to scrutinize their bank's credit risk, that's why we have the FDIC! But here the depositors are themselves massive risk takers - tech startups. And so politically, seeing the depositors get a handout is going to be a tough pill to swallow. Even though the risk that blew them up (bank credit) wasn't the risk typically associated with their business model.
- deleted 4y ago
  [deleted]
garyclarke27 4y ago
He’s correct. The $250k limit is stupid - Deposits at highly regulated banks should be insured in full. Shareholders should loose everything but not depositors. Bank executives should also be regulated like lawyers and accountants they should be fined heavily and never work in Finance again. If SVB is not saved quickly the consequences are likely to be dire, there will a run on many more banks and many small companies will go bankrupt if they can’t make payroll. It was a massive mistake not to bailout Lehman Brothers unfortunately Janet Yellon is so useless that I expect they’ll probably repeat it.
- greenthrow 4y ago
  The $250k limit is not stupid, it is deliberate. The point is to protect normal people and small companies. Not to provide federal coverage against irresponsible behavior for corporations and billionaires.
  - amluto 4y ago
    What irresponsible behavior are you talking about? Having $4M of operating cash held in an account at a medium-sized bank? A company that can comfortably get by with < $250k of cash reserves is small indeed. The actual irresponsible behavior here seems to have been on the part of SVB in treating T bonds and excessively correlated business loans as low-risk assets, and on the part of regulators for allowing this because SVB wasn’t quite big enough to have to follow the real rules. But there was no good way for SVB’s depositors to know any of this. Heck, SVB was older than a decent fraction of its depositors and their executives. It’s was an institution around here. You can wander around a few towns and find their branches. What were people and businesses supposed to do? Walk around, point to the SVB branch and say “nope, not those folks — they don’t understand interest rate risk”?
  - garyclarke27 4y ago
    What is irresponsible about placing cash on deposit at a regulated bank? Capitalism will be much less efficient if businesses can’t trust banks to perform their most fundamental function of keeping their money safe.
rektide 4y ago
Twitter finally has long posts, and they are 100% as incredibly awful & terrible as prophecy has foretold.
dpweb 4y ago
Enjoy your weekend. Obvs a prediction, but while the limit is 250k - the FDIC will act to protect depositors with higher amounts - probably a private aquisition of some kind. May be worth upping the (advertised) 250k insurance limit, as the de facto amount is already higher.
fairity 4y ago
I wonder why he thinks it’s unlikely a buyer steps up by Monday. He says that 98% of deposits will be covered in liquidation. The FDIC can backstop any remaining amount. And, all that’s left is a rich client base and the infra of a previously successful top-20 bank. Aren’t the remaining parts an extremely attractive asset for another bank or PE?
- skippyboxedhero 4y ago
  The FDIC cannot backstop the remaining amount, that isn't how the FDIC works. And the remaining parts aren't attractive if they have to be sold in order to meet demands for liquidity by creditors. That is the point he is making. Value in these situations is recursive, and can only be preserved if the govt steps in to break the doom loop.
tppiotrowski 4y ago
> consider the feasibility of a world where each depositor must do their own credit assessment of the bank they choose to bank with Isn't this exactly the problem the FDIC solves? Nobody with less than $250K need worry about who they bank with if they see the FDIC logo.
- triyambakam 4y ago
  How strong of a guarantee is it? Have there been other examples of a bank failure where depositors with less than $250k were refunded?
  - jmull 4y ago
    It happens all the time. Here's a summary of relatively recent history: https://www.fdic.gov/bank/historical/bank/ https://www.fdic.gov/bank/historical/bank/ I believe the FDIC has come through 100% of the time since it came into existence in the 1930s. Here's what they say: "Since the start of FDIC insurance on January 1, 1934, no depositor has lost a penny of insured funds as a result of a failure." I believe that's true. https://www.fdic.gov/about/what-we-do/ https://www.fdic.gov/about/what-we-do/
- skippyboxedhero 4y ago
