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Let me sum this up for you, "Privatize the profits and socialize the costs"
by PLenz 4y ago
Let me sum this up for you, "Privatize the profits and socialize the costs"
- Laaas 4y agoThis 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 agoTrickle up economics 101
- cscurmudgeon 4y agoThe US has been doing trickle 360 degrees economics. Up is also a direction.
- throwaway173738 4y agoI’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 agoWhy do payroll taxes not count? Employees are able to provide the value because there is an employer that enables them to.
- abzolv 4y agoExactly.
- eqmvii 4y agoIt's a little more complicated. Nobody wants to socialize the loss for the bank's management or stockholders. They're gonna be wiped out regardless. But we socialize losses for bank depositors all the time, it's a lot less objectionable generally. It's just harder to be sympathetic when the depositors are risky startups.
- matthewdgreen 4y agoRisky startups run (or funded) by people like Bill Ackman who have been urging the Fed to tighten its monetary policy [1], which is precisely the policy that caused SVB to fail. [1] https://twitter.com/BillAckman/status/1529133155801829380 https://twitter.com/BillAckman/status/1529133155801829380
- mustache_kimono 4y ago> It's a little more complicated. I'd beg to disagree. Bank makes bad bets. VCs put all their eggs in bad bank. VCs now hold a gun to our head. "But the depositors?!" Who is a depositor of more than $250K cash in an account who can't take a 20-30% haircut, because they didn't understand FDIC insurance? And why shouldn't they? Because they're special? This is an argument that only makes sense to people with mid 6 figure salaries, a gold plated benefits package, stock options/grants, Uber Eats for lunch. Everyone else says -- "Looks like those depositors made a mistake, huh?"
- j0hnyl 4y agoHow is this socialized costs when FDIC insurance premiums are paid by the banks?
- greenthrow 4y agoBecause we're talking way above and beyond what FDIC insurance covers.
- cscurmudgeon 4y agoWhat? He is primarily asking for another private bank to acquire SVB not a bailout. Even if a bailout happens this may be smaller than the sum US spends randomly. E.g., we sent ~$80 billion to Ukraine in a year. https://www.cfr.org/article/how-much-aid-has-us-sent-ukraine-here-are-six-charts https://www.cfr.org/article/how-much-aid-has-us-sent-ukraine.... If you agree there is a good argument for sending money to Ukraine benefitting US then why not agree there is an argument protecting against bank runs and depositors? SVB's total deposits are in that range (ignoring other assets they have).
- kennywinker 4y agoDid you really just compare a war, where somewhere in the order of 200,000 people have died, with a bank collapse?
- cscurmudgeon 4y agoDid you just do an emotional appeal devoid of logic (but taking advantage of deaths of 200,000 people)?
- kennywinker 4y agoWell, if you believe that the only thing the lives at stake have to do with are emotions, then yes I did. But usually the reason for spending money is considered part of the rational decision making process.
- cscurmudgeon 4y agoWell, at least you care more than Zelensky. https://www.ndtv.com/feature/oscars-reject-ukraine-president-volodymyr-zelenskys-request-to-speak-at-the-ceremony-3850622 https://www.ndtv.com/feature/oscars-reject-ukraine-president... Btw, the govt is responsible for this mess as they prevented narrow banking. So, nothing morally wrong with a public bailout. https://www.bloomberg.com/opinion/articles/2019-03-08/the-fed-versus-the-narrow-bank https://www.bloomberg.com/opinion/articles/2019-03-08/the-fe... In a way, the govt is obligated to bailout the depositors as the govt. prevented safer forms of banking. And to reiterate the amount will be small compared to US govt spending on allies and internal losses due to govt. corruption and ineptitude. https://foreignpolicy.com/2021/01/28/report-transparency-international-corruption-worst-decade-united-states/ https://foreignpolicy.com/2021/01/28/report-transparency-int... https://www.cnbc.com/2023/03/09/how-medicare-and-medicaid-fraud-became-a-100b-problem-for-the-us.html https://www.cnbc.com/2023/03/09/how-medicare-and-medicaid-fr... https://www.concernusa.org/story/foreign-aid-by-country/ https://www.concernusa.org/story/foreign-aid-by-country/