21 ms·

LOL, nope. Not interested in taking another spin on the “privatize gain, socialize loss” merry-go-round. The banks had to be saved in 2008 because they were, l

LOL, nope. Not interested in taking another spin on the “privatize gain, socialize loss” merry-go-round. The banks had to be saved in 2008 because they were, like, the financial system. I don’t see why private companies and funds that are much less integral to the functioning of the economy as a whole should be saved by the public fisc. Sorry about your disruption.

mberning 4y ago
100% agree. These titans of industry can surely help themselves.
- throwwwaway69 4y ago
  The free markets will resolve this I'm sure
jarym 4y ago
Are you saying if I deposit more than $250k (which is NOT a lot for a business) into a reputable and regulated US bank at negligible rates of interest I should just accept the impact of the bank shutting down due to events unrelated to my actions and choices? And that my deposit should vanish into thin air?
- KerrAvon 4y ago
  I think you should be made whole, but only if you submit a public statement supporting welfare for individuals as well as corporations in trouble. If you want a socialist handout from the government, fine, but you can’t be a hypocrite about it.
- secondcoming 4y ago
  In the UK, consumer deposits are protected only up to £85k. Everyone has several bank accounts. If the person on the street knows this, it’s not too much to ask that someone running a business does too.
  - deleted 4y ago
    [deleted]
  - muyuu 4y ago
    yep and if US$250K in cash is not a lot to have in deposits, then certainly some basic risk management and due diligence shouldn't be too much to ask for either
- slondr 4y ago
  > Are you saying if I deposit more than $250k (which is NOT a lot for a business) into a reputable and regulated US bank at negligible rates of interest I should just accept the impact of the bank shutting down due to events unrelated to my actions and choices? Yes, because that is how risk works. > And that my deposit should vanish into thin air? No, you should insulate yourself from that risk, either by spreading out your cash between multiple institutions, or obtaining deposit insurance beyond the government's, or (most likely) both.
  - skwirl 4y ago
    >No, you should insulate yourself from that risk, either by spreading out your cash between multiple institutions, or obtaining deposit insurance beyond the government's, or (most likely) both. Why would I do that when I can bank with a too-big-to-fail bank like JP Morgan Chase, Citibank, Wells Fargo, or Bank of America?
    - AlchemistCamp 4y ago
      In the case of many founders, especially non-US citizens, those banks won’t open accounts for them.
    - baq 4y ago
      That’s the point?
      - skwirl 4y ago
        The point is that everyone should bank with four too-big-to-fail banks and all other banks in the US should be shut down? That's certainly A Take. I thought we wanted to do away with too-big-to-fail banks, not permanently cement them into place.
    - pixl97 4y ago
      Because you're assuming just as much risk that one of these banks won't lock the entirety of your account for {reasons} while you fight it out with them.
- anonymous_sorry 4y ago
  Yes. Insure against this if you like.
- dctoedt 4y ago
  Yes, actually — choices have consequences, or so we keep being told by "the market will provide everything!" capitalists.
  - nightmarish 4y ago
    [flagged]
    - IncRnd 4y ago
      If they are asking for government assistance to bail them out of their own problem that were created when they lobbied the government to lower oversight regulations of SVB, then no, they aren't capitalists.
- BobbyJo 4y ago
  That is the contract you are signing, so yes?
- toomuchtodo 4y ago
  SVB lobbied to not be regulated as strongly as other banks, and won. You would be perfectly fine at most other banks. This was a choice. https://www.theguardian.com/business/2023/mar/11/silicon-valley-bank-weaken-risk-regulations-svb https://www.theguardian.com/business/2023/mar/11/silicon-val... Edit: https://www.levernews.com/svb-chief-pressed-lawmakers-to-weaken-bank-risk-regs/ https://www.levernews.com/svb-chief-pressed-lawmakers-to-wea... > Eight years before the second-largest bank failure in American history occurred this week, the bank’s president personally pressed Congress to reduce scrutiny of his financial institution, citing the “low risk profile of our activities and business model”, according to federal records reviewed by the Lever. > Three years later – after the bank spent more than half a million dollars on federal lobbying – lawmakers obliged.
  - garry 4y ago
    We are asking for new regulation that would prevent this from occurring.
    - DrBenCarson 4y ago
      Losing your business is a powerful way to learn a lesson. Don't ask taxpayers to fix your mistakes for you.
    - davidgerard 4y ago
      That rule already exists. It's Basel III, and SVB was one of those who lobbied to have it removed for particular US banks in 2018. As you well know. Here's the explainer for everyone else: https://archive.is/gmJxU https://archive.is/gmJxU
    - nightmarish 4y ago
      [flagged]
  - kzz102 4y ago
    It's truly remarkable that most likely SVB lobbied congress to allow more risk taking because it will encourages innovation, while in reality what it did destroys innovation.
- nickpeterson 4y ago
  I guess why didn’t you spread it around to multiple banks?
  - novalis78 4y ago
    …which is what many crypto companies have had to do for a very long time… bank redundancy is crucial in an environment where innovation has stalled, regulations stifle and monopolies abound.
- deleted 4y ago
  [deleted]
- delusional 4y ago
  Are you arguing for the abolishment of private banking and erecting a government run banking institution in its place? because it sounds like that to me.
- gameshot911 4y ago
  You don't lose everything, only a percentage based on what the FDIC isn't able to recover after the sale of all assets. And - yes.
  - DennisP 4y ago
    That process takes a long time. Most startups would be out of business by then.
    - IncRnd 4y ago
      Just about everyone in the US who has a business bank account faces that same issue. There have been hundreds of bank failures before this. SVB account holders are not unique and probably won't get special treatment.
    - beezle 4y ago
      Then they should have only kept the minimum funds necessary for transacting business in that bank account and kept the rest in short dated treasury bills at another institution(s). Part of being a company is having a treasury department to manage the cash flow needs, whether that is one person or ten.
- echion 4y ago
  > Are you saying if I deposit [...] I should just accept the impact [...] due to events unrelated to my actions and choices? You chose that bank and you chose to deposit more than $250,000. Are you saying the limit should be higher?
  - pixl97 4y ago
    I mean when that limit was set 250k was a lot, but it really needs to be pegged to inflation.
    - daviross 4y ago
      You mean 2009? The limit was 100k before then. I wouldn't be against pegging it to inflation, but that's still only moving it up to ~$330k.
    - subsistence234 4y ago
      that limit was set in 2008. before that it was $100k
- leipert 4y ago
  I know that 250k cash is not a lot for a company with a few folks on payroll. But why wouldn’t you distribute cash across multiple banks as a business? It hasn’t to be this situation, but if your accounts are flagged for fraud or someone hacks an account, aren’t you safer by distributing cash in multiple banks?
  - kibwen 4y ago
    People keep saying 250k, but it's actually 500k for any account with two signatories, which a company should be trivially able to produce.
  - TuringNYC 4y ago
    >I know that 250k cash is not a lot for a company with a few folks on payroll. But why wouldn’t you distribute cash across multiple banks as a business? On the topic of FDIC insurance and startups... I'll put in a shameless plug for a startup I helped launch 20yrs ago: *Promontory Interfinancial Network" https://www.intrafi.com/solutions/depositors/ https://www.intrafi.com/solutions/depositors/ It was a startup them (now acquired), and created a bank deposit product "CDARS" which took customer deposits and distributed it across (k = N/<FDIC Limit) banks and kept the relationship as a single bank with a single account. Even cooler, as k other people did it at k other banks, the service would just swap deposits across all the banks. It was a super-cool and valuable product, and i'm proud to say I helped write the matching engine for it back in 2002. I realize this doesnt help startups with locked funds at SVB, but I'm pointing out -- there are options out there to have 100% FDIC insured safety for both individuals and startups.
  - dehrmann 4y ago
    This workaround seems rather silly when it mostly applies to medium-sized businesses trying to get safe, stable bank accounts. FDIC coverage is too low for businesses.
    - JohnFen 4y ago