  Yes, but it also creates the obligation for regulators to add the safety of the system which did not happen here. The problem of regulators being unable to proactively stop a crisis (and then using that as part of an agenda to expand their powers further...before they fail again, and then say they could have stopped it with more power) hasn't gone away though. Btw, if you doubt this, I have already seen stories briefed into the media out of regulators saying that this happened because Congress passed a bill lowering the threshold for stress tests...ignoring the fact that SVIB was still being overseen by three distinct regulators, was still doing stress tests, and the problem concerned extremely liquid financial instruments that were reported in full in their totally public reporting.
sourcecodeplz 4y ago
Call daddy to socialize the loses while we pocket the profits.
kzz102 4y ago
With how the system is supposed to work, isn't anyone who have uninsured deposits supposed to buy their own insurance? If the risk of bank failure is low, then the insurance premium should be very low. If the premium is high, that's an indication that the risk is too high and maybe you should find an alternative.
ww520 4y ago
Save the whales! Wonder how many of the companies are in his portfolio. The government is going to save the depositors. FDIC will liquidate SVB’s assets and pay the depositors back. They might take a haircut in the process.
neovialogistics 4y ago
For some reason my script for turning twitter links into nitter and putting the tweet on archive.org failed and I wound up getting the twitter web experience, which includes a box of "More Tweets" which are popular tweets from other accounts that are connected to @billackman by some similarity or network algorithm. I don't mean to discredit him by association, but the association is entirely stablecoin posters, antivax, federal reserve conspiracies, january 6 "truthers", "traditional white culture" enthusiasts and a Bed, Bath and Beyond retrospective. So maybe think twice about taking financial advice from somebody who uses the single-tweet essay function twitter now has.
abzolv 4y ago
The FDIC $250,000 insurance is there to protect the depositors. The amount is not a secret. If you keep more than that in cash in a bank account, you take a known risk and must definitely not be bailed out. You did not need to keep that large amount in cash. You could have bought short-term US treasury bills with every cent above $250k, and your deposits would have been perfectly safe. All of it.
jmull 4y ago
This would be a radical change in US banking policy. It shouldn't be done in haste... and there's no need to -- if this does indeed shake confidence in regional and community banks and we want to preserve them, then we can do something to reverse that. (Much better, by the way, to see how it actually goes down so that the solution can be tailored to the problem.) The fake 48h deadline is a dead giveaway this is a scam... that false sense of urgency.
deleted 4y ago
[deleted]
jzellis 4y ago
We had protection against this shit. It was called the Glass-Steagall Act. But rich people weren't getting rich enough, so they were yet again allowed to play with other people's money. That never, ever turns out well, because it turns out that most capitalists are clever at getting rich and fantastically stupid at understanding how systems work at a macro scale. Which is how we got 2008 and what's about to happen, which is gonna be hilarious, for "19th century Russian novel" values of hilarious.
analognoise 4y ago
There are no libertarians in a bank run.
- precompute 4y ago
  There are no more libertarians any more, period. Exit is the only fundamental right.
hackeraccount 4y ago
I'm not in favor of this but most of the money lost will be by bondholders. Why would you keep more than a 250K in a single savings account? If it's an investment you should invest it. If it's for liquidity why not split over multiple banks? Personally I don't keep that kind of money in a savings account but what's the story for people who do?
- dano 4y ago
  Mostly because it's easier from an accounting and money management perspective. Now Roku's $460+ million on deposit is unfathomable.
  - hackeraccount 4y ago
    Is the overhead from say, 10 accounts as opposed to 1 really that onerous? If you have 25 million in cash that you want liquid is a savings account really the best vehicle?
fairity 4y ago
It seems like people are so focused on class warfare and politics that they completely shut off the problem solving side of their brain. Assuming there’s no buyer found by Monday, the fed should just step in and guarantee deposits via a bridge loan at payday-loan interest rates. The interest will offset defaults and taxpayers will make money, which also means the fed can sell off this debt to the private sector. But, time is of the essence which is why govt assistance is needed. Depositors are mostly businesses that will be able to solve for the long term interest payment impacts. The problem for them is purely short term liquidity.
RexFactorem 4y ago
[flagged]
antibasilisk 4y ago
can someone explain how a tweet this long is possible?

