5 ms·

But why? What purpose does that serve? It's hardly even inflationary, the value was basically destroyed, so the Fed conjuring replacement money doesn't seem lik

But why? What purpose does that serve? It's hardly even inflationary, the value was basically destroyed, so the Fed conjuring replacement money doesn't seem like such a bad thing. Shareholders will still be taking a major loss, and they are the ones who ought to be held responsible, so it makes sense. You can't fault depositors for not doing thorough diligence on a 40-year-old bank with a good reputation and it doesn't make sense to punish their employees for it, especially in a cooling job market with uncomfortably high inflation.

lotsofpulp 4y ago
Suppose an immigrant is starting a restaurant, and has to pay up front to some suppliers that have been in business for 40 years for kitchen equipment. And the supplier goes out of business, and the money is gone. And the immigrant has no more time or money to hire a lawyer to submit a claim to recover it. Is there a federal bailout waiting for the immigrant? Or the immigrant’s employees who might also be family members? > What purpose does that serve? The purpose is to show we are playing by the same rules. And that somehow, it is not always the poorer, the more uneducated, the ones born to the wrong parents who do not get bailed out.
- nerdponx 4y ago
  > Is there a federal bailout waiting for the immigrant? Or the immigrant’s employees who might also be family members? Why shouldn't there be? As long as they weren't utterly reckless up to some reasonable standard, IMO they should be. This has the same empty tenor as arguments against student debt relief on whatabout/fairness grounds. > The purpose is to show we are playing by the same rules. And that somehow, it is not always the poorer, the more uneducated, the ones born to the wrong parents who do not get bailed out. Two wrongs don't make a right. I get that you're bitter. So am I. Doesn't mean we need to fuck over a bunch of people who are not at all at fault and possibly trigger systemic economic problems, contagion, recession, etc.
  - deleted 4y ago
    [deleted]
  - s1artibartfast 4y ago
    Someone always gets fucked. It is either startup or the taxpayer, restaurant owner or the taxpayer, student debt holder or the taxpayer. The taxpayer minding their own business gets tired of always being on the short end.
    - nerdponx 4y ago
      You could say the same about any government-provided taxpayer-funded service that benefits people in times of need. This is literally what our taxes are supposed to be for.
      - s1artibartfast 4y ago
        >You could say the same about any government-provided taxpayer-funded service that benefits people in times of need. But certainly not every need should be the taxpayers responsibility. Government safety nets should have positive return on investment for individual citizens. Increasing the cost to the individual without increasing the benefit threatens to delegitimize the entire endeavor. Why would I ever want to expand the scope to include restaurants, student debt, or business risk if that scope has no benefit to me? If I don't have student debt, a restaurant, or a corporate account, it just becomes crony capitalism and extortion from my perspective. A lot of people feel that the purpose of taxes is not to socialize the cost of people's mistakes, but rather provide services where all sides see net benefit.
        nerdponx 4y ago
        Preventing thousands of job losses and helping small businesses stay afloat during crises that they should not reasonably have to expect does have a positive return on investment for taxpayers. It is absolutely valid to interpret this incident as a regulatory failure and the failure of our legal system to enact sufficient penalties on those responsible, leading to some amount of moral hazard, which means that problems like this might arise again in the future. But you are also arguing that, in general, spending taxpayer money to help businesses and individuals ride out random crises and catastrophes is not a good use of that taxpayer money. I and I think most sound-minded economists would disagree with you, on a purely mechanical cost-benefit basis.
- thephyber 4y ago
  What if the restaurant employs 5 people? 500 people? 50,000? 5,000,000 people? Sometimes it actually pays to evaluate breaking a policy if the harm of following it is larger than the harm of coming up with a different decision. How much does the US Treasury expect to lose in tax revenue if SVB’s customers are stuck with frozen accounts or the assets are sold at too steep of a discount just to get them resolved quickly? The use of bailout here seems to be using a tainted term to spread taint to the victim. The restauranteur is a depositor. His assets can be very nearly made while so long as there is no fire sale on the bank assets. The “bailout” is really just providing sufficient liquidity to keep the bank working. It’s only insolvent so long as it has short term liquidity issues.
lolinder 4y ago
> You can't fault depositors for not doing thorough diligence on a 40-year-old bank with a good reputation The 40-year-old bank with a good reputation was offering deals that were too good to be true, like 4.5% APR on a savings account (other high yield savings accounts are at 3.5% right now, and those are online banks that achieve those rates by having minimal overhead). Naive startup founders aside, the VCs should have known better than to think interest rates like that were coming from a bank that was playing it safe, and for them to now be asking for the taxpayer to make up the difference between the bank's assets and their startups' deposits is weird. They knew they were advising their startups to put all of their money into a high reward system, but we're supposed to believe that they didn't realize that was also high risk?
- nerdponx 4y ago
  So blame the VCs, but I don't see why of startup founders and their employees should suffer for doing what their investors told them to do.
  - lolinder 4y ago
    The VCs put money into a startup and encouraged them to engage in risky banking practices. If these startups succeed the VCs get a payout, if they fail they get nothing. A taxpayer-funded bailout of the depositors is socialized risk, privatized reward. Why should the taxpayers stand for that?
    - nerdponx 4y ago
      Again, two wrongs don't make a right. This is like arguing that we shouldn't pay for housing for the homeless because rich property developers are partly to blame for the housing crises in many cities.
cma 4y ago
The bank became a crypto onramp/offramp and also counted a bunch of web3 stuff to not draw down their deposits. That we can't let crypto-ponzi involved stuff infect the real system and get bailouts is a general sentiment over this that makes sense. $250,000 per account is what we are mandated to compensate Circle legally and to go beyond is people who stayed out of crypto subsidizing the crypto ponzi scheme ecosystem. USDC can probably maintain $1 from the crazy amount of slippage from people losing their keys anyway.