      There are a number of mechanisms besides the FDIC that are commonly used for depositors of this scale. You can even buy your own insurance, if nothing else.
- danny_taco 4y ago
  And who do you expect to foot the bill to recover your money? There are ways to mitigate this risk and it's not the taxpayers problem you mismanage your assets.
- nocoiner 4y ago
  Look up CDARS. There are well known cash management strategies that solve for exactly this set of circumstances. I’m not really sure why taxpayers are supposed to backstop CFO competence? But to answer your question, yeah, I think the equity in a for-profit business takes the risks and rewards of capitalism as they come. If the owners didn’t want to lose the basis points by holding cash in CDARS or liked the interest paid by SVB (approximately twice the median of other financial institutions), they probably shouldn’t have been trying to pick up pennies in front of steamrollers or expecting taxpayers to save them from the consequences of that freely made decision. Capitalism, baby.
  - TuringNYC 4y ago
    Awesome to hear about CDARS on this board. CDARS have only seemed valuable twice in my life (2008, and yesterday)...but that is how insurance-linked products are supposed to work. You only need them when you need them. But when you need them, it is darn good to have them.
- mindcrime 4y ago
  Are you saying if I deposit more than $250k (which is NOT a lot for a business) into a reputable and regulated US bank at negligible rates of interest I should just accept the impact of the bank shutting down due to events unrelated to my actions and choices? Yes. That's the way this works. Or you can choose whatever risk mitigation strategy you're comfortable with: spread your deposits across multiple institutions, buy Krugerrands and bury them in the backyard, purchase 3rd party insurance whatever.
  - DennisP 4y ago
    People keep talking about buying third-party insurance for this but a quick google didn't turn up any mention of insurance like that. Could you link some?
    - IncRnd 4y ago
      That's very odd, the entire first page was full of hits for me. What were you searching? Take a look at https://www.forbes.com/advisor/banking/ways-to-insure-excess-deposits/ https://www.forbes.com/advisor/banking/ways-to-insure-excess.... It explains several methods, including extra deposit insurance from CDARS, MaxSafe, Depositors Insurance Fund, etc. It also explains cash management accounts, credit union overflow, using multiple banks, and so forth. I can't help but think a good CFO or comptroller would be well aware of these.
      - DennisP 4y ago
        Yes, I'm aware that I can put money in multiple accounts, or get an account that spreads the money to multiple accounts for me. None of these are what I was responding to: the suggestion to "purchase 3rd party insurance." The closest in that article is DIF but even that isn't insurance you go and buy, it's another kind of special bank account available at DIF's member banks. As far as I can tell, you can't just go buy supplemental deposit insurance, but for some reason people keep suggesting that as something SVB's depositors should have done. (And as someone who's worked as the first employee of a startup, I can tell you it was while before we were able to get a CFO.)
- IncRnd 4y ago
  Are you saying that the more successful you are means that everyone else should cover your losses due to your banking relationships?
- gigitrix 4y ago
  You don't accept it, you deal with the regulators and FDIC and demand they release liquidity as soon as possible, which they are striving to do.
- JohnFen 4y ago
  If you deposit more than $250k, you absolutely should take actions to limit your risk to an acceptable level. There are myriad ways to do this. > I should just accept the impact of the bank shutting down due to events unrelated to my actions and choices? You should hedge against potential losses, yes, absolutely. You're knowingly taking a risk. Just like every other risk in business, you determine if you can take the hit if things fail, and if you can't you arrange a mechanism that will reduce the damage to a level where you can. It's just basic business management.
- friend_and_foe 4y ago
  Or, you should purchase private additional insurance, yes. It's not like it didn't say "covered up to $250,000" on the package, it's not like theyre the only bank in town, it's not like the FDIC was the only option.
PaulHoule 4y ago
If this is handled by the ordinary procedures used to handle bank bailouts and if the story is what we've been told (problems w/ bonds going bad because of an interest rate increase) there could be some haircut for depositors but it will not be apocalyptic. If the real problem is the quality of the loan book, however, it calls the startup and VC economy into question. We'll learn a lot more about this in the next few weeks.
- simonw 4y ago
  If a startup can't pay their employees at the end of the month, it's apocalyptic no matter whether or not they get access to their money again at some future date.
  - PaulHoule 4y ago
    The FDIC should have payments working very close to normal early next week if not by Monday. People might be getting paid a few days late and whoever is processing payments will be working overtime but there's a good chance it will be "no big deal" for most employees. Often when a bank fails they change the sign at the branch to some other name otherwise you wouldn't know what happened. In the 1980s there was a lot of bank instability in New Hampshire, my mom kept all the statements going back to 1971, the name of the bank changed numerous times and she was not inconvenience except when the mortgage was about to come due the bank said the original payment was miscalculated and she'd owe more payments. I told her to go tell the bank regulator about it and the bank came back with their tail between their legs and forgave her the last 6 months of mortgage payments. When I was a student I was banking with an S&L in New Mexico that went under as part of the S&L crisis, they just moved me to a different S&L, it was no skin off my back. So there's a good chance that the FDIC will manage this with a minimum amount of disruption... Bank routines are handled routinely.
    - polynox 4y ago
      I'm not sure what your argument is exactly. They haven't transferred the depositors' balances to new banks, they've simply issued them IOUs (receivership certificates). From what is known about the balance sheet of SVB, it will probably be between 8 and 10 years before those IOUs are replaced with dollars. You can't pay employees, the FTB or the IRS in receivership certificates. To say that it will be "no big deal" and that there will be a "minimum amount of disruption" is simply an assertion based on no evidence.
flappyeagle 4y ago
What socialized loss are you talking about? This seems like TARP, which was a huge gain for taxpayers.
- nocoiner 4y ago
  TARP did turn a profit, but there was no guarantee that the US treasury wasn’t going to take a loss on it. Now, if these companies are willing to sign over warrants for 79.99% of the equity (like the banks did)… well, maybe there’s something to discuss. But otherwise reaping the rewards of capitalism while declining to take its risks - nah, I don’t think so.
  - Vt71fcAqt7 4y ago
    I think by "capitalism" you mean "free market" but yeah there is a massive difference between giving loans to massive banks, the larger of which were not going to fail anyway except Morgan Stanley, and giving money to small companies that can potentialy lose all of it (AKA the "start up" business model).
- deleted 4y ago
  [deleted]
wnevets 4y ago
Government interference in the economy is bad* *Unless it's to bail me out.
- garry 4y ago
  FWIW I've never had that perspective, so I'm not sure why you are saying that.
  - School-Cotton 4y ago
    Most commenters have a very low-dimensional understanding of politics, and assume if you’re a businessman or capitalist, all failings of Republicans can be attributed to you personally.
    - nightmarish 4y ago
      [flagged]
      - School-Cotton 4y ago
        None? Where did I claim in my post that I was a capitalist or investor?
        nightmarish 4y ago
        [flagged]
  - fsckboy 4y ago
    he's making a joke that I think is pretty clear, and jokes are only funny when they're stripped to their essentials. if anybody holds the perspective that the govt should use public funds to save a set of companies because ma jobs, ma innovations, etc. in the venture capital sector it would seem that person does hold that perspective, at least enough to joke about it. Unless you're making a more unlikely point that the government should be intervening all the time?
crummy 4y ago
Didn't the public get paid back, plus extra, after bailing out the banks?
- garry 4y ago
  https://www.cbo.gov/publication/57341 https://www.cbo.gov/publication/57341
  - slowmovintarget 4y ago
    So the punchline is that while most of it (~85%) was paid back, the program wrote off $66 Billion as a loss.
- deleted 4y ago
  [deleted]
- TuringNYC 4y ago