56 points by jasondavies 4y ago

danbmil99 4y ago

that's a lot more than 288 characters

penguin_booze 4y ago
Yeah, I was wondering the same. I'm not a T user. Is there no character limit now?

daydream 4y ago

My guess: SVB collapse took everyone including the FDIC by surprise. It has unfolded very quickly. Bill Ackman makes the point that the FDIC/government should have realized their exposure and been monitoring them much more closely. This is likely a valid point.

luckylion 4y ago
Is that not true for pretty much every collapse in the history of collapses? If everyone saw it coming from far away, it wouldn't be a sudden collapse, it would be slow and controlled demolition or they'd undertake repairs way before anything was falling apart. It's the nature of these collapses that you don't see them coming, everything looks fine one minute and the house vanishes the next. Should the government always guarantee everything with no limits, because "they should have seen it coming and should have done something a long time before it collapsed"?
- treis 4y ago
  No, it's unusual. Usually the FDIC is ahead enough to do a planned takeover on a Friday with the aim of re-opening Monday morning. This might be the first honest to goodness bank run we've seen since the FDIC was created.
- mixdup 4y ago
  No, this collapse is pretty rare. Typically they seize the bank after it closes on a Friday, have a buyer lined up in a secret auction conducted before the seizure, and on Monday the bank re-opens as a branch of the acquiring bank. It usually happens this way because the FDIC and state regulators usually do see it coming from a mile away Out of over 550 seizures since 2000, only 31 did not operate under this pattern SVB was closed at noon in the middle of the day and there was no one to acquire the assets and deposits. This happened very quickly and obviously got out of control faster than anyone realized
  - luckylion 4y ago
    Thanks, I'm still not convinced something that happens in ~5% of cases is the exception to get rid of the rules, but that adds some context and perspective.
    - daydream 4y ago
      Upthread you wrote: >Should the government always guarantee everything with no limits, because "they should have seen it coming and should have done something a long time before it collapsed"? I never said anything about guaranteeing everything with no limits. I don't believe that is reasonable. Maybe you are reacting to something Bill Ackman wrote in his tweet? If the FDIC/gov had been monitoring them much closer it opens up the set of potential solutions way wider than "government closes your bank in the afternoon on Friday because you wouldn't have made it to the end of day." Maybe this actually was happening and there were reasons events unfolded this way. Maybe it wasn't. It seems like it wasn't.

PLenz 4y ago

Let me sum this up for you, "Privatize the profits and socialize the costs"

Laaas 4y ago
This would only be the case if the company didn't benefit society at large. These companies pay taxes, drive the economy and innovation, and help the USA be the superpower it is. Mostly privatize the profit and slightly socialize the costs.
- henriquez 4y ago
  Trickle up economics 101
  - cscurmudgeon 4y ago
    The US has been doing trickle 360 degrees economics. Up is also a direction.
- throwaway173738 4y ago
  I’m not sure I believe your assertion that the companies in question “pay taxes.” If you operate at a loss you get to deduct that loss. And there are lots of loopholes every company used to avoid paying their fair share. Unless you mean the employer share of the payroll taxes, which are paid on behalf of each employee and in my opinion don’t count. The fact is that it’s really important to do due diligence on any institution that you’re putting more than six figures into. I would expect any “sophisticated investor” to understand the risks to the degree that they would be able to make an informed decision.
  - Laaas 4y ago
    Why do payroll taxes not count? Employees are able to provide the value because there is an employer that enables them to.
abzolv 4y ago

jmclnx 4y ago

If he gets what he wants, I guess if you are rich you get no risk. What about all the people who lost what to them was a lot of money in 2008, did the Gov protect them ? I do not think so. All this shows is who runs the US, not the voters but the people who has a big stake in Wall Street. What should be done, the execs of SVC pays up for not paying attention to to what the Fed was doing. There was another story about SVC execs selling their stock before the issue became known. Will they get in trouble, I doubt it but you can be sure they will still get their large bonus. EDIT: added https://news.ycombinator.com/item?id=35104396 https://news.ycombinator.com/item?id=35104396

