5 ms·

I want to have sympathy for the depositors, but it is hard to knowing that they chose to keep their funds in an bank that was actively lobbying to weaken risk r

by bratao 4y ago

I want to have sympathy for the depositors, but it is hard to knowing that they chose to keep their funds in an bank that was actively lobbying to weaken risk regulations. There multiple products that would help in this situation, such as insurances and virtual accounts that split between multiple FDIC accounts/banks. Bailing out these depositors would send the wrong message and encourage moral hazard, i.e., the belief that someone else will always bear the costs of risky behavior. Educating entrepreneurs and investors on the importance of diversification, due diligence, and risk management would create a more resilient and sustainable innovation ecosystem, where success is based on merit and hard work, not on cronyism or government intervention.

ProllyInfamous 4y ago
"Privatize profits, subsidize losses." It's the global economy way! Hint: nothing will change, depositors and banks will get bailed out. Water is wet.
- mrkurt 4y ago
  SVB isn't getting a bailout. That company is gone. Their shareholders lost everything they invested. Depositors don't get bailouts. That's not what bailouts are.
  - gregw2 4y ago
    If taxpayers help wealthy depositors get more than their insured amounts, (and more than a normal liquidation of assets) that is a bailout It may or may not be the right thing to do, but it most definitely is a bailout.
    - mrkurt 4y ago
      Yes that's reasonable. That's probably not what's happening here. In some ways, the _promise_ of the FDIC getting depositors almost all their money back is enough. The biggest problem people have right now is time. Over time, everyone will probably get most of their deposits from SVB back from SVB assets. What people (the ones who know what they're talking about, anyway) are asking for is closer to taxpayers covering the costs of getting that money back sooner. There's a definite cost, but it's not taxpayers writing checks to cover deposit values.
      - lp0_on_fire 4y ago
        > Over time, everyone will probably get most of their deposits from SVB back from SVB assets. > What people (the ones who know what they're talking about, anyway) are asking for is closer to taxpayers covering the costs of getting that money back sooner. There's a definite cost, but it's not taxpayers writing checks to cover deposit values. Except it's literally asking the taxpayer to cover the costs to cover these funds for some indeterminate period of time in the HOPES that SVB will "probably" be able to make their depositors whole, someday.
        mrkurt 4y ago
        I think that's what I said? There's a cost, we don't know what it is. It's not as high as it sounds when you say "we should only let people get $250k liquid and everyone else should pound sand". The cost to letting these companies keep their money tied up is a lot of people not getting paychecks. Which suddenly means no tax witholdings. And more unemployed people. And companies that can't pay vendors. Doing nothing is not free. It might be cheaper, it might not. I get the instinct to hold the man accountable but it's not as simple as most people are suggesting.
      - adharmad 4y ago
        But why can their investors not cover the costs? Surely the same VCs who lent the startups money can lend them some more for the short period until SVB's assets valuation gets sorted out? Aren't they the ones to lose most if the startups go down under?
nico 4y ago
> Bailing out these depositors would send the wrong message and encourage moral hazard This seems to be the way the financial system has operated in the last 20 years. So I’d expect a bailout. Also, SVB depositors weren’t just random individuals, they are some of the wealthiest people and organizations in the country or even the world. They are going to leverage their power and influence to recover as much as they can as quickly as they can. > where success is based on merit and hard work That’s the lie we all want to believe, but reality is that people at the top are a small club that will always prefer their family/friends/network than some hardworking rando from “the outside”. You are far more likely to be successful (money/career-wise), if you are born into a well off, well connected family, than if you are born poor but super hardworking.
- lp0_on_fire 4y ago
  > Also, SVB depositors weren’t just random individuals, they are some of the wealthiest people and organizations in the country or even the world. They are going to leverage their power and influence to recover as much as they can as quickly as they can. All the more reason regular people need to be screaming to high heaven that those rich and powerful people will get eaten if they push for and eventually receive a bailout.
  - mrkurt 4y ago
    There's no bailout. SVB is dead. People are pushing for depositors to get their money back. Which is, I think, reasonable. Putting your company money in a bank account should be safe. We should regulate banks like SVB to make it more safe. We should also make sure when the regulations fail the people who use a bank, they can continue doing business.
    - MrMan 4y ago
      depositors are only entitled to what is left over after resolution of the assets, nothing more! dont make this situation worse by advocating for something unethical and which is bad for the entire system
jasonwatkinspdx 4y ago
Are you aware of all the lobbying your current bank does? Seems an unreasonable expectation.
- bratao 4y ago
  I´m not, but I do expect sophisticated companies such as Roku to do better risk management than me.
  - mrkurt 4y ago
    If this was just Roku money, I doubt there would be an uproar. This hit a lot of very small startups with, like, $2mm and 14 months to live. These are not sophisticated companies.
    - dehrmann 4y ago
      Setting aside whether or not the due diligence is to be expected, early-stage startups are in no position to do it, so they listen to their VCs.
    - jasonwatkinspdx 4y ago
      There's solo freelancers that run things through their LLC as well. It's not just all fat cats for sure.
somsak2 4y ago
> it is hard to knowing that they chose to keep their funds in an bank that was actively lobbying to weaken risk regulations what an insane standard. as a customer of any company I'm now supposed to investigate their lobbying activity? what else do I need to do due diligence on?
- deleted 4y ago
  [deleted]
- mindslight 4y ago
  If you loan someone millions of dollars, yes you should probably do some diligence on them. (The limitless extrapolation of HN never ceases to amaze)
- dehrmann 4y ago
  Agreed. They put their money in a regulated bank that's an FDIC member. Banks are a bit like the US airline in that they're heavily regulated, how they treat you and the fees the charge are all over the place, but they're all safe.
mrkurt 4y ago
SVB was the place investors told companies to put money. SVB was also somewhat difficult to work with, they created a tremendous amount of pressure to do all your banking with them. And SVB didn't have products that would help you maximize FDIC insurance. It wasn't exactly predatory, but they set everything up to leave everyone very exposed to SVB issues. I think on purpose, just to maintain power in the ecosystem.
hn_throwaway_99 4y ago
> Bailing out these depositors would send the wrong message and encourage moral hazard, i.e., the belief that someone else will always bear the costs of risky behavior. Totally agree, and this is what makes me so furious. On one hand, you have all these business leaders demanding fewer regulations because they're "costly", but then when shit hits the fan suddenly everyone, from congresspeople on both sides, to billionaire investors and tech leaders, is crying on Twitter how it's the "end of civilization" if they don't get a bailout. The whole purpose of things like insurance and regulations is so that you can plan for disasters before they occur. If political pressure can ensure a bailout regardless if depositors are over the FDIC limit, than we should just drop the pretense of there being "uninsured deposits" and demand that depositors pay for insurance, regardless of their deposit amount, up front. At the very least they need laws in place so they can claw back money from those who took advantage of loose regulations (or prosecute egregious cases). The CEO of SVB sold millions of stock 2 weeks before it collapsed. He better be first in line to return money to make depositors whole if there is a bailout. So sick of this "heads I win tails you lose" BS.