  >> Didn't the public get paid back, plus extra, after bailing out the banks? To be totally factual, while the public did get paid back, part of the reason is that the Fed started printing money and buying bonds way above asking price to move the market. If you do this enough, prices naturally correct because everyone knows there is a buyer at a certain price and a floor price. The downside is, well, all the printed money.
  - somewhereoutth 4y ago
    Which inevitably leads to inflation, requiring interest rate hikes to fix - and here we are.
garry 4y ago
These are depositors of a bank. Most startups only have one bank. Startups should live or die because they create good products and solve real problems in real markets, not because they made an arbitrary choice like which bank they started using. There's also a real risk of bank contagion if it is only safe to deposit in the largest banks.
- axlee 4y ago
  There was nothing arbitrary about that choice. This bank promised better deals BECAUSE they were not careful enough about the risk it entailed. That was their competitive advantage, and they made bank for it. Well, tough luck, now it's not anymore: it has nothing to do with being a large bank or a small bank, it has to do with healthy business practices.
  - jlmorton 4y ago
    Sorry, I'm not sure if you're confused, but these are simple bank accounts. There was no high interest yield. The average interest yield was a fraction of a percent. No one was chasing any yield. No one was taking any risks. It's a bank account. Are you suggesting tens of thousands of small business customers need to do due dilligence on the investment practices of their banks? And what about all the other regional banks? Based on your comment, do you think the prudent thing would be for every single small business in America to transfer their funds out of regional banks into a large bank?
    - pixl97 4y ago
      >Are you suggesting tens of thousands of small business customers need to do due dilligence on the investment practices of their banks? 100% yes.
    - lolinder 4y ago
      They were definitely doing high interest yield: > ## Up to 4.50% annual percentage yield > Help make your money last longer with our Startup Money Market Account. Like with a savings account, you’ll earn up to 4.50% APY on deposits — so you gain a longer runway. Certain restrictions apply. https://www.svb.com/startup-banking https://www.svb.com/startup-banking
roenxi 4y ago
> The banks had to be saved in 2008 because they were, like, the financial system. There was a false choice there because there are multiple options that were strategically ignored by the people who own the banking system. The financial system can be replaced. The crypto people haven't been getting bailouts AFAIK and it doesn't seem to be hurting the ecosystem; we're running side by side experiments despite the best efforts of the powers that be and it is showing that in low-trust environments the system is actually pretty robust. The response should have been to get rid of the systemic inflation that incentivises people to give their money to untrustworthy institutions. > Not interested in taking another spin on the “privatize gain, socialize loss” merry-go-round. I personally feel this way. But as a matter of fairness, if banks get bailouts why shouldn't YC get bailouts? YC is a more deserving cause than the banks. This was always the problem with bailouts; it is grossly unfair that incompetent banks get a handout but potentially competent companies do not.
- simple-thoughts 4y ago
  The crypto people would be getting a bailout through USDC - which is exactly why I don’t support this as a web3 developer. The ideal for crypto is a free marketplace and bad products that failed to do due diligence, were negligent, relied on false government promises, and lied to users must be allowed to fail.
axlee 4y ago
110% agree. At some point, risk HAS to be treated as what it is, risk, rather than just "another way to do things". We have so many banks treating risk as what it is, and pricing for it, well these people decided to go to another bank to get funding, well deal with it. It's not like the average citizen has this luxury.
- garry 4y ago
  The equity holders and management of SVB are likely to be wiped. In the petition we specifically call this out: we are not asking for their risks to be "socialized." Depositors have a reasonable expectation that when they choose a bank (especially a publicly traded bank that is regulated) that their deposits are safe. If this is not true, then most people will only bank with the largest banks. That's not a good situation. We're asking for depositors to be made whole and for regulation to prevent this from happening to depositors in the future.
  - andsoitis 4y ago
    > If this is not true, then most people will only bank with the largest banks. That's not a good situation. It is an elite class of people who banked at SVB. Most people bank with less risk-taking community banks or the very large ones. Casting SVB as an underdog and the people who bank with them as helpless is upside down.
  - nightmarish 4y ago
    [flagged]
    - nocoiner 4y ago
      [flagged]
    - JanSt 4y ago
      SVB did the mismanagement, didn‘t they?
      - 4y ago
mc32 4y ago
And with all their connections, one would imagine they could raise some funding in exchange for shares, like their startups do. Why not?
tikkun 4y ago
Disagree. People who invested in SVB should be wiped out, probably. People who deposited in SVB should not be wiped out. Depositors in banks aren't expected to do due diligence on the financial statements of the bank they're depositing in. Have you read the 10-K filings of your bank in detail?
- cmurf 4y ago
  Correct. The $250,000 FDIC cap is a favor to banks. They only pay fees to insure up to that amount. And it's bogus. The FDIC should require deposits to be insured, no matter the amount.
  - oldgradstudent 4y ago
    The insurance is there to prevent run on retail banks by the general public. It is expected that you manage your risks if you have significantly more than the insured amount.
  - downvotetruth 4y ago
    I'm not going to pay to insure a millionaire. Insurance is not free.
    - geodel 4y ago
      With the way things are going, don't be surprised if some silicon valley innovator come with insurance product that can be purchased after the fact. With marketing like "Come, Disrupt the Insurance Industry" it might just work out fine
      - muzz 4y ago
        The first sentence is basically what Tan is proposing
        trogdor 4y ago
        Minus the “purchased” part. He just wants it.
AlchemistCamp 4y ago
Startups have been anything but “socialized losses”. They’ve literally been the growth engine of the country for the past twenty years. According to Brookings, “Annually, venture investment makes up only 0.2% of GDP, but delivers an astonishing 21% of U.S. GDP in the form of VC-backed business revenues.” https://www.brookings.edu/research/as-the-venture-capital-game-gets-bigger-the-midwest-keeps-missing-out/ https://www.brookings.edu/research/as-the-venture-capital-ga...
- andrepd 4y ago
  Who cares if it's 99% of GDP of that is going into the hands of venture capitalists?
  - molsongolden 4y ago
    Or… also to all of the people employed by the startups?
    - bigbillheck 4y ago
      You mean the 'independent contractors'?
      - molsongolden 4y ago
        All of those VC-backed companies are out there spending that VC money by paying it to employees.
  - AlchemistCamp 4y ago
    Anyone who has really looked at the 2nd order effects. SV-style tech startups distribute more equity to employees than any other sector of business I know of and the average VC’s returns are worse than private equity, worse than the stock market and worse than real estate. You only hear about the biggest winners, but venture capitalists are taking on very long odds and the vast majority lose. More importantly, we all benefit from the advances the industry leads to—such as this wonderful phone I’m typing this comment into that can access and search nearly any encyclopedia, map or song in the world in seconds, from almost anywhere.
fallingknife 4y ago
I have an idea. The startup depositors are made whole in exchange for the FDIC receiving shares in the company that dilute the VCs in an amount depending on company valuation and balance lost. This way you bail out the small business and make the VCs pay.
- ashwagary 4y ago
  It would be safer for all if the FDIC sticks to what it does best and doesn't take on additional risk outside its mandate as a favor to irresponsible businesses.
cmurf 4y ago
Do you understand what you're saying though? The consequence is, cash deposits for thousands of small businesses, are unavailable. The direct consequence is these businesses can't pay payroll, and can't pay vendors. This isn't about socializing investor's losses. It's about making sure employees, contractors, and vendors get paid by fully backing cash deposits.
JJMcJ 4y ago