DennisP 4y ago
This is not about protecting investors in SVC. It's about protecting people who deposited money in an SVC bank account. If you have less than $250K in a bank account, then all of it is automatically protected by law. So yes, all the regular people got similar protection in 2008.
- treis 4y ago
  And more broadly, protecting the other banks in a similar situation from their own runs. I think there's a reasonable argument to be made that it'd be cheaper in the long run to stop the contagion at SVB instead of watching another dozen banks collapse.
  - swatcoder 4y ago
    Maybe in the medium run. In the long run, you just establish that it's okay to make higher risk bets than you can afford to recover from because the government is too skittish to let any domino fall. That's the road to increasingly wild volatility, not a reliable economy.
    - DennisP 4y ago
      Bailing out depositors is not the same as bailing out the bank. The bank should go out of business, but that doesn't mean depositors have to lose their funds.

fullshark 4y ago

This guy lost all credibility re: this stuff after his meltdown on CNBC

ModernMech 4y ago

Haven’t been on Twitter in a while. The giant run on paragraph format is definitely a huge step down compared to the tweet thread. Yikes.

devmor 4y ago
To be fair, you absolutely can use paragraphs when doing this. The tweeter just didn't bother.
- rektide 4y ago
  It'd still be worse to me than a thread. I'd rather see specific reactions to pieces, rather than all replies & reactions being muddled together.

mixdup 4y ago

Wonder what Bill Ackman's stance is on student loan forgiveness

groestl 4y ago

Let companies fail, but take care of the people that relied on them, if necessary. That should be the principle of a free market, if you insist on keeping it free.

jsutton 4y ago
Companies shouldn't fail just because their bank lost their money. That's ridiculous and not at all the principle of a free market.
- groestl 4y ago
  Well, mitigating counterparty risk should be priced into goods, so yes, it's the free market.
- antibasilisk 4y ago
  banks are a part of the market, why should they be exempt from market conditions?
krapp 4y ago
>That should be the principle of a free market, if you insist on keeping it free. In a free market when companies and banks go down people are just fucked. This is why we don't (and shouldn't) have a free market.
- groestl 4y ago
  I agree. I'm ordoliberal, as I recently learned.

drachdesigns 4y ago

Always wonder what trades people have on when they start talking like this.

simonster 4y ago

If the government is going to guarantee 100% of deposits de facto but not de jure, that seems weird. Perhaps FDIC should guarantee 100% of deposits, but then banking regulations should be designed with that in mind.

mixdup 4y ago
Exactly. The rules here are well known. If you can't take the hit of your bank failing, no matter how rare you think it may be, you should protect yourself against it Every single CFO and company treasurer knows what the FDIC is and what the limits are. If your one bank collapsing means you can't make payroll, you failed as the financial guide of your company That said, if we as a society want to protect all deposits that's actually not a terrible idea. We just have to accept what that means, that banks are going to be even more boring institutions than they are, and we have to structure our regulations to make that a feasible arrangement Dramatically changing the rules of the game in the middle of the play because we don't like the (known ahead of time) outcome of the existing rules is silly and means we basically have no rules
- x0x0 4y ago
  > Every single CFO and company treasurer knows what the FDIC is and what the limits are. That's a hell of an operational ask for a 2 person startup with (for example, looking at the site we're on) $500k. I suppose I could take $4m and break that up into 16 different banks, but 16 kyc convos, 16 logins, etc... what a waste of time and energy.
  - mixdup 4y ago
    >what a waste of time and energy There are services that do this for you. And, maybe it's a risk you're willing to take. Startups are inherently very risky ventures, so out of all the other risks being taken your bank failing is probably low on the risk register in comparison. I think it's ridiculous for established public companies like Roku to get caught flat-footed here, though At the end of the day it's a known risk, and if you're going to play in the game, you know the rules going into it

