9 ms·

Nailed it. If people get whatever short term vengeance they're looking for, the contagion will cause a whole lot of collateral damage to people who aren't in te

Nailed it. If people get whatever short term vengeance they're looking for, the contagion will cause a whole lot of collateral damage to people who aren't in tech.

Jtsummers 4y ago
What contagion? How is this going to spread to the rest of the US that isn't actually dependent upon any of these startups or this bank? No other banks have yet popped up with similar risk exposure so its not a systemic issue like 15 years ago and startups are not that big a part of the US economy.
- idopmstuff 4y ago
  SVB was the sixteenth largest bank in the US. When businesses see that their money isn't safe in the sixteenth largest bank, they're going to cause bank runs on all the smaller banks as they attempt to move all of their money to the top three or four. > No other banks have yet popped up with similar risk exposure so its not a systemic issue like 15 years ago and startups are not that big a part of the US economy. That doesn't matter in the slightest. Companies don't do deep evaluations of the financial risks of their banks (as clearly evidenced by what's happening right now). They'll flee from what they perceive as unsafe into what they perceive as safe, regardless of balance sheet realities.
  - Jtsummers 4y ago
    > they're going to cause bank runs on all the smaller banks as they attempt to move all of their money to the top three or four. One of the primary issues being discussed is the insured limits at banks, and the uncertainty on whether depositors can be made "whole" (it's unclear whether people saying that mean 100% or something close to 100%, so I'm putting it in quotes, some people are being really loose with their terms in this thread). Why the fuck would people, given that context, ever move "all of their money" to only the biggest 3 or 4 institutions and increase their risk by consolidating in exactly the same way that caused the current problems? If anything this is a potential boon for the many smaller banks as they can gain additional depositors as people wise up to their risk exposure.
    - akavi 4y ago
      Because if there was a run on JP Morgan, the US government would absolutely "bail out" depositors. Consolidating increases the risk of a bank run, decreases the risk to the individual depositor.
      - Jtsummers 4y ago
        I can see the logic of that, "Let's act irrationally together and force the government to bail us out next time we make a run on our own bank." Or they can act rationally, distribute (manually or through existing methods) their cash across multiple banks so that their risk exposure is lower and they don't have to depend on the government maybe, possibly, bailing them out. You know, the thing they'd have done if they'd hired financial managers in the first place (which obviously they didn't, or they hired incompetent ones).
        throw2311 4y ago
        It's not irrational to act in your own interest. It's irrational to suppose that everyone should act in the majorities interest.
        Jtsummers 4y ago
        I'm not saying they should act in the majority's interest, I'm saying they should act in their own interest. Mitigate their risk by managing their capital properly instead of hoping ("Hope is a poor substitute for strategy") that things will work out. It's irrational to act in a way that, if a failure occurs, requires someone else to bail you out when they aren't legally or ethically required to bail you out. That's operating on hope, not strategy.
        throw2311 4y ago
