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The government should “rescue” people who have money in a failing bank. Banking should not be an adventure people seem to be conflating the people who invested

by jzb 4y ago

The government should “rescue” people who have money in a failing bank. Banking should not be an adventure people seem to be conflating the people who invested in SVB and the people and businesses, who had money there, because they have to move money around or store money to run their businesses or their lives. Having more money than the FDIC insures is not very hard for any business larger than a few people. Government should absolutely be in the business of protecting the people storing their money in the bank. People investing in a bank as a security should be responsible for that risk, yes, because they’ll be getting the profits if successful.

bravo22 4y ago
The banks can maintain a central body with insurance to bail out the failed ones which is essentially what FDIC is. That part isn't the government stepping in. The step in part is what VCs and corps are asking for which is to be made whole. In reality they should have realized -- as sophisticated actors -- that large amounts of money are always at risk. Even if you put them in a bank because it is not a vault. They're investments that you just don't have control over. If the wish was to secure their millions to billions of capitals it should have been invested by them in some sort of instrument. This is what any treasury in a large corp already does. So it isn't unknown knowledge. It would be as if they stored their most critical IP in a cloud server. It went down and now they want to be made whole. You can't arbitrate away large financial risk anymore than you can technical risk. So you must understand it when you're dealing with substantial amounts of it. FDICs 250K limit works fine for unsophisticated retail customers.
- jzb 4y ago
  You realize that the "sophisticated actors" here are by and large employers, right? Depending on how much and how fast they get their money back, it isn't just those folks who are going to pay the price. It's the people employed by them who will suffer first, and their spouses and kids (assuming they have them). This "they should have known better" narrative is garbage. Companies have no choice but to park money in amounts greater than $250K. Some of the companies with SVB (as I understand it) were required to bank with them. There's also the fact that SVB might well have been fine if not for the Thiel-induced run on the bank. But even if I bought into the idea that primary depositors were at fault, I'm not keen to see all the collateral damage that's going to come out of this and hit workers and their families.

by jzb 4y ago

bravo22 4y ago

The banks can maintain a central body with insurance to bail out the failed ones which is essentially what FDIC is. That part isn't the government stepping in. The step in part is what VCs and corps are asking for which is to be made whole. In reality they should have realized -- as sophisticated actors -- that large amounts of money are always at risk. Even if you put them in a bank because it is not a vault. They're investments that you just don't have control over. If the wish was to secure their millions to billions of capitals it should have been invested by them in some sort of instrument. This is what any treasury in a large corp already does. So it isn't unknown knowledge. It would be as if they stored their most critical IP in a cloud server. It went down and now they want to be made whole. You can't arbitrate away large financial risk anymore than you can technical risk. So you must understand it when you're dealing with substantial amounts of it. FDICs 250K limit works fine for unsophisticated retail customers.

jzb 4y ago
You realize that the "sophisticated actors" here are by and large employers, right? Depending on how much and how fast they get their money back, it isn't just those folks who are going to pay the price. It's the people employed by them who will suffer first, and their spouses and kids (assuming they have them). This "they should have known better" narrative is garbage. Companies have no choice but to park money in amounts greater than $250K. Some of the companies with SVB (as I understand it) were required to bank with them. There's also the fact that SVB might well have been fine if not for the Thiel-induced run on the bank. But even if I bought into the idea that primary depositors were at fault, I'm not keen to see all the collateral damage that's going to come out of this and hit workers and their families.