charles_f 4y ago

And here I was thinking that the best thing one can do for the economy is to let the market run freely and without any intervention from that pesky government who's always trying to regulate things it doesn't comprehend

pclmulqdq 4y ago

I guess someone lost a lot of money here... Really, though, the Biden admin is going to do a bailout if they can. SVB is the bank for some of their biggest donors (including bill ackman).

greatpostman 4y ago

This is a classic case of rich people taking risk with capital, and when they fail, society shoulders the losses. Over and over again. We are socializing the losses of controllers of capital. If there were real consequences to their wealth they wouldn’t act this way. And I’m not just talking about SVB

DennisP 4y ago
It's not, because it's not about protecting the people who took the risks. Their business failed and it's not getting bailed out. The tweet, which admittedly is long and lacks paragraphs, is about protecting people who simply deposited money in a bank account. That's not supposed to be a risky endeavor.
- deleted 4y ago
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- prpl 4y ago
  Depositing anything over the $250k limit is a risk, but one that is standard operating procedure. The reality is that every startup/VC was happy to absorb that risk for benefits previously described. They, in fact, should have hedged their exposure at the very least.
  - chipsa 4y ago
    I’ve got 100 employees that need to get paid this month, and they need to get paid $7500. How can I not have more than $250k without having to do really complicated stuff that will make my accountant hate life? A quarter mil is a lot for a person. It’s not a lot for a business, and businesses were most of SVB’s clientele by asset amount.
    - pclmulqdq 4y ago
      Don't split into accounts at a $250k limit, but have 2 accounts with working capital in different banks. This is the same principle as having servers in 2 different datacenters. SVB's clients will not lose all their money - their assets can cover most of it. You mostly just need the second bank to cover the period in which you may not be able to access your money.

bradleyjg 4y ago

How much of his personal fortune is Bill Ackman putting up to guarantee deposits?

mustache_kimono 4y ago

Let me get this clear: Is Ackman arguing that there was some sort of implied guarantee, beyond the $250K insurance limit, that the federal government would never let anyone lose money if held in an account at a federally insured bank? Because WTF. This is precisely moral hazard. The rich can't lose money... in Silicon Valley of all places.

pclmulqdq 4y ago
Generally, the FDIC will go over $250k if the bank has the assets for it - the guarantee is $250k, but you could be made mostly whole. People online in the banking sphere are suggesting that SVB accounts may be getting a 20-30% haircut (except those at $250k or under, which are not going to lose anything). Bill Ackman wants them to insure every dollar held at SVB, but not necessarily make a rule to always do this. He only wants his own bank accounts insured, not other peoples'. Edit: Clarifying - the FDIC doesn't pay anyone to get to a balance over $250k, but they are the ones who administer the bank when it is in bankruptcy, and they use the bank's assets to cover depositors' interests first. In some bank failures, the FDIC ends up spending almost nothing on the insurance because the assets end up covering the accounts completely.
- mixdup 4y ago
  The FDIC doesn't go above the $250k in that case--the assets cover it. I don't think the FDIC has ever paid above and beyond the insured amount to make people whole A lot of times their takeovers end up with people being made whole, but because they transfer the assets and deposits into another, healthy bank, and the FDIC makes up the losses in the assets, but those losses are going to be less than if they had just paid all depositors their $250k
  - havkom 4y ago
    I think sometimes historically FDIC has misjudged the banks asset values and payed out too big an advance for uninsured funds (and then hence had to absorbe the loss themselves upon liquidation)