        Putting all your capital in one too big to fail bank is the least costly option and the optimum strategy. Until the US lets the largest bank fail this will continue to be the case.
  - jonfromsf 4y ago
    The top four banks are too big to fail and WILL be rescued, as happened in 2008. Bank of America or Citi failing would be the end of America as we know it. That's why everyone will move to the bigger banks. Which is obviously not what we want. But it's what will happen if you leave depositers out to dry because it's a smaller bank.
  - andrewmutz 4y ago
    I don't think that's likely. Most banks have about half of their deposits FDIC insured because their depositors have low balances. SVB only had 3%. Most banks are unlikely targets for a bank run as a result.
    - eyphka 4y ago
      This is simply not true and very easy to verify via https://banks.data.fdic.gov/bankfind-suite/bankfind https://banks.data.fdic.gov/bankfind-suite/bankfind Most banks actually have most of their deposits NOT insured. Most banks are not bofa.
  - deleted 4y ago
    [deleted]
wpietri 4y ago
If you're claiming that startups are so systemically important that they need special protection, then you are also saying that they are so systemically dangerous that they need much more aggressive regulation. Is that really what you want?
- x0x0 4y ago
  That's a very odd way of stating "here's a sector that will be badly hurt if the contents of their checking accounts disappear with an unknown timeline and percentage recovered." By that rubric, you could perfectly well claim that your accountant, laundromat, and lawn care companies are systematically important, because they'd fire their employees if their checking accounts disappeared.
  - wpietri 4y ago
    Sure, so I'm saying those things are not systemically vital such that they should be exempt from the consequences of their market choices. You're the one claiming there will be contagion here. I don't think that's the case. If a bunch of unprofitable companies with bad treasury management go under, I think the rest of the economy will be fine. Companies go out of business every day. If you are claiming that tech is somehow special such that contagion will harm the wider economy, as was the case with mortgage-backed securities in 2008, then any taxpayer-funded bailout should be a one-time deal that goes along with enough regulation so that contagion is no longer a risk in the future.
    - x0x0 4y ago
      > You're the one claiming there will be contagion here. In the sense that I never said that, sure. The only thing I claimed, even implicitly, is firing a bunch of people because their employer's cash disappeared would be bad.
      - wpietri 4y ago
        No, you explicitly used the word contagion: "If people get whatever short term vengeance they're looking for, the contagion will cause a whole lot of collateral damage to people who aren't in tech." That has a technical meaning in finance: https://en.wikipedia.org/wiki/Financial_contagion https://en.wikipedia.org/wiki/Financial_contagion
MrMan 4y ago
that's a lie. and if there is contagion it won't be stemmed by bailing you as a depositor out, we will need that money elsewhere to shore up the system. good luck to you
BeFlatXIII 4y ago
Perhaps we ought to stop paying off the hostage-takers and let things follow their natural course.
Gibbon1 4y ago
People saying that depositors need to be ratfucked reminds me of a guy writing about living through the great depression. First he knew about it was one morning when his dad showed his mom the paper with a headline about the stock market crashing. And saying 'good that'll teach those guys'. Six months later his dads tailor shop went under and his dad never had stable employment after that.

