4 ms·

The reason is because there are countless scenarios in the US economic system, where people/businesses fail cause of no fault of their own, but they are told to

The reason is because there are countless scenarios in the US economic system, where people/businesses fail cause of no fault of their own, but they are told tough luck that's the free market at work cause these people are simply unconnected or their failure is deemed unimportant. It's why the finanical bailouts left a bitter taste for anyone paying attention, and why gov't action here is immediately scoffed at.

Cyph0n 4y ago
Exactly. Rules for thee but not for me.
- stanleydrew 4y ago
  The problem is that we don't yet know what the "rules" will be in this case, and a lot of commenters are getting out over their skis assuming that tax money is going to go into the bank accounts of SVB depositors or something similar.
- bratbag 4y ago
  Different rules for something that could risk systemic failure, more like.
  - dragontamer 4y ago
    We literally have Dodd-Frank rules built up over the last 15 years to prevent these things from becoming a systemic failure. I get that people are still squeamish about 2008. But our banking system is quite different today compared to back then. We built up these rules so that we wouldn't have to bailout banks in these situations anymore. That's what the entire damn point was. If it doesn't work, then it doesn't work. But I for one am more than willing to test out these rules... at least for the next few weeks... to see if they actually work. If they don't work, then we strengthen our regulations over the next 10 years. If they do work, then... success. -------- We absolutely shouldn't just hit the bailout button before understanding this problem. 2008 + Dodd Frank was supposed to prevent this from being a systemic cataclysm. ----------- What probably needs to happen is for Thursday's bank run to be undone. Issue a clawback so that the $46 Billion that escaped on Thursday and punish those who bankrun / collapsed the bank in a panicky stampede. That's far, far more fair than a bailout. Redistribute the money in a more fair way, but accept the risk that SIVB made for itself and its community.
    - SpicyLemonZest 4y ago
      What happened from a regulatory perspective is pretty straightforward; in 2018 large regional banks like SVB successfully lobbied for a partial Dodd-Frank exemption. (https://www.npr.org/sections/thetwo-way/2018/05/22/613390275/congress-to-undo-part-of-dodd-frank-easing-rules-for-mid-sized-smaller-banks https://www.npr.org/sections/thetwo-way/2018/05/22/613390275...)
    - dhbanes 4y ago
      How do you expect Dodd-Frank to prevent every regional bank depositor with half a brain cell attempting to move their deposits to a big 4 first thing Monday morning? Do you understand the consequences of that? If that happens, dozens and perhaps eventually hundreds of regional banks will fail and many many more depositors will be out money.
      - dragontamer 4y ago
        Do you understand how crap SIVB's books were? 50%+ held to maturity? Long dated 10Y and 30Y bonds? A complete lack of a Risk Officer from April 2022 through January 2023? Given how utterly terribly SIVB was run, I'm not exactly expecting a major issue come Monday. I'm looking at the books of like Ally Bank, and they're way better. https://d18rn0p25nwr6d.cloudfront.net/CIK-0000040729/f4eb4064-f7ec-4ee1-962f-fe4b69d8a58d.pdf https://d18rn0p25nwr6d.cloudfront.net/CIK-0000040729/f4eb406... ---------- If there are other banks as poorly run as SIVB, they probably do deserve to collapse. But I also don't expect there to be many banks with that level of stupidity. At Silicon Valley Bank, we're basically looking at a bank, whose Risks were completely slept on during the entire period of the fastest rising federal funds rate in the last half-century. (Or really, the position of Chief Risk Officer was vacant for this entire period). I assume the other banks had better risk management.
        schrodinger 4y ago
        Mostly agree, but panic isn't always rational and I suspect most people will react emotionally rather than look at their bank's books like you did.
  - brasic 4y ago
    SVB explicitly argued that it was not capable of risking systemic failure and on that basis gained an exemption from Dodd-Frank rules that would have prevented them from failing to hedge against interest rate risk that took them down. https://fortune.com/2023/03/11/silicon-valley-bank-svb-ceo-greg-becker-dodd-frank-trump-rollback-systemically-important-fdic/ https://fortune.com/2023/03/11/silicon-valley-bank-svb-ceo-g... There has to be some accounting for that.
harles 4y ago
I don’t understand this debate. The article says nothing about whether or not depositors will be bailed out.
- ianai 4y ago
  It says exactly that: “ Janet Yellen said on Sunday that the US government was working closely with banking regulators to help depositors at Silicon Valley Bank but dismissed the idea of a bailout. […] “Let me be clear that during the financial crisis, there were investors and owners of systemic large banks that were bailed out . . . and the reforms that have been put in place means we are not going to do that again,” Yellen said. “But we are concerned about depositors, and we’re focused on trying to meet their needs.”“
  - harles 4y ago
    The quote says the opposite of that. Depositors are not investors or owners. How can so many people misread this?
    - ianai 4y ago
      Reread it.
      - schrodinger 4y ago
        She is saying the bank will go out of business, and any people who owned stock in it will lose all of that money, hence the difference from 2008. And then continues on to say that _depositors_, i.e. the people who had savings accounts there, will be helped (although she notably didn't commit to 100%).
  - Kon-Peki 4y ago
    I think we should assume that they are going to be making the advance deposit earlier in the week rather than later, and it will be as large as they can possibly make it.
- 4y ago
hirako2000 4y ago
Well put, can pull the "capitalism" at the expense of few to many yet "socialist" when conductive for mostly a few, but not many times. I still think they will get away with bailing out several banks that will otherwise fall hence the system. Via means that adhere to whatever rules were put in place.
ianai 4y ago
Except this is the opposite of what happened in 2008 with bailing out the banks. Then, the banks got public money to remain solvent. Here, the bank is taking the hit and the government is ensuring the depositors get their funds back. In 08 people were kicked out of their homes and banks were propped up with public funds. Here, the depositors are being made whole and the bank is going out of business. The salt is your typical 0 knowledge hot take. It’s absolutely in the interest of the greater economy to have a functioning banking system backing high risk/high reward activities like Silicon Valley. And charge the risk appropriately high fees, of course. SV has been a very bright spot in the economy for several decades now - through thick and thin. If anything, it’s a lesson about how assets should be accounted for in corporate statements. It’s also a statement that the perception of SV is a little sour and could use some reflection. Maybe look for ways to better engage the rest of the community and figure out where resentment stems. (I’d guess calling large swaths of the US “fly over country”, charging high prices, and other consumer feedback involved.)
- auntienomen 4y ago
  Tangent: In decades of socializing in NYC and the Bay Area, I've only ever seen the term 'flyover country' used by people complaining that the coastal elites look down on them. Never once heard the term from an actual coastal elite.
  - ianai 4y ago
    And I live in “flyover country” and hear it plenty and it is a fact of life and business here. Look, when corporations like Amazon look for a new HQ they head to places like NYC. They say it’s because of the larger labor pools there. And it’s even valid to an extent - Arizona keeps getting semi fabs because they already have semi fabs and labor. The opposite would be looking for some location with the characteristics to grow over time into the location a company wants and making the expanse a long term project. Population characteristics absolutely can change on the scale of decades. Edit-Just to put a point on this. “Flyover country” is undeveloped country. It’s cheaper to develop. If you want to build a huge fab in the middle of nowhere it’s going to cost little more than the costs of supplies and labor. And there’s always a way to get labor if the price is right. Do it in NYC or SF and you’re competing with all the other current/future uses of that land and it’s going to be expensive. Probably going to face zoning restrictions.
helsinkiandrew 4y ago
Because if a normal business goes bust leaving customers out of pocket, it’s usually only a small percent of the customers “wealth” (and often insurance will cover it). If someone’s bank goes bust they can loose a much larger proportion of their wealth. Often causing them to go bust, causing more bankruptcies and job losses. Governments act as insurer of last resort for most bank defaults, because the confidence of the banking system and money is integral to the countries existence.
- thesimon 4y ago
  > If someone’s bank goes bust they can loose a much larger proportion of their wealth But only if they decide to hold their wealth in uninsured deposits to save money or effort.