RockyMcNuts 4y ago

generic billionaire logic: - be richer than God - don't rescue a venerable, functional institution that is modestly, temporarily impaired, partly due to terrible risk management and partly due to a tsunami of cash flowing in and then starting to flow out. (SVB didn't have to buy Treasurys, could have lent overnight, deposited at Fed and taken interest on excess reserves. Instead they stretched for a relatively puny yield pickup and got badly burned.) - don't calm the waters. instead, tell people to take money out - short SVB stock and make a killing - say it's Biden's fault and he has to do something and bail the startup ecosystem out - https://tenor.com/view/the-big-lebowski-youre-not-wrong-just-an-asshole-gif-4575092 https://tenor.com/view/the-big-lebowski-youre-not-wrong-just... Bill Ackman didn't do all these things but as a group that's what people like him and Thiel and Musk 100% did. They want to be disruption chaos monkeys and then have the taxpayers bail them out of a mess they created. Remember than when they go bananas about Biden wanting them to pay similar tax rates to middle class folk.

bambax 4y ago

Matt Levine says essentially the same thing [0]: > There was a run on SVB in part because there hasn’t been a big bank run in a while, and people — venture capitalists, startups — were naturally worried that they might lose their deposits if their bank failed. Then the bank failed. If it turns out to be true that they lose their deposits, there could be more bank runs: Lots of businesses keep uninsured deposits at lots of banks, and if the moral of SVB is “your uninsured transaction-banking deposits can vanish overnight” then those businesses will do a lot more credit analysis, move their money out of weaker banks, and put it at, like, JPMorgan. This could be self-fulfillingly bad for a lot of weaker banks. My assumption is that the FDIC, the Federal Reserve, and the banks who are looking at buying SVB all really don’t want that. But what it means is, there isn't (or there can't be) "uninsured" deposits, because they would cause unacceptable systemic risk. Then the next question is, of course: why should there be insured deposits, why pay the premiums, if in effect all deposits are insured by vertue of the necessity of protecting the system? [0] https://www.bloomberg.com/opinion/articles/2023-03-10/startup-bank-had-a-startup-bank-run https://www.bloomberg.com/opinion/articles/2023-03-10/startu...

skippyboxedhero 4y ago
No-one is saying this. Ackman isn't saying this. He says explicitly that depositors outside of FDIC will need to be paid through the sale of assets. What he is saying is that the bank should be recapped (with existing equity essentially wiped out), the govt should put in place a support package to help with the sale of assets (that would likely be profitable for the taxpayer, as in 2008), and the franchise value (which is undoubtedly positive) should be preserved. I do not agree with elements of this but the FDIC system isn't supposed to work proactively. The insurance element of the system is working, they have stopped depositors doing things that will harm the value of the assets, it is working.

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drivingmenuts 4y ago

Why are we bailing out the rich people? Again?

jsutton 4y ago
We're not, we're bailing out startup companies. You know, the main audience of this social media platform we're on?
- Ekaros 4y ago
  I don't think anyone involved with those is exactly in poverty. So there is lot more deserving people around the globe.
  - jsutton 4y ago
    We're not talking about poverty. We're simply talking about restoring the bank deposits of early stage companies.
- BaseballPhysics 4y ago
  Also it's not "bailing out" in this case. SVB has a liquidity problem. What they need is a couple billion short term debt (which they just about got before things blew up) to support cash outflows while they unwind their bond positions. This is not the same as tax payer money going straight into the pockets of creditors ala FDIC insurance.

eqmvii 4y ago

Any kind of bailout for this crash has a big optics problem, because the typically sympathetic depositors to a failed bank are in this case big risk taking startups. Two wildly different groups are in trouble with any bank failure: First, the bank equity holders and senior management. Second, the depositors. In general, I'm sure everyone believes that first group - the risk takers - should be wiped out. Moral hazard etc. etc. etc. But that second group is usually really sympathetic! These are just bank deposits. You don't WANT people to have to scrutinize their bank's credit risk, that's why we have the FDIC! But here the depositors are themselves massive risk takers - tech startups. And so politically, seeing the depositors get a handout is going to be a tough pill to swallow. Even though the risk that blew them up (bank credit) wasn't the risk typically associated with their business model.