by bratao 4y ago

ProllyInfamous 4y ago

"Privatize profits, subsidize losses." It's the global economy way! Hint: nothing will change, depositors and banks will get bailed out. Water is wet.

mrkurt 4y ago
SVB isn't getting a bailout. That company is gone. Their shareholders lost everything they invested. Depositors don't get bailouts. That's not what bailouts are.
- gregw2 4y ago
  If taxpayers help wealthy depositors get more than their insured amounts, (and more than a normal liquidation of assets) that is a bailout It may or may not be the right thing to do, but it most definitely is a bailout.
  - mrkurt 4y ago
    Yes that's reasonable. That's probably not what's happening here. In some ways, the _promise_ of the FDIC getting depositors almost all their money back is enough. The biggest problem people have right now is time. Over time, everyone will probably get most of their deposits from SVB back from SVB assets. What people (the ones who know what they're talking about, anyway) are asking for is closer to taxpayers covering the costs of getting that money back sooner. There's a definite cost, but it's not taxpayers writing checks to cover deposit values.
    - lp0_on_fire 4y ago
      > Over time, everyone will probably get most of their deposits from SVB back from SVB assets. > What people (the ones who know what they're talking about, anyway) are asking for is closer to taxpayers covering the costs of getting that money back sooner. There's a definite cost, but it's not taxpayers writing checks to cover deposit values. Except it's literally asking the taxpayer to cover the costs to cover these funds for some indeterminate period of time in the HOPES that SVB will "probably" be able to make their depositors whole, someday.
      - mrkurt 4y ago
        I think that's what I said? There's a cost, we don't know what it is. It's not as high as it sounds when you say "we should only let people get $250k liquid and everyone else should pound sand". The cost to letting these companies keep their money tied up is a lot of people not getting paychecks. Which suddenly means no tax witholdings. And more unemployed people. And companies that can't pay vendors. Doing nothing is not free. It might be cheaper, it might not. I get the instinct to hold the man accountable but it's not as simple as most people are suggesting.
    - adharmad 4y ago
      But why can their investors not cover the costs? Surely the same VCs who lent the startups money can lend them some more for the short period until SVB's assets valuation gets sorted out? Aren't they the ones to lose most if the startups go down under?