SVB has some ordinary people as depositors, with a regular commercial bank as their Boston Private subsidiary. It would be very disruptive and cruel if they lost all or much of their deposits. SVB's stockholders, on the other hand . . .
- lolinder 4y ago
  The ordinary-people depositors almost certainly don't have more than $250k in the bank, so they will already be made whole by the FDIC on Monday.
  - JJMcJ 4y ago
    That is absolutely the plan. The assets are now with a new bank that will be open for business on Monday. FDIC promises for the ordinary-people, everything will be uninterrupted. Checks from the older SVB accounts will clear, debit cards will work, money will be available.
cscurmudgeon 4y ago
Right there in the article. I guess not reading obvious text bolded is the hip new thing to do: > Small business depositors at Silicon Valley Bank should be made whole. Regulators need to conduct a backstop of depositors. We are not asking for a bank bailout. > Not interested in taking another spin on the “privatize gain, socialize loss” merry-go-round Where are they asking for that? Edit: And of course, downvoted. Lol.
- kelnos 4y ago
  The two assertions, "depositors should be made whole", and "we are not asking for a bank bailout" are a bit... misleading? No, they are technically not asking for a bank bailout, but they are asking for a bailout.
CM30 4y ago
Agreed 100%. So many issues with the economic system come from the fact companies want capitalism when it benefits them, but something akin to socialism when there's a risk they'll fail. So no. If your bank can't make payments? Tough, it should close down and go into administration or whatever. Maybe the government can bail out individuals, but companies relying on said banks can deal with bankruptcy or closure like it was any other sort of business risk. Company can't pay a higher minimum wage (or a livable one)? Then deal with less staff, or shut down, your business model simply doesn't work and isn't profitable. And if your industry is dying because of technology (like say, Australian media outlets with Google and the internet), then tough. Accept it's probably dead and either downsize, come up with a new business strategy or close down. So many seem to want a dog eat dog system when they're winning, but beg for mercy when it goes wrong.
scarface74 4y ago
I’m torn. When I put my money in the bank, I don’t consider that an “investment” and neither did the employees. I’m the last person to feel sorry for BigTech employees (I am one) making $300K+ a year (I don’t. I’m not complaining) who got laid off and didn’t save during the good times (I have used almost every penny of my after tax signing bonus/RSUs toward “increasing my net worth”). But most of the people working at startups aren’t making nearly that much (?). Why should they suffer harm? Could the CFOs at these companies known they were making risky bets (serious question)
- oldgradstudent 4y ago
  > Could the CFOs at these companies known they were making risky bets (serious question) Banks fail. That's part of life. Every decade or two there is a wave of bank failures. It's a risk that should be managed.
- subsistence234 4y ago
  apparently SVB offered APY far above what other banks were offering.
- kelnos 4y ago
  > When I put my money in the bank, I don’t consider that an “investment” and neither did the employees. No, but you should be aware that if you put money into a deposit account, and the bank fails, you are only guaranteed (by the FDIC) to get $250k of that money back. This is usually not a problem, as most individuals don't have that much cash, period, let alone in a single bank account. But it's a problem for businesses, obviously. And yes: > Could the CFOs at these companies known they were making risky bets Absolutely! Putting more than the FDIC-insured max into a deposit account is an obvious risk that any CFO (or corporate finance person in general) will absolutely know about.
lamontcg 4y ago
With this being the top-voted sentiment we are so very, very fucked. In the 2009 crisis the banks got bailed out because we were in the position of very nearly breaking the buck on money market funds. The interconnectedness of the entire financial system meant that we were plausibly looking at a situation where most businesses wouldn't be able to make payroll soon. ATMs could start to not give out cash. The whole short-term lending market was in danger of freezing up solid. The lesson from that seems to not have been "we need to regulate things better up front so companies cannot make bets that place the system at risk and imperil everyone" but "fuck it, let it all burn down". And we've got Republicans controlling the House that will drive the financial system into a brick wall hoping that they can blame it all on Biden and take over in the next election. Honestly starting to think the right idea might be to stock up on food, water, gas and toilet paper like I'm worried about another pandemic and go bury $10k in the backyard. People have gotten fucking insane.
- deleted 4y ago
  [deleted]
- ashwagary 4y ago
  >Honestly starting to think the right idea might be to stock up on food, water, gas and toilet paper like I'm worried about another pandemic and go bury $10k in the backyard. If you are saying that you should take additional personal steps to protect yourself from downside risks, the answer is yes. It's not a foolish way to live and in the long term, the benefits outweigh the costs, similar to being adequately insured.
Enginerrrd 4y ago
Can someone start a counter-petition requesting they NOT get a bailout? I've been talking to deaf ears for the better part of a decade about what I called Silicon Valley Sickness and how it's had some really negative impacts in a lot of sectors outside of tech.
deleted 4y ago
[deleted]
moviedo 4y ago
I work at a startup that may be affected by this situation and even I agree with your sentiment. If the startups affected by this ordeal are bailed out, then at the bare minimum we the public should get 10% equity for every startup saved. Let's go the VC route and get something for our tax dollars(socialize those gains).
deleted 4y ago
[deleted]
glerk 4y ago
I am leaning libertarian and I am very sympathetic to this point of view. However, with the amount of taxes these companies pay and the economic growth they generate, they have every right to ask the question: when does the government benefit us? If this very costly government is not able to guarantee the integrity of its federal reserve notes deposits, then what is its purpose? What makes it legitimate?
- scarface74 4y ago
  How much in taxes do money losing startups pay? But, I am sympathetic to the employees and even the owners of the startups. They didn’t take risky bets. I couldn’t imagine spreading my business as a startup (if I had one) to 10 different banks and trying to manage all of the obligations.
- briHass 4y ago
  How is this the government's fault, unless you want to talk about tighter regulations? From a libertarian perspective, you deposit money at a bank, they make you sign documents about the well-known FDIC insurance limits (a bonus insurance offered by the government), and you make the free choice to mitigate whatever risks you think you have based on that 250K vs whatever you plan to deposit. It's essentially a business choosing to underinsure themselves.
  - glerk 4y ago
    I wouldn't say it is the government's fault, but is it that unreasonable to expect this basic safety net as a benefit for being a subject/customer of this government? Various organs of the government are claiming the authority to create and enforce financial regulations. And yet, cash deposits in government-backed currency at a 100% government-regulated bank can still vanish overnight. Given the huge costs of maintaining this government, and given the similar benefits it provides to others (Wall Street bailouts, stimulus checks, student debt forgiveness, etc.), is it that unreasonable to ask what YC is asking?
    - eropple 4y ago
deleted 4y ago
[deleted]
blurbleblurble 4y ago
Who exactly are you trying to punish here?
huijzer 4y ago
Sounds also as a great opportunity for the, so called, "angel investors" to show that they are.
tarsinge 4y ago
There is an intermediate solution that seems always conveniently ignored: You ask for taxpayers money to save a business and its employees? Then it’s a good old nationalization. Everyone is happy except shareholders and execs that are rightfully not made whole for their bad bets and management, no special exception to market rules.
TomSwirly 4y ago
> The banks had to be saved in 2008 because they were, like, the financial system. They could easily have jailed a lot of bankers, and saved the banks. They didn't. HSBC alone pleaded guilty to over 1000 counts of money laundering, each one of which should have gotten someone 7-14 years in jail.
berniedurfee 4y ago
Agreed. The government bailing out private industry seems counter to the maturation of private industry. It sucks that the ones will who suffer the most have the least culpability in this situation.
n3rv 4y ago
pretty much this. hard pass on signing this nonsense.