deleted 4y ago
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garyclarke27 4y ago

He’s correct. The $250k limit is stupid - Deposits at highly regulated banks should be insured in full. Shareholders should loose everything but not depositors. Bank executives should also be regulated like lawyers and accountants they should be fined heavily and never work in Finance again. If SVB is not saved quickly the consequences are likely to be dire, there will a run on many more banks and many small companies will go bankrupt if they can’t make payroll. It was a massive mistake not to bailout Lehman Brothers unfortunately Janet Yellon is so useless that I expect they’ll probably repeat it.

greenthrow 4y ago
The $250k limit is not stupid, it is deliberate. The point is to protect normal people and small companies. Not to provide federal coverage against irresponsible behavior for corporations and billionaires.
- amluto 4y ago
  What irresponsible behavior are you talking about? Having $4M of operating cash held in an account at a medium-sized bank? A company that can comfortably get by with < $250k of cash reserves is small indeed. The actual irresponsible behavior here seems to have been on the part of SVB in treating T bonds and excessively correlated business loans as low-risk assets, and on the part of regulators for allowing this because SVB wasn’t quite big enough to have to follow the real rules. But there was no good way for SVB’s depositors to know any of this. Heck, SVB was older than a decent fraction of its depositors and their executives. It’s was an institution around here. You can wander around a few towns and find their branches. What were people and businesses supposed to do? Walk around, point to the SVB branch and say “nope, not those folks — they don’t understand interest rate risk”?
- garyclarke27 4y ago
  What is irresponsible about placing cash on deposit at a regulated bank? Capitalism will be much less efficient if businesses can’t trust banks to perform their most fundamental function of keeping their money safe.

rektide 4y ago

Twitter finally has long posts, and they are 100% as incredibly awful & terrible as prophecy has foretold.

dpweb 4y ago

Enjoy your weekend. Obvs a prediction, but while the limit is 250k - the FDIC will act to protect depositors with higher amounts - probably a private aquisition of some kind. May be worth upping the (advertised) 250k insurance limit, as the de facto amount is already higher.

fairity 4y ago

I wonder why he thinks it’s unlikely a buyer steps up by Monday. He says that 98% of deposits will be covered in liquidation. The FDIC can backstop any remaining amount. And, all that’s left is a rich client base and the infra of a previously successful top-20 bank. Aren’t the remaining parts an extremely attractive asset for another bank or PE?

skippyboxedhero 4y ago
The FDIC cannot backstop the remaining amount, that isn't how the FDIC works. And the remaining parts aren't attractive if they have to be sold in order to meet demands for liquidity by creditors. That is the point he is making. Value in these situations is recursive, and can only be preserved if the govt steps in to break the doom loop.

tppiotrowski 4y ago

> consider the feasibility of a world where each depositor must do their own credit assessment of the bank they choose to bank with Isn't this exactly the problem the FDIC solves? Nobody with less than $250K need worry about who they bank with if they see the FDIC logo.

triyambakam 4y ago
How strong of a guarantee is it? Have there been other examples of a bank failure where depositors with less than $250k were refunded?
- jmull 4y ago
  It happens all the time. Here's a summary of relatively recent history: https://www.fdic.gov/bank/historical/bank/ https://www.fdic.gov/bank/historical/bank/ I believe the FDIC has come through 100% of the time since it came into existence in the 1930s. Here's what they say: "Since the start of FDIC insurance on January 1, 1934, no depositor has lost a penny of insured funds as a result of a failure." I believe that's true. https://www.fdic.gov/about/what-we-do/ https://www.fdic.gov/about/what-we-do/
skippyboxedhero 4y ago
Yes, but it also creates the obligation for regulators to add the safety of the system which did not happen here. The problem of regulators being unable to proactively stop a crisis (and then using that as part of an agenda to expand their powers further...before they fail again, and then say they could have stopped it with more power) hasn't gone away though. Btw, if you doubt this, I have already seen stories briefed into the media out of regulators saying that this happened because Congress passed a bill lowering the threshold for stress tests...ignoring the fact that SVIB was still being overseen by three distinct regulators, was still doing stress tests, and the problem concerned extremely liquid financial instruments that were reported in full in their totally public reporting.