nico 4y ago

> Bailing out these depositors would send the wrong message and encourage moral hazard This seems to be the way the financial system has operated in the last 20 years. So I’d expect a bailout. Also, SVB depositors weren’t just random individuals, they are some of the wealthiest people and organizations in the country or even the world. They are going to leverage their power and influence to recover as much as they can as quickly as they can. > where success is based on merit and hard work That’s the lie we all want to believe, but reality is that people at the top are a small club that will always prefer their family/friends/network than some hardworking rando from “the outside”. You are far more likely to be successful (money/career-wise), if you are born into a well off, well connected family, than if you are born poor but super hardworking.

lp0_on_fire 4y ago
> Also, SVB depositors weren’t just random individuals, they are some of the wealthiest people and organizations in the country or even the world. They are going to leverage their power and influence to recover as much as they can as quickly as they can. All the more reason regular people need to be screaming to high heaven that those rich and powerful people will get eaten if they push for and eventually receive a bailout.
- mrkurt 4y ago
  There's no bailout. SVB is dead. People are pushing for depositors to get their money back. Which is, I think, reasonable. Putting your company money in a bank account should be safe. We should regulate banks like SVB to make it more safe. We should also make sure when the regulations fail the people who use a bank, they can continue doing business.
  - MrMan 4y ago
    depositors are only entitled to what is left over after resolution of the assets, nothing more! dont make this situation worse by advocating for something unethical and which is bad for the entire system

jasonwatkinspdx 4y ago

Are you aware of all the lobbying your current bank does? Seems an unreasonable expectation.

bratao 4y ago
I´m not, but I do expect sophisticated companies such as Roku to do better risk management than me.
- mrkurt 4y ago
  If this was just Roku money, I doubt there would be an uproar. This hit a lot of very small startups with, like, $2mm and 14 months to live. These are not sophisticated companies.
  - dehrmann 4y ago
    Setting aside whether or not the due diligence is to be expected, early-stage startups are in no position to do it, so they listen to their VCs.
  - jasonwatkinspdx 4y ago
    There's solo freelancers that run things through their LLC as well. It's not just all fat cats for sure.

somsak2 4y ago

> it is hard to knowing that they chose to keep their funds in an bank that was actively lobbying to weaken risk regulations what an insane standard. as a customer of any company I'm now supposed to investigate their lobbying activity? what else do I need to do due diligence on?

deleted 4y ago
[deleted]
mindslight 4y ago
If you loan someone millions of dollars, yes you should probably do some diligence on them. (The limitless extrapolation of HN never ceases to amaze)
dehrmann 4y ago
Agreed. They put their money in a regulated bank that's an FDIC member. Banks are a bit like the US airline in that they're heavily regulated, how they treat you and the fees the charge are all over the place, but they're all safe.

mrkurt 4y ago

SVB was the place investors told companies to put money. SVB was also somewhat difficult to work with, they created a tremendous amount of pressure to do all your banking with them. And SVB didn't have products that would help you maximize FDIC insurance. It wasn't exactly predatory, but they set everything up to leave everyone very exposed to SVB issues. I think on purpose, just to maintain power in the ecosystem.

hn_throwaway_99 4y ago

> Bailing out these depositors would send the wrong message and encourage moral hazard, i.e., the belief that someone else will always bear the costs of risky behavior. Totally agree, and this is what makes me so furious. On one hand, you have all these business leaders demanding fewer regulations because they're "costly", but then when shit hits the fan suddenly everyone, from congresspeople on both sides, to billionaire investors and tech leaders, is crying on Twitter how it's the "end of civilization" if they don't get a bailout. The whole purpose of things like insurance and regulations is so that you can plan for disasters before they occur. If political pressure can ensure a bailout regardless if depositors are over the FDIC limit, than we should just drop the pretense of there being "uninsured deposits" and demand that depositors pay for insurance, regardless of their deposit amount, up front. At the very least they need laws in place so they can claw back money from those who took advantage of loose regulations (or prosecute egregious cases). The CEO of SVB sold millions of stock 2 weeks before it collapsed. He better be first in line to return money to make depositors whole if there is a bailout. So sick of this "heads I win tails you lose" BS.