mberning 4y ago

100% agree. These titans of industry can surely help themselves.

throwwwaway69 4y ago
The free markets will resolve this I'm sure

jarym 4y ago

Are you saying if I deposit more than $250k (which is NOT a lot for a business) into a reputable and regulated US bank at negligible rates of interest I should just accept the impact of the bank shutting down due to events unrelated to my actions and choices? And that my deposit should vanish into thin air?

KerrAvon 4y ago
I think you should be made whole, but only if you submit a public statement supporting welfare for individuals as well as corporations in trouble. If you want a socialist handout from the government, fine, but you can’t be a hypocrite about it.
secondcoming 4y ago
In the UK, consumer deposits are protected only up to £85k. Everyone has several bank accounts. If the person on the street knows this, it’s not too much to ask that someone running a business does too.
- deleted 4y ago
  [deleted]
- muyuu 4y ago
  yep and if US$250K in cash is not a lot to have in deposits, then certainly some basic risk management and due diligence shouldn't be too much to ask for either
slondr 4y ago
> Are you saying if I deposit more than $250k (which is NOT a lot for a business) into a reputable and regulated US bank at negligible rates of interest I should just accept the impact of the bank shutting down due to events unrelated to my actions and choices? Yes, because that is how risk works. > And that my deposit should vanish into thin air? No, you should insulate yourself from that risk, either by spreading out your cash between multiple institutions, or obtaining deposit insurance beyond the government's, or (most likely) both.
- skwirl 4y ago
  >No, you should insulate yourself from that risk, either by spreading out your cash between multiple institutions, or obtaining deposit insurance beyond the government's, or (most likely) both. Why would I do that when I can bank with a too-big-to-fail bank like JP Morgan Chase, Citibank, Wells Fargo, or Bank of America?
  - AlchemistCamp 4y ago
    In the case of many founders, especially non-US citizens, those banks won’t open accounts for them.
  - baq 4y ago
    That’s the point?
    - skwirl 4y ago
      The point is that everyone should bank with four too-big-to-fail banks and all other banks in the US should be shut down? That's certainly A Take. I thought we wanted to do away with too-big-to-fail banks, not permanently cement them into place.
  - pixl97 4y ago
    Because you're assuming just as much risk that one of these banks won't lock the entirety of your account for {reasons} while you fight it out with them.
anonymous_sorry 4y ago
Yes. Insure against this if you like.
dctoedt 4y ago
Yes, actually — choices have consequences, or so we keep being told by "the market will provide everything!" capitalists.
- nightmarish 4y ago
  [flagged]
  - IncRnd 4y ago
    If they are asking for government assistance to bail them out of their own problem that were created when they lobbied the government to lower oversight regulations of SVB, then no, they aren't capitalists.
BobbyJo 4y ago
That is the contract you are signing, so yes?
toomuchtodo 4y ago
SVB lobbied to not be regulated as strongly as other banks, and won. You would be perfectly fine at most other banks. This was a choice. https://www.theguardian.com/business/2023/mar/11/silicon-valley-bank-weaken-risk-regulations-svb https://www.theguardian.com/business/2023/mar/11/silicon-val... Edit: https://www.levernews.com/svb-chief-pressed-lawmakers-to-weaken-bank-risk-regs/ https://www.levernews.com/svb-chief-pressed-lawmakers-to-wea... > Eight years before the second-largest bank failure in American history occurred this week, the bank’s president personally pressed Congress to reduce scrutiny of his financial institution, citing the “low risk profile of our activities and business model”, according to federal records reviewed by the Lever. > Three years later – after the bank spent more than half a million dollars on federal lobbying – lawmakers obliged.
- garry 4y ago
  We are asking for new regulation that would prevent this from occurring.
  - DrBenCarson 4y ago
    Losing your business is a powerful way to learn a lesson. Don't ask taxpayers to fix your mistakes for you.
  - davidgerard 4y ago
    That rule already exists. It's Basel III, and SVB was one of those who lobbied to have it removed for particular US banks in 2018. As you well know. Here's the explainer for everyone else: https://archive.is/gmJxU https://archive.is/gmJxU
  - nightmarish 4y ago
    [flagged]
- kzz102 4y ago
  It's truly remarkable that most likely SVB lobbied congress to allow more risk taking because it will encourages innovation, while in reality what it did destroys innovation.
nickpeterson 4y ago
I guess why didn’t you spread it around to multiple banks?
- novalis78 4y ago
  …which is what many crypto companies have had to do for a very long time… bank redundancy is crucial in an environment where innovation has stalled, regulations stifle and monopolies abound.
deleted 4y ago
[deleted]
delusional 4y ago
Are you arguing for the abolishment of private banking and erecting a government run banking institution in its place? because it sounds like that to me.
gameshot911 4y ago
You don't lose everything, only a percentage based on what the FDIC isn't able to recover after the sale of all assets. And - yes.
- DennisP 4y ago
  That process takes a long time. Most startups would be out of business by then.
  - IncRnd 4y ago
    Just about everyone in the US who has a business bank account faces that same issue. There have been hundreds of bank failures before this. SVB account holders are not unique and probably won't get special treatment.
  - beezle 4y ago
    Then they should have only kept the minimum funds necessary for transacting business in that bank account and kept the rest in short dated treasury bills at another institution(s). Part of being a company is having a treasury department to manage the cash flow needs, whether that is one person or ten.
echion 4y ago
> Are you saying if I deposit [...] I should just accept the impact [...] due to events unrelated to my actions and choices? You chose that bank and you chose to deposit more than $250,000. Are you saying the limit should be higher?
- pixl97 4y ago
  I mean when that limit was set 250k was a lot, but it really needs to be pegged to inflation.
  - daviross 4y ago
    You mean 2009? The limit was 100k before then. I wouldn't be against pegging it to inflation, but that's still only moving it up to ~$330k.
  - subsistence234 4y ago
    that limit was set in 2008. before that it was $100k
leipert 4y ago
I know that 250k cash is not a lot for a company with a few folks on payroll. But why wouldn’t you distribute cash across multiple banks as a business? It hasn’t to be this situation, but if your accounts are flagged for fraud or someone hacks an account, aren’t you safer by distributing cash in multiple banks?
- kibwen 4y ago
  People keep saying 250k, but it's actually 500k for any account with two signatories, which a company should be trivially able to produce.
- TuringNYC 4y ago
  >I know that 250k cash is not a lot for a company with a few folks on payroll. But why wouldn’t you distribute cash across multiple banks as a business? On the topic of FDIC insurance and startups... I'll put in a shameless plug for a startup I helped launch 20yrs ago: *Promontory Interfinancial Network" https://www.intrafi.com/solutions/depositors/ https://www.intrafi.com/solutions/depositors/ It was a startup them (now acquired), and created a bank deposit product "CDARS" which took customer deposits and distributed it across (k = N/<FDIC Limit) banks and kept the relationship as a single bank with a single account. Even cooler, as k other people did it at k other banks, the service would just swap deposits across all the banks. It was a super-cool and valuable product, and i'm proud to say I helped write the matching engine for it back in 2002. I realize this doesnt help startups with locked funds at SVB, but I'm pointing out -- there are options out there to have 100% FDIC insured safety for both individuals and startups.
- dehrmann 4y ago
  This workaround seems rather silly when it mostly applies to medium-sized businesses trying to get safe, stable bank accounts. FDIC coverage is too low for businesses.
  - JohnFen 4y ago
    There are a number of mechanisms besides the FDIC that are commonly used for depositors of this scale. You can even buy your own insurance, if nothing else.
danny_taco 4y ago
And who do you expect to foot the bill to recover your money? There are ways to mitigate this risk and it's not the taxpayers problem you mismanage your assets.
nocoiner 4y ago
Look up CDARS. There are well known cash management strategies that solve for exactly this set of circumstances. I’m not really sure why taxpayers are supposed to backstop CFO competence? But to answer your question, yeah, I think the equity in a for-profit business takes the risks and rewards of capitalism as they come. If the owners didn’t want to lose the basis points by holding cash in CDARS or liked the interest paid by SVB (approximately twice the median of other financial institutions), they probably shouldn’t have been trying to pick up pennies in front of steamrollers or expecting taxpayers to save them from the consequences of that freely made decision. Capitalism, baby.
- TuringNYC 4y ago
  Awesome to hear about CDARS on this board. CDARS have only seemed valuable twice in my life (2008, and yesterday)...but that is how insurance-linked products are supposed to work. You only need them when you need them. But when you need them, it is darn good to have them.
mindcrime 4y ago
Are you saying if I deposit more than $250k (which is NOT a lot for a business) into a reputable and regulated US bank at negligible rates of interest I should just accept the impact of the bank shutting down due to events unrelated to my actions and choices? Yes. That's the way this works. Or you can choose whatever risk mitigation strategy you're comfortable with: spread your deposits across multiple institutions, buy Krugerrands and bury them in the backyard, purchase 3rd party insurance whatever.
- DennisP 4y ago
  People keep talking about buying third-party insurance for this but a quick google didn't turn up any mention of insurance like that. Could you link some?
  - IncRnd 4y ago
    That's very odd, the entire first page was full of hits for me. What were you searching? Take a look at https://www.forbes.com/advisor/banking/ways-to-insure-excess-deposits/ https://www.forbes.com/advisor/banking/ways-to-insure-excess.... It explains several methods, including extra deposit insurance from CDARS, MaxSafe, Depositors Insurance Fund, etc. It also explains cash management accounts, credit union overflow, using multiple banks, and so forth. I can't help but think a good CFO or comptroller would be well aware of these.
    - DennisP 4y ago
      Yes, I'm aware that I can put money in multiple accounts, or get an account that spreads the money to multiple accounts for me. None of these are what I was responding to: the suggestion to "purchase 3rd party insurance." The closest in that article is DIF but even that isn't insurance you go and buy, it's another kind of special bank account available at DIF's member banks. As far as I can tell, you can't just go buy supplemental deposit insurance, but for some reason people keep suggesting that as something SVB's depositors should have done. (And as someone who's worked as the first employee of a startup, I can tell you it was while before we were able to get a CFO.)
IncRnd 4y ago
Are you saying that the more successful you are means that everyone else should cover your losses due to your banking relationships?
gigitrix 4y ago
You don't accept it, you deal with the regulators and FDIC and demand they release liquidity as soon as possible, which they are striving to do.
JohnFen 4y ago
If you deposit more than $250k, you absolutely should take actions to limit your risk to an acceptable level. There are myriad ways to do this. > I should just accept the impact of the bank shutting down due to events unrelated to my actions and choices? You should hedge against potential losses, yes, absolutely. You're knowingly taking a risk. Just like every other risk in business, you determine if you can take the hit if things fail, and if you can't you arrange a mechanism that will reduce the damage to a level where you can. It's just basic business management.
friend_and_foe 4y ago
Or, you should purchase private additional insurance, yes. It's not like it didn't say "covered up to $250,000" on the package, it's not like theyre the only bank in town, it's not like the FDIC was the only option.