sourcecodeplz 4y ago

Call daddy to socialize the loses while we pocket the profits.

kzz102 4y ago

With how the system is supposed to work, isn't anyone who have uninsured deposits supposed to buy their own insurance? If the risk of bank failure is low, then the insurance premium should be very low. If the premium is high, that's an indication that the risk is too high and maybe you should find an alternative.

ww520 4y ago

Save the whales! Wonder how many of the companies are in his portfolio. The government is going to save the depositors. FDIC will liquidate SVB’s assets and pay the depositors back. They might take a haircut in the process.

neovialogistics 4y ago

For some reason my script for turning twitter links into nitter and putting the tweet on archive.org failed and I wound up getting the twitter web experience, which includes a box of "More Tweets" which are popular tweets from other accounts that are connected to @billackman by some similarity or network algorithm. I don't mean to discredit him by association, but the association is entirely stablecoin posters, antivax, federal reserve conspiracies, january 6 "truthers", "traditional white culture" enthusiasts and a Bed, Bath and Beyond retrospective. So maybe think twice about taking financial advice from somebody who uses the single-tweet essay function twitter now has.

abzolv 4y ago

The FDIC $250,000 insurance is there to protect the depositors. The amount is not a secret. If you keep more than that in cash in a bank account, you take a known risk and must definitely not be bailed out. You did not need to keep that large amount in cash. You could have bought short-term US treasury bills with every cent above $250k, and your deposits would have been perfectly safe. All of it.

jmull 4y ago

This would be a radical change in US banking policy. It shouldn't be done in haste... and there's no need to -- if this does indeed shake confidence in regional and community banks and we want to preserve them, then we can do something to reverse that. (Much better, by the way, to see how it actually goes down so that the solution can be tailored to the problem.) The fake 48h deadline is a dead giveaway this is a scam... that false sense of urgency.

deleted 4y ago

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jzellis 4y ago

We had protection against this shit. It was called the Glass-Steagall Act. But rich people weren't getting rich enough, so they were yet again allowed to play with other people's money. That never, ever turns out well, because it turns out that most capitalists are clever at getting rich and fantastically stupid at understanding how systems work at a macro scale. Which is how we got 2008 and what's about to happen, which is gonna be hilarious, for "19th century Russian novel" values of hilarious.

analognoise 4y ago

There are no libertarians in a bank run.

precompute 4y ago
There are no more libertarians any more, period. Exit is the only fundamental right.

hackeraccount 4y ago

I'm not in favor of this but most of the money lost will be by bondholders. Why would you keep more than a 250K in a single savings account? If it's an investment you should invest it. If it's for liquidity why not split over multiple banks? Personally I don't keep that kind of money in a savings account but what's the story for people who do?

dano 4y ago
Mostly because it's easier from an accounting and money management perspective. Now Roku's $460+ million on deposit is unfathomable.
- hackeraccount 4y ago
  Is the overhead from say, 10 accounts as opposed to 1 really that onerous? If you have 25 million in cash that you want liquid is a savings account really the best vehicle?

fairity 4y ago

It seems like people are so focused on class warfare and politics that they completely shut off the problem solving side of their brain. Assuming there’s no buyer found by Monday, the fed should just step in and guarantee deposits via a bridge loan at payday-loan interest rates. The interest will offset defaults and taxpayers will make money, which also means the fed can sell off this debt to the private sector. But, time is of the essence which is why govt assistance is needed. Depositors are mostly businesses that will be able to solve for the long term interest payment impacts. The problem for them is purely short term liquidity.

RexFactorem 4y ago

[flagged]

antibasilisk 4y ago

can someone explain how a tweet this long is possible?