Cyph0n 4y ago

Exactly. Rules for thee but not for me.

stanleydrew 4y ago
The problem is that we don't yet know what the "rules" will be in this case, and a lot of commenters are getting out over their skis assuming that tax money is going to go into the bank accounts of SVB depositors or something similar.
bratbag 4y ago
Different rules for something that could risk systemic failure, more like.
- dragontamer 4y ago
  We literally have Dodd-Frank rules built up over the last 15 years to prevent these things from becoming a systemic failure. I get that people are still squeamish about 2008. But our banking system is quite different today compared to back then. We built up these rules so that we wouldn't have to bailout banks in these situations anymore. That's what the entire damn point was. If it doesn't work, then it doesn't work. But I for one am more than willing to test out these rules... at least for the next few weeks... to see if they actually work. If they don't work, then we strengthen our regulations over the next 10 years. If they do work, then... success. -------- We absolutely shouldn't just hit the bailout button before understanding this problem. 2008 + Dodd Frank was supposed to prevent this from being a systemic cataclysm. ----------- What probably needs to happen is for Thursday's bank run to be undone. Issue a clawback so that the $46 Billion that escaped on Thursday and punish those who bankrun / collapsed the bank in a panicky stampede. That's far, far more fair than a bailout. Redistribute the money in a more fair way, but accept the risk that SIVB made for itself and its community.
  - SpicyLemonZest 4y ago
    What happened from a regulatory perspective is pretty straightforward; in 2018 large regional banks like SVB successfully lobbied for a partial Dodd-Frank exemption. (https://www.npr.org/sections/thetwo-way/2018/05/22/613390275/congress-to-undo-part-of-dodd-frank-easing-rules-for-mid-sized-smaller-banks https://www.npr.org/sections/thetwo-way/2018/05/22/613390275...)
  - dhbanes 4y ago
    How do you expect Dodd-Frank to prevent every regional bank depositor with half a brain cell attempting to move their deposits to a big 4 first thing Monday morning? Do you understand the consequences of that? If that happens, dozens and perhaps eventually hundreds of regional banks will fail and many many more depositors will be out money.
    - dragontamer 4y ago
      Do you understand how crap SIVB's books were? 50%+ held to maturity? Long dated 10Y and 30Y bonds? A complete lack of a Risk Officer from April 2022 through January 2023? Given how utterly terribly SIVB was run, I'm not exactly expecting a major issue come Monday. I'm looking at the books of like Ally Bank, and they're way better. https://d18rn0p25nwr6d.cloudfront.net/CIK-0000040729/f4eb4064-f7ec-4ee1-962f-fe4b69d8a58d.pdf https://d18rn0p25nwr6d.cloudfront.net/CIK-0000040729/f4eb406... ---------- If there are other banks as poorly run as SIVB, they probably do deserve to collapse. But I also don't expect there to be many banks with that level of stupidity. At Silicon Valley Bank, we're basically looking at a bank, whose Risks were completely slept on during the entire period of the fastest rising federal funds rate in the last half-century. (Or really, the position of Chief Risk Officer was vacant for this entire period). I assume the other banks had better risk management.
      - schrodinger 4y ago
        Mostly agree, but panic isn't always rational and I suspect most people will react emotionally rather than look at their bank's books like you did.
- brasic 4y ago
  SVB explicitly argued that it was not capable of risking systemic failure and on that basis gained an exemption from Dodd-Frank rules that would have prevented them from failing to hedge against interest rate risk that took them down. https://fortune.com/2023/03/11/silicon-valley-bank-svb-ceo-greg-becker-dodd-frank-trump-rollback-systemically-important-fdic/ https://fortune.com/2023/03/11/silicon-valley-bank-svb-ceo-g... There has to be some accounting for that.

