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But what you're saying here is unrelated to the reality of the situation. Yellen has already said there will be no bailout of the bank. A bailout would be somet

But what you're saying here is unrelated to the reality of the situation. Yellen has already said there will be no bailout of the bank. A bailout would be something that rescues equity holders. What people are talking about here is making sure depositors don't lose their money.

matheusmoreira 4y ago
I don't see "depositors" as a special class of people at all. They're equivalent to shareholders to me. They all poured money in and expected dividends. The true reality of the situation is that these people lent their money to the bank. To bail them out is equivalent to bailing out shareholders.
- wrs 4y ago
  You’re expecting dividends from your checking account?
  - matheusmoreira 4y ago
    I do expect interest payments from any money of mine that's not in my physical posession. Checking accounts don't pay interest so I don't use them. They're just a temporary register for my "pay bills" and "invest" operations.
    - wrs 4y ago
      I don’t know where you’ve been banking for the last ten years or so, but I wish I did — interest payments on liquid deposits weren’t a thing for a long time. And startups don’t “invest”, they only “pay bills”.
      - matheusmoreira 4y ago
        I'm brazilian so I use brazilian banks. Some of my banks pay me interest on liquid accounts. I don't allow money to accumulate in the accounts of those that don't. I also spread my investments over as many banks as possible: my accounts are independently insured for up to some amount. I also move money off of the banks as soon as humanly possible by buying real property instead. I don't trust them.
        wrs 4y ago
        You do this for your business accounts?
        matheusmoreira 4y ago
        You bet. My father did too. It's one of many reasons why he was highly successful in responsibly managing the money of every institution he was ever put in charge of.
- noisenotsignal 4y ago
  Depositors don’t put money in a bank expecting profits!! Yes they might get interest, but the main goal is safe storage of easily accessible money. Where exactly do you expect people to put money if not a bank?! And do you really expect, and want to live in a world where there is such an expectation (due to unreliable financial institutions), the average startup founder to spend time hedging bank risk? Not to mention that depositors can get their money back without taxpayer money being used. That’s the whole point of the FDIC stepping in. SVB’s assets have value and can be used to give money back; if another bank buys SVB, odds are depositors will get the vast majority of their money back. It’s not a bailout if the government is not spending money and I don’t know why even a positive, non-bailout outcome seems to be viewed unfavorably.
  - matheusmoreira 4y ago
    > the main goal is safe storage of easily accessible money Absolute bullshit. If that was the goal, banks would be 100% solvent at all times. Every single dollar people ever deposited in the bank would be sitting there in the bank's safe. That's NOT what happens in practice. Banks simply cannot bear to watch a huge pile of money just sitting there safely doing nothing. So they do fractional reserve banking. People deposit 100 dollars at the bank, the bank stores like 10 dollars only and then loans out 90 dollars to anyone in need of cash. Then the bank literally lies to people's faces when they provide a statement saying they have $100 in their "account" when in fact they only have 10 dollars with $90 being tied up in outstanding liabilities and therefore exposing them to risk. