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Businesses need to pay their employees from the money they have not from taxpayer money. If a business loses that money because their banking partner lost the m

Businesses need to pay their employees from the money they have not from taxpayer money. If a business loses that money because their banking partner lost the money, taxpayers have no obligation to help (beyond the 250k)

macintux 4y ago
Taxpayers benefit enormously from a banking system that isn't a crapshoot. Workers benefit from businesses being able to make payroll. The government isn't offering to bail out depositors. And taxpayers aren't even paying the $250k, that's from an insurance fund paid into by banks.
- nodemaker 4y ago
  Can the banking system learn from this and improve? For sure it can and that would benefit everyone. But we cant retroactively change the rules. In fact you can argue that people would vote more pro-legistation if something like this was allowed to fail like it should and that would protect more people in the long run. And yes if an insurance fund pays for it then I am all for it. Someone other than the taxpayer has to foot this bill thats all.
  - macintux 4y ago
    Each time we learn new things, impose new regulations, and make new mistakes.
  - colinmorelli 4y ago
    The only way taxpayers avoid footing the bill here is if the FDIC can sell assets to cover 100% of deposits in a very short timeframe, or if another bank comes in and agrees to cover the shortfall. In any other scenario, if businesses with deposits in SVB lose some material amount of their cash, people will be getting laid off, prices will increase for some goods, and some companies will fail. All of these things negatively impact taxpayers. It's not clear to me what the better outcome here is, but this is going to affect everyday people either way.
    - tome 4y ago
      > if businesses with deposits in SVB lose some material amount of their cash, people will be getting laid off, prices will increase for some goods Why so necessarily? The first thing to happen is that their equity holders will take a hit. Only then will the other things you state happen. And if the equity holders take a hit, well, that's exactly why they're equity holders.
      - colinmorelli 4y ago
        Losing deposits means losing cash flow to fund runway. Many tech companies just spent the last year optimizing to get 18-24 months cash runway. If they just lost several months of that, they will need to recover it somehow. That will come either from layoffs or increasing prices. Similarly, companies raise capital to achieve goals. If 10-20% of that capital vaporizes, the ability to achieve those goals will be harmed. Some companies will not achieve those goals, and may be unable to raise future financing. We're talking about operating cash for these companies. The hit to equity holders is not the problem right now. Of course my comments above refer mostly to venture backed tech companies, but that represents a significant share of SVB's clients.
        tome 4y ago
        > Many tech companies just spent the last year optimizing to get 18-24 months cash runway. If they just lost several months of that, they will need to recover it somehow. That will come either from layoffs or increasing prices. Or by raising earlier than expected, as a down round? I don't understand why a solid company would be in trouble (though I'm not convinced that a high proportion of SV companies are actually solid).
        colinmorelli 4y ago
        > Or by raising earlier than expected, as a down round? Raising down rounds will be lower on the priority list to layoffs. Most companies would vastly prefer to buy more time to grow into their next milestone than to admit they can't achieve it and raise at a lower valuation. We generally know this to be true, in part because we just watched it happen across the entire tech ecosystem over the last ~12 months or so. Logically, it makes sense. VC backed startups operate on optics and momentum. Layoffs are recoverable, failing to hit goals is much less so (I'm speaking purely about optics here, not my personal preference). > though I'm not convinced that a high proportion of SV companies are actually solid This is likely accurate. But that's not necessarily criticism, most companies in their early days aren't "solid" (if by solid you mean default alive and/or having a path to profitability). SVB is overly exposed to these types of clients, which is why I think there stands to be a large impact here if depositors need to take a 10-20% haircut.
- SkyPuncher 4y ago
  > Taxpayers benefit enormously from a banking system that isn't a crapshoot. I wonder how many people here would be screaming the exact opposite if this was their personal banking account? Yes, you can spread your money among multiple accounts. However, data shows it's exceedingly rare (1) an individual bank to fail (2) depositors to loose any money when a bank fails. According to the FDIC list of failed banks [0], there have only been 17 bank failures in the past 5 years. It's been 9 years since a bank has failed without finding an acquirer. To say this is something you must plan for is a bit of a stretch. * https://www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/ https://www.fdic.gov/resources/resolutions/bank-failures/fai...
admax88qqq 4y ago
Taxpayers arn't paying the 250k, the FDIC is funded by fees they charge the banks, not taxpayers.
lambo4bkfast 4y ago
Taxpayers do have an obligation to ensure that I do not view my checking account as a risky loan to the bank... It is not a positive outcome for taxpayers if they no longer view their deposits as safe. $250k is also a ridiculously low insurance amount for any company with a non-trivial number of employees.