PaulHoule 4y ago

If this is handled by the ordinary procedures used to handle bank bailouts and if the story is what we've been told (problems w/ bonds going bad because of an interest rate increase) there could be some haircut for depositors but it will not be apocalyptic. If the real problem is the quality of the loan book, however, it calls the startup and VC economy into question. We'll learn a lot more about this in the next few weeks.

simonw 4y ago
If a startup can't pay their employees at the end of the month, it's apocalyptic no matter whether or not they get access to their money again at some future date.
- PaulHoule 4y ago
  The FDIC should have payments working very close to normal early next week if not by Monday. People might be getting paid a few days late and whoever is processing payments will be working overtime but there's a good chance it will be "no big deal" for most employees. Often when a bank fails they change the sign at the branch to some other name otherwise you wouldn't know what happened. In the 1980s there was a lot of bank instability in New Hampshire, my mom kept all the statements going back to 1971, the name of the bank changed numerous times and she was not inconvenience except when the mortgage was about to come due the bank said the original payment was miscalculated and she'd owe more payments. I told her to go tell the bank regulator about it and the bank came back with their tail between their legs and forgave her the last 6 months of mortgage payments. When I was a student I was banking with an S&L in New Mexico that went under as part of the S&L crisis, they just moved me to a different S&L, it was no skin off my back. So there's a good chance that the FDIC will manage this with a minimum amount of disruption... Bank routines are handled routinely.
  - polynox 4y ago
    I'm not sure what your argument is exactly. They haven't transferred the depositors' balances to new banks, they've simply issued them IOUs (receivership certificates). From what is known about the balance sheet of SVB, it will probably be between 8 and 10 years before those IOUs are replaced with dollars. You can't pay employees, the FTB or the IRS in receivership certificates. To say that it will be "no big deal" and that there will be a "minimum amount of disruption" is simply an assertion based on no evidence.

flappyeagle 4y ago

What socialized loss are you talking about? This seems like TARP, which was a huge gain for taxpayers.

nocoiner 4y ago
TARP did turn a profit, but there was no guarantee that the US treasury wasn’t going to take a loss on it. Now, if these companies are willing to sign over warrants for 79.99% of the equity (like the banks did)… well, maybe there’s something to discuss. But otherwise reaping the rewards of capitalism while declining to take its risks - nah, I don’t think so.
- Vt71fcAqt7 4y ago
  I think by "capitalism" you mean "free market" but yeah there is a massive difference between giving loans to massive banks, the larger of which were not going to fail anyway except Morgan Stanley, and giving money to small companies that can potentialy lose all of it (AKA the "start up" business model).
deleted 4y ago
[deleted]

wnevets 4y ago

Government interference in the economy is bad* *Unless it's to bail me out.

garry 4y ago
FWIW I've never had that perspective, so I'm not sure why you are saying that.
- School-Cotton 4y ago
  Most commenters have a very low-dimensional understanding of politics, and assume if you’re a businessman or capitalist, all failings of Republicans can be attributed to you personally.
  - nightmarish 4y ago
    [flagged]
    - School-Cotton 4y ago
      None? Where did I claim in my post that I was a capitalist or investor?
      - nightmarish 4y ago
        [flagged]
- fsckboy 4y ago
  he's making a joke that I think is pretty clear, and jokes are only funny when they're stripped to their essentials. if anybody holds the perspective that the govt should use public funds to save a set of companies because ma jobs, ma innovations, etc. in the venture capital sector it would seem that person does hold that perspective, at least enough to joke about it. Unless you're making a more unlikely point that the government should be intervening all the time?

crummy 4y ago

Didn't the public get paid back, plus extra, after bailing out the banks?