harles 4y ago

I don’t understand this debate. The article says nothing about whether or not depositors will be bailed out.

ianai 4y ago
It says exactly that: “ Janet Yellen said on Sunday that the US government was working closely with banking regulators to help depositors at Silicon Valley Bank but dismissed the idea of a bailout. […] “Let me be clear that during the financial crisis, there were investors and owners of systemic large banks that were bailed out . . . and the reforms that have been put in place means we are not going to do that again,” Yellen said. “But we are concerned about depositors, and we’re focused on trying to meet their needs.”“
- harles 4y ago
  The quote says the opposite of that. Depositors are not investors or owners. How can so many people misread this?
  - ianai 4y ago
    Reread it.
    - schrodinger 4y ago
      She is saying the bank will go out of business, and any people who owned stock in it will lose all of that money, hence the difference from 2008. And then continues on to say that _depositors_, i.e. the people who had savings accounts there, will be helped (although she notably didn't commit to 100%).
- Kon-Peki 4y ago
  I think we should assume that they are going to be making the advance deposit earlier in the week rather than later, and it will be as large as they can possibly make it.
4y ago

hirako2000 4y ago

Well put, can pull the "capitalism" at the expense of few to many yet "socialist" when conductive for mostly a few, but not many times. I still think they will get away with bailing out several banks that will otherwise fall hence the system. Via means that adhere to whatever rules were put in place.

ianai 4y ago

Except this is the opposite of what happened in 2008 with bailing out the banks. Then, the banks got public money to remain solvent. Here, the bank is taking the hit and the government is ensuring the depositors get their funds back. In 08 people were kicked out of their homes and banks were propped up with public funds. Here, the depositors are being made whole and the bank is going out of business. The salt is your typical 0 knowledge hot take. It’s absolutely in the interest of the greater economy to have a functioning banking system backing high risk/high reward activities like Silicon Valley. And charge the risk appropriately high fees, of course. SV has been a very bright spot in the economy for several decades now - through thick and thin. If anything, it’s a lesson about how assets should be accounted for in corporate statements. It’s also a statement that the perception of SV is a little sour and could use some reflection. Maybe look for ways to better engage the rest of the community and figure out where resentment stems. (I’d guess calling large swaths of the US “fly over country”, charging high prices, and other consumer feedback involved.)

auntienomen 4y ago
Tangent: In decades of socializing in NYC and the Bay Area, I've only ever seen the term 'flyover country' used by people complaining that the coastal elites look down on them. Never once heard the term from an actual coastal elite.
- ianai 4y ago
  And I live in “flyover country” and hear it plenty and it is a fact of life and business here. Look, when corporations like Amazon look for a new HQ they head to places like NYC. They say it’s because of the larger labor pools there. And it’s even valid to an extent - Arizona keeps getting semi fabs because they already have semi fabs and labor. The opposite would be looking for some location with the characteristics to grow over time into the location a company wants and making the expanse a long term project. Population characteristics absolutely can change on the scale of decades. Edit-Just to put a point on this. “Flyover country” is undeveloped country. It’s cheaper to develop. If you want to build a huge fab in the middle of nowhere it’s going to cost little more than the costs of supplies and labor. And there’s always a way to get labor if the price is right. Do it in NYC or SF and you’re competing with all the other current/future uses of that land and it’s going to be expensive. Probably going to face zoning restrictions.

helsinkiandrew 4y ago

Because if a normal business goes bust leaving customers out of pocket, it’s usually only a small percent of the customers “wealth” (and often insurance will cover it). If someone’s bank goes bust they can loose a much larger proportion of their wealth. Often causing them to go bust, causing more bankruptcies and job losses. Governments act as insurer of last resort for most bank defaults, because the confidence of the banking system and money is integral to the countries existence.

thesimon 4y ago
> If someone’s bank goes bust they can loose a much larger proportion of their wealth But only if they decide to hold their wealth in uninsured deposits to save money or effort.