lotsofpulp 4y ago

Suppose an immigrant is starting a restaurant, and has to pay up front to some suppliers that have been in business for 40 years for kitchen equipment. And the supplier goes out of business, and the money is gone. And the immigrant has no more time or money to hire a lawyer to submit a claim to recover it. Is there a federal bailout waiting for the immigrant? Or the immigrant’s employees who might also be family members? > What purpose does that serve? The purpose is to show we are playing by the same rules. And that somehow, it is not always the poorer, the more uneducated, the ones born to the wrong parents who do not get bailed out.

nerdponx 4y ago
> Is there a federal bailout waiting for the immigrant? Or the immigrant’s employees who might also be family members? Why shouldn't there be? As long as they weren't utterly reckless up to some reasonable standard, IMO they should be. This has the same empty tenor as arguments against student debt relief on whatabout/fairness grounds. > The purpose is to show we are playing by the same rules. And that somehow, it is not always the poorer, the more uneducated, the ones born to the wrong parents who do not get bailed out. Two wrongs don't make a right. I get that you're bitter. So am I. Doesn't mean we need to fuck over a bunch of people who are not at all at fault and possibly trigger systemic economic problems, contagion, recession, etc.
- deleted 4y ago
  [deleted]
- s1artibartfast 4y ago
  Someone always gets fucked. It is either startup or the taxpayer, restaurant owner or the taxpayer, student debt holder or the taxpayer. The taxpayer minding their own business gets tired of always being on the short end.
  - nerdponx 4y ago
    You could say the same about any government-provided taxpayer-funded service that benefits people in times of need. This is literally what our taxes are supposed to be for.
    - s1artibartfast 4y ago
      >You could say the same about any government-provided taxpayer-funded service that benefits people in times of need. But certainly not every need should be the taxpayers responsibility. Government safety nets should have positive return on investment for individual citizens. Increasing the cost to the individual without increasing the benefit threatens to delegitimize the entire endeavor. Why would I ever want to expand the scope to include restaurants, student debt, or business risk if that scope has no benefit to me? If I don't have student debt, a restaurant, or a corporate account, it just becomes crony capitalism and extortion from my perspective. A lot of people feel that the purpose of taxes is not to socialize the cost of people's mistakes, but rather provide services where all sides see net benefit.
      - nerdponx 4y ago
        Preventing thousands of job losses and helping small businesses stay afloat during crises that they should not reasonably have to expect does have a positive return on investment for taxpayers. It is absolutely valid to interpret this incident as a regulatory failure and the failure of our legal system to enact sufficient penalties on those responsible, leading to some amount of moral hazard, which means that problems like this might arise again in the future. But you are also arguing that, in general, spending taxpayer money to help businesses and individuals ride out random crises and catastrophes is not a good use of that taxpayer money. I and I think most sound-minded economists would disagree with you, on a purely mechanical cost-benefit basis.
thephyber 4y ago
What if the restaurant employs 5 people? 500 people? 50,000? 5,000,000 people? Sometimes it actually pays to evaluate breaking a policy if the harm of following it is larger than the harm of coming up with a different decision. How much does the US Treasury expect to lose in tax revenue if SVB’s customers are stuck with frozen accounts or the assets are sold at too steep of a discount just to get them resolved quickly? The use of bailout here seems to be using a tainted term to spread taint to the victim. The restauranteur is a depositor. His assets can be very nearly made while so long as there is no fire sale on the bank assets. The “bailout” is really just providing sufficient liquidity to keep the bank working. It’s only insolvent so long as it has short term liquidity issues.

lolinder 4y ago

> You can't fault depositors for not doing thorough diligence on a 40-year-old bank with a good reputation The 40-year-old bank with a good reputation was offering deals that were too good to be true, like 4.5% APR on a savings account (other high yield savings accounts are at 3.5% right now, and those are online banks that achieve those rates by having minimal overhead). Naive startup founders aside, the VCs should have known better than to think interest rates like that were coming from a bank that was playing it safe, and for them to now be asking for the taxpayer to make up the difference between the bank's assets and their startups' deposits is weird. They knew they were advising their startups to put all of their money into a high reward system, but we're supposed to believe that they didn't realize that was also high risk?

nerdponx 4y ago
So blame the VCs, but I don't see why of startup founders and their employees should suffer for doing what their investors told them to do.
- lolinder 4y ago
  The VCs put money into a startup and encouraged them to engage in risky banking practices. If these startups succeed the VCs get a payout, if they fail they get nothing. A taxpayer-funded bailout of the depositors is socialized risk, privatized reward. Why should the taxpayers stand for that?
  - nerdponx 4y ago
    Again, two wrongs don't make a right. This is like arguing that we shouldn't pay for housing for the homeless because rich property developers are partly to blame for the housing crises in many cities.

cma 4y ago

The bank became a crypto onramp/offramp and also counted a bunch of web3 stuff to not draw down their deposits. That we can't let crypto-ponzi involved stuff infect the real system and get bailouts is a general sentiment over this that makes sense. $250,000 per account is what we are mandated to compensate Circle legally and to go beyond is people who stayed out of crypto subsidizing the crypto ponzi scheme ecosystem. USDC can probably maintain $1 from the crazy amount of slippage from people losing their keys anyway.