garry 4y ago
https://www.cbo.gov/publication/57341 https://www.cbo.gov/publication/57341
- slowmovintarget 4y ago
  So the punchline is that while most of it (~85%) was paid back, the program wrote off $66 Billion as a loss.
deleted 4y ago
[deleted]
TuringNYC 4y ago
>> Didn't the public get paid back, plus extra, after bailing out the banks? To be totally factual, while the public did get paid back, part of the reason is that the Fed started printing money and buying bonds way above asking price to move the market. If you do this enough, prices naturally correct because everyone knows there is a buyer at a certain price and a floor price. The downside is, well, all the printed money.
- somewhereoutth 4y ago
  Which inevitably leads to inflation, requiring interest rate hikes to fix - and here we are.

garry 4y ago

These are depositors of a bank. Most startups only have one bank. Startups should live or die because they create good products and solve real problems in real markets, not because they made an arbitrary choice like which bank they started using. There's also a real risk of bank contagion if it is only safe to deposit in the largest banks.

axlee 4y ago
There was nothing arbitrary about that choice. This bank promised better deals BECAUSE they were not careful enough about the risk it entailed. That was their competitive advantage, and they made bank for it. Well, tough luck, now it's not anymore: it has nothing to do with being a large bank or a small bank, it has to do with healthy business practices.
- jlmorton 4y ago
  Sorry, I'm not sure if you're confused, but these are simple bank accounts. There was no high interest yield. The average interest yield was a fraction of a percent. No one was chasing any yield. No one was taking any risks. It's a bank account. Are you suggesting tens of thousands of small business customers need to do due dilligence on the investment practices of their banks? And what about all the other regional banks? Based on your comment, do you think the prudent thing would be for every single small business in America to transfer their funds out of regional banks into a large bank?
  - pixl97 4y ago
    >Are you suggesting tens of thousands of small business customers need to do due dilligence on the investment practices of their banks? 100% yes.
  - lolinder 4y ago
    They were definitely doing high interest yield: > ## Up to 4.50% annual percentage yield > Help make your money last longer with our Startup Money Market Account. Like with a savings account, you’ll earn up to 4.50% APY on deposits — so you gain a longer runway. Certain restrictions apply. https://www.svb.com/startup-banking https://www.svb.com/startup-banking

roenxi 4y ago

> The banks had to be saved in 2008 because they were, like, the financial system. There was a false choice there because there are multiple options that were strategically ignored by the people who own the banking system. The financial system can be replaced. The crypto people haven't been getting bailouts AFAIK and it doesn't seem to be hurting the ecosystem; we're running side by side experiments despite the best efforts of the powers that be and it is showing that in low-trust environments the system is actually pretty robust. The response should have been to get rid of the systemic inflation that incentivises people to give their money to untrustworthy institutions. > Not interested in taking another spin on the “privatize gain, socialize loss” merry-go-round. I personally feel this way. But as a matter of fairness, if banks get bailouts why shouldn't YC get bailouts? YC is a more deserving cause than the banks. This was always the problem with bailouts; it is grossly unfair that incompetent banks get a handout but potentially competent companies do not.

simple-thoughts 4y ago
The crypto people would be getting a bailout through USDC - which is exactly why I don’t support this as a web3 developer. The ideal for crypto is a free marketplace and bad products that failed to do due diligence, were negligent, relied on false government promises, and lied to users must be allowed to fail.

axlee 4y ago

110% agree. At some point, risk HAS to be treated as what it is, risk, rather than just "another way to do things". We have so many banks treating risk as what it is, and pricing for it, well these people decided to go to another bank to get funding, well deal with it. It's not like the average citizen has this luxury.

garry 4y ago
The equity holders and management of SVB are likely to be wiped. In the petition we specifically call this out: we are not asking for their risks to be "socialized." Depositors have a reasonable expectation that when they choose a bank (especially a publicly traded bank that is regulated) that their deposits are safe. If this is not true, then most people will only bank with the largest banks. That's not a good situation. We're asking for depositors to be made whole and for regulation to prevent this from happening to depositors in the future.
- andsoitis 4y ago
  > If this is not true, then most people will only bank with the largest banks. That's not a good situation. It is an elite class of people who banked at SVB. Most people bank with less risk-taking community banks or the very large ones. Casting SVB as an underdog and the people who bank with them as helpless is upside down.
- nightmarish 4y ago
  [flagged]
  - nocoiner 4y ago
    [flagged]
  - JanSt 4y ago
    SVB did the mismanagement, didn‘t they?
    - 4y ago

mc32 4y ago

And with all their connections, one would imagine they could raise some funding in exchange for shares, like their startups do. Why not?

tikkun 4y ago

Disagree. People who invested in SVB should be wiped out, probably. People who deposited in SVB should not be wiped out. Depositors in banks aren't expected to do due diligence on the financial statements of the bank they're depositing in. Have you read the 10-K filings of your bank in detail?

cmurf 4y ago
Correct. The $250,000 FDIC cap is a favor to banks. They only pay fees to insure up to that amount. And it's bogus. The FDIC should require deposits to be insured, no matter the amount.
- oldgradstudent 4y ago
  The insurance is there to prevent run on retail banks by the general public. It is expected that you manage your risks if you have significantly more than the insured amount.
- downvotetruth 4y ago
  I'm not going to pay to insure a millionaire. Insurance is not free.
  - geodel 4y ago
    With the way things are going, don't be surprised if some silicon valley innovator come with insurance product that can be purchased after the fact. With marketing like "Come, Disrupt the Insurance Industry" it might just work out fine
    - muzz 4y ago
      The first sentence is basically what Tan is proposing
      - trogdor 4y ago
        Minus the “purchased” part. He just wants it.

AlchemistCamp 4y ago

Startups have been anything but “socialized losses”. They’ve literally been the growth engine of the country for the past twenty years. According to Brookings, “Annually, venture investment makes up only 0.2% of GDP, but delivers an astonishing 21% of U.S. GDP in the form of VC-backed business revenues.” https://www.brookings.edu/research/as-the-venture-capital-game-gets-bigger-the-midwest-keeps-missing-out/ https://www.brookings.edu/research/as-the-venture-capital-ga...

andrepd 4y ago
Who cares if it's 99% of GDP of that is going into the hands of venture capitalists?
- molsongolden 4y ago
  Or… also to all of the people employed by the startups?
  - bigbillheck 4y ago
    You mean the 'independent contractors'?
    - molsongolden 4y ago
      All of those VC-backed companies are out there spending that VC money by paying it to employees.
- AlchemistCamp 4y ago
  Anyone who has really looked at the 2nd order effects. SV-style tech startups distribute more equity to employees than any other sector of business I know of and the average VC’s returns are worse than private equity, worse than the stock market and worse than real estate. You only hear about the biggest winners, but venture capitalists are taking on very long odds and the vast majority lose. More importantly, we all benefit from the advances the industry leads to—such as this wonderful phone I’m typing this comment into that can access and search nearly any encyclopedia, map or song in the world in seconds, from almost anywhere.

fallingknife 4y ago

I have an idea. The startup depositors are made whole in exchange for the FDIC receiving shares in the company that dilute the VCs in an amount depending on company valuation and balance lost. This way you bail out the small business and make the VCs pay.

ashwagary 4y ago
It would be safer for all if the FDIC sticks to what it does best and doesn't take on additional risk outside its mandate as a favor to irresponsible businesses.

cmurf 4y ago

Do you understand what you're saying though? The consequence is, cash deposits for thousands of small businesses, are unavailable. The direct consequence is these businesses can't pay payroll, and can't pay vendors. This isn't about socializing investor's losses. It's about making sure employees, contractors, and vendors get paid by fully backing cash deposits.