Nailed it. If people get whatever short term vengeance they're looking for, the contagion will cause a whole lot of collateral damage to people who aren't in tech.

Jtsummers 4y ago

What contagion? How is this going to spread to the rest of the US that isn't actually dependent upon any of these startups or this bank? No other banks have yet popped up with similar risk exposure so its not a systemic issue like 15 years ago and startups are not that big a part of the US economy.

idopmstuff 4y ago
SVB was the sixteenth largest bank in the US. When businesses see that their money isn't safe in the sixteenth largest bank, they're going to cause bank runs on all the smaller banks as they attempt to move all of their money to the top three or four. > No other banks have yet popped up with similar risk exposure so its not a systemic issue like 15 years ago and startups are not that big a part of the US economy. That doesn't matter in the slightest. Companies don't do deep evaluations of the financial risks of their banks (as clearly evidenced by what's happening right now). They'll flee from what they perceive as unsafe into what they perceive as safe, regardless of balance sheet realities.
- Jtsummers 4y ago
  > they're going to cause bank runs on all the smaller banks as they attempt to move all of their money to the top three or four. One of the primary issues being discussed is the insured limits at banks, and the uncertainty on whether depositors can be made "whole" (it's unclear whether people saying that mean 100% or something close to 100%, so I'm putting it in quotes, some people are being really loose with their terms in this thread). Why the fuck would people, given that context, ever move "all of their money" to only the biggest 3 or 4 institutions and increase their risk by consolidating in exactly the same way that caused the current problems? If anything this is a potential boon for the many smaller banks as they can gain additional depositors as people wise up to their risk exposure.
  - akavi 4y ago
    Because if there was a run on JP Morgan, the US government would absolutely "bail out" depositors. Consolidating increases the risk of a bank run, decreases the risk to the individual depositor.
    - Jtsummers 4y ago
      I can see the logic of that, "Let's act irrationally together and force the government to bail us out next time we make a run on our own bank." Or they can act rationally, distribute (manually or through existing methods) their cash across multiple banks so that their risk exposure is lower and they don't have to depend on the government maybe, possibly, bailing them out. You know, the thing they'd have done if they'd hired financial managers in the first place (which obviously they didn't, or they hired incompetent ones).
      - throw2311 4y ago
        It's not irrational to act in your own interest. It's irrational to suppose that everyone should act in the majorities interest.
        Jtsummers 4y ago
        I'm not saying they should act in the majority's interest, I'm saying they should act in their own interest. Mitigate their risk by managing their capital properly instead of hoping ("Hope is a poor substitute for strategy") that things will work out. It's irrational to act in a way that, if a failure occurs, requires someone else to bail you out when they aren't legally or ethically required to bail you out. That's operating on hope, not strategy.
        throw2311 4y ago
        Putting all your capital in one too big to fail bank is the least costly option and the optimum strategy. Until the US lets the largest bank fail this will continue to be the case.
- jonfromsf 4y ago
  The top four banks are too big to fail and WILL be rescued, as happened in 2008. Bank of America or Citi failing would be the end of America as we know it. That's why everyone will move to the bigger banks. Which is obviously not what we want. But it's what will happen if you leave depositers out to dry because it's a smaller bank.
- andrewmutz 4y ago
  I don't think that's likely. Most banks have about half of their deposits FDIC insured because their depositors have low balances. SVB only had 3%. Most banks are unlikely targets for a bank run as a result.
  - eyphka 4y ago
    This is simply not true and very easy to verify via https://banks.data.fdic.gov/bankfind-suite/bankfind https://banks.data.fdic.gov/bankfind-suite/bankfind Most banks actually have most of their deposits NOT insured. Most banks are not bofa.
- deleted 4y ago
  [deleted]

wpietri 4y ago

If you're claiming that startups are so systemically important that they need special protection, then you are also saying that they are so systemically dangerous that they need much more aggressive regulation. Is that really what you want?

x0x0 4y ago
That's a very odd way of stating "here's a sector that will be badly hurt if the contents of their checking accounts disappear with an unknown timeline and percentage recovered." By that rubric, you could perfectly well claim that your accountant, laundromat, and lawn care companies are systematically important, because they'd fire their employees if their checking accounts disappeared.
- wpietri 4y ago
  Sure, so I'm saying those things are not systemically vital such that they should be exempt from the consequences of their market choices. You're the one claiming there will be contagion here. I don't think that's the case. If a bunch of unprofitable companies with bad treasury management go under, I think the rest of the economy will be fine. Companies go out of business every day. If you are claiming that tech is somehow special such that contagion will harm the wider economy, as was the case with mortgage-backed securities in 2008, then any taxpayer-funded bailout should be a one-time deal that goes along with enough regulation so that contagion is no longer a risk in the future.
  - x0x0 4y ago
    > You're the one claiming there will be contagion here. In the sense that I never said that, sure. The only thing I claimed, even implicitly, is firing a bunch of people because their employer's cash disappeared would be bad.
    - wpietri 4y ago
      No, you explicitly used the word contagion: "If people get whatever short term vengeance they're looking for, the contagion will cause a whole lot of collateral damage to people who aren't in tech." That has a technical meaning in finance: https://en.wikipedia.org/wiki/Financial_contagion https://en.wikipedia.org/wiki/Financial_contagion

MrMan 4y ago

that's a lie. and if there is contagion it won't be stemmed by bailing you as a depositor out, we will need that money elsewhere to shore up the system. good luck to you

BeFlatXIII 4y ago

Perhaps we ought to stop paying off the hostage-takers and let things follow their natural course.

Gibbon1 4y ago

People saying that depositors need to be ratfucked reminds me of a guy writing about living through the great depression. First he knew about it was one morning when his dad showed his mom the paper with a headline about the stock market crashing. And saying 'good that'll teach those guys'. Six months later his dads tailor shop went under and his dad never had stable employment after that.