macintux 4y ago

Taxpayers benefit enormously from a banking system that isn't a crapshoot. Workers benefit from businesses being able to make payroll. The government isn't offering to bail out depositors. And taxpayers aren't even paying the $250k, that's from an insurance fund paid into by banks.

nodemaker 4y ago
Can the banking system learn from this and improve? For sure it can and that would benefit everyone. But we cant retroactively change the rules. In fact you can argue that people would vote more pro-legistation if something like this was allowed to fail like it should and that would protect more people in the long run. And yes if an insurance fund pays for it then I am all for it. Someone other than the taxpayer has to foot this bill thats all.
- macintux 4y ago
  Each time we learn new things, impose new regulations, and make new mistakes.
- colinmorelli 4y ago
  The only way taxpayers avoid footing the bill here is if the FDIC can sell assets to cover 100% of deposits in a very short timeframe, or if another bank comes in and agrees to cover the shortfall. In any other scenario, if businesses with deposits in SVB lose some material amount of their cash, people will be getting laid off, prices will increase for some goods, and some companies will fail. All of these things negatively impact taxpayers. It's not clear to me what the better outcome here is, but this is going to affect everyday people either way.
  - tome 4y ago
    > if businesses with deposits in SVB lose some material amount of their cash, people will be getting laid off, prices will increase for some goods Why so necessarily? The first thing to happen is that their equity holders will take a hit. Only then will the other things you state happen. And if the equity holders take a hit, well, that's exactly why they're equity holders.
    - colinmorelli 4y ago
      Losing deposits means losing cash flow to fund runway. Many tech companies just spent the last year optimizing to get 18-24 months cash runway. If they just lost several months of that, they will need to recover it somehow. That will come either from layoffs or increasing prices. Similarly, companies raise capital to achieve goals. If 10-20% of that capital vaporizes, the ability to achieve those goals will be harmed. Some companies will not achieve those goals, and may be unable to raise future financing. We're talking about operating cash for these companies. The hit to equity holders is not the problem right now. Of course my comments above refer mostly to venture backed tech companies, but that represents a significant share of SVB's clients.
      - tome 4y ago
        > Many tech companies just spent the last year optimizing to get 18-24 months cash runway. If they just lost several months of that, they will need to recover it somehow. That will come either from layoffs or increasing prices. Or by raising earlier than expected, as a down round? I don't understand why a solid company would be in trouble (though I'm not convinced that a high proportion of SV companies are actually solid).
        colinmorelli 4y ago
        > Or by raising earlier than expected, as a down round? Raising down rounds will be lower on the priority list to layoffs. Most companies would vastly prefer to buy more time to grow into their next milestone than to admit they can't achieve it and raise at a lower valuation. We generally know this to be true, in part because we just watched it happen across the entire tech ecosystem over the last ~12 months or so. Logically, it makes sense. VC backed startups operate on optics and momentum. Layoffs are recoverable, failing to hit goals is much less so (I'm speaking purely about optics here, not my personal preference). > though I'm not convinced that a high proportion of SV companies are actually solid This is likely accurate. But that's not necessarily criticism, most companies in their early days aren't "solid" (if by solid you mean default alive and/or having a path to profitability). SVB is overly exposed to these types of clients, which is why I think there stands to be a large impact here if depositors need to take a 10-20% haircut.
SkyPuncher 4y ago
> Taxpayers benefit enormously from a banking system that isn't a crapshoot. I wonder how many people here would be screaming the exact opposite if this was their personal banking account? Yes, you can spread your money among multiple accounts. However, data shows it's exceedingly rare (1) an individual bank to fail (2) depositors to loose any money when a bank fails. According to the FDIC list of failed banks [0], there have only been 17 bank failures in the past 5 years. It's been 9 years since a bank has failed without finding an acquirer. To say this is something you must plan for is a bit of a stretch. * https://www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/ https://www.fdic.gov/resources/resolutions/bank-failures/fai...

admax88qqq 4y ago

Taxpayers arn't paying the 250k, the FDIC is funded by fees they charge the banks, not taxpayers.

lambo4bkfast 4y ago

Taxpayers do have an obligation to ensure that I do not view my checking account as a risky loan to the bank... It is not a positive outcome for taxpayers if they no longer view their deposits as safe. $250k is also a ridiculously low insurance amount for any company with a non-trivial number of employees.