JJMcJ 4y ago

SVB has some ordinary people as depositors, with a regular commercial bank as their Boston Private subsidiary. It would be very disruptive and cruel if they lost all or much of their deposits. SVB's stockholders, on the other hand . . .

lolinder 4y ago
The ordinary-people depositors almost certainly don't have more than $250k in the bank, so they will already be made whole by the FDIC on Monday.
- JJMcJ 4y ago
  That is absolutely the plan. The assets are now with a new bank that will be open for business on Monday. FDIC promises for the ordinary-people, everything will be uninterrupted. Checks from the older SVB accounts will clear, debit cards will work, money will be available.

cscurmudgeon 4y ago

Right there in the article. I guess not reading obvious text bolded is the hip new thing to do: > Small business depositors at Silicon Valley Bank should be made whole. Regulators need to conduct a backstop of depositors. We are not asking for a bank bailout. > Not interested in taking another spin on the “privatize gain, socialize loss” merry-go-round Where are they asking for that? Edit: And of course, downvoted. Lol.

kelnos 4y ago
The two assertions, "depositors should be made whole", and "we are not asking for a bank bailout" are a bit... misleading? No, they are technically not asking for a bank bailout, but they are asking for a bailout.

CM30 4y ago

Agreed 100%. So many issues with the economic system come from the fact companies want capitalism when it benefits them, but something akin to socialism when there's a risk they'll fail. So no. If your bank can't make payments? Tough, it should close down and go into administration or whatever. Maybe the government can bail out individuals, but companies relying on said banks can deal with bankruptcy or closure like it was any other sort of business risk. Company can't pay a higher minimum wage (or a livable one)? Then deal with less staff, or shut down, your business model simply doesn't work and isn't profitable. And if your industry is dying because of technology (like say, Australian media outlets with Google and the internet), then tough. Accept it's probably dead and either downsize, come up with a new business strategy or close down. So many seem to want a dog eat dog system when they're winning, but beg for mercy when it goes wrong.

scarface74 4y ago

I’m torn. When I put my money in the bank, I don’t consider that an “investment” and neither did the employees. I’m the last person to feel sorry for BigTech employees (I am one) making $300K+ a year (I don’t. I’m not complaining) who got laid off and didn’t save during the good times (I have used almost every penny of my after tax signing bonus/RSUs toward “increasing my net worth”). But most of the people working at startups aren’t making nearly that much (?). Why should they suffer harm? Could the CFOs at these companies known they were making risky bets (serious question)

oldgradstudent 4y ago
> Could the CFOs at these companies known they were making risky bets (serious question) Banks fail. That's part of life. Every decade or two there is a wave of bank failures. It's a risk that should be managed.
subsistence234 4y ago
apparently SVB offered APY far above what other banks were offering.
kelnos 4y ago
> When I put my money in the bank, I don’t consider that an “investment” and neither did the employees. No, but you should be aware that if you put money into a deposit account, and the bank fails, you are only guaranteed (by the FDIC) to get $250k of that money back. This is usually not a problem, as most individuals don't have that much cash, period, let alone in a single bank account. But it's a problem for businesses, obviously. And yes: > Could the CFOs at these companies known they were making risky bets Absolutely! Putting more than the FDIC-insured max into a deposit account is an obvious risk that any CFO (or corporate finance person in general) will absolutely know about.

lamontcg 4y ago

With this being the top-voted sentiment we are so very, very fucked. In the 2009 crisis the banks got bailed out because we were in the position of very nearly breaking the buck on money market funds. The interconnectedness of the entire financial system meant that we were plausibly looking at a situation where most businesses wouldn't be able to make payroll soon. ATMs could start to not give out cash. The whole short-term lending market was in danger of freezing up solid. The lesson from that seems to not have been "we need to regulate things better up front so companies cannot make bets that place the system at risk and imperil everyone" but "fuck it, let it all burn down". And we've got Republicans controlling the House that will drive the financial system into a brick wall hoping that they can blame it all on Biden and take over in the next election. Honestly starting to think the right idea might be to stock up on food, water, gas and toilet paper like I'm worried about another pandemic and go bury $10k in the backyard. People have gotten fucking insane.

deleted 4y ago
[deleted]
ashwagary 4y ago
>Honestly starting to think the right idea might be to stock up on food, water, gas and toilet paper like I'm worried about another pandemic and go bury $10k in the backyard. If you are saying that you should take additional personal steps to protect yourself from downside risks, the answer is yes. It's not a foolish way to live and in the long term, the benefits outweigh the costs, similar to being adequately insured.

Enginerrrd 4y ago

Can someone start a counter-petition requesting they NOT get a bailout? I've been talking to deaf ears for the better part of a decade about what I called Silicon Valley Sickness and how it's had some really negative impacts in a lot of sectors outside of tech.

deleted 4y ago

[deleted]

moviedo 4y ago

I work at a startup that may be affected by this situation and even I agree with your sentiment. If the startups affected by this ordeal are bailed out, then at the bare minimum we the public should get 10% equity for every startup saved. Let's go the VC route and get something for our tax dollars(socialize those gains).

deleted 4y ago

[deleted]

glerk 4y ago

I am leaning libertarian and I am very sympathetic to this point of view. However, with the amount of taxes these companies pay and the economic growth they generate, they have every right to ask the question: when does the government benefit us? If this very costly government is not able to guarantee the integrity of its federal reserve notes deposits, then what is its purpose? What makes it legitimate?

scarface74 4y ago
How much in taxes do money losing startups pay? But, I am sympathetic to the employees and even the owners of the startups. They didn’t take risky bets. I couldn’t imagine spreading my business as a startup (if I had one) to 10 different banks and trying to manage all of the obligations.
briHass 4y ago
How is this the government's fault, unless you want to talk about tighter regulations? From a libertarian perspective, you deposit money at a bank, they make you sign documents about the well-known FDIC insurance limits (a bonus insurance offered by the government), and you make the free choice to mitigate whatever risks you think you have based on that 250K vs whatever you plan to deposit. It's essentially a business choosing to underinsure themselves.
- glerk 4y ago
  I wouldn't say it is the government's fault, but is it that unreasonable to expect this basic safety net as a benefit for being a subject/customer of this government? Various organs of the government are claiming the authority to create and enforce financial regulations. And yet, cash deposits in government-backed currency at a 100% government-regulated bank can still vanish overnight. Given the huge costs of maintaining this government, and given the similar benefits it provides to others (Wall Street bailouts, stimulus checks, student debt forgiveness, etc.), is it that unreasonable to ask what YC is asking?
  - eropple 4y ago

deleted 4y ago

[deleted]

blurbleblurble 4y ago

Who exactly are you trying to punish here?

huijzer 4y ago

Sounds also as a great opportunity for the, so called, "angel investors" to show that they are.

tarsinge 4y ago

There is an intermediate solution that seems always conveniently ignored: You ask for taxpayers money to save a business and its employees? Then it’s a good old nationalization. Everyone is happy except shareholders and execs that are rightfully not made whole for their bad bets and management, no special exception to market rules.

TomSwirly 4y ago

> The banks had to be saved in 2008 because they were, like, the financial system. They could easily have jailed a lot of bankers, and saved the banks. They didn't. HSBC alone pleaded guilty to over 1000 counts of money laundering, each one of which should have gotten someone 7-14 years in jail.

berniedurfee 4y ago

Agreed. The government bailing out private industry seems counter to the maturation of private industry. It sucks that the ones will who suffer the most have the least culpability in this situation.

n3rv 4y ago

pretty much this. hard pass on signing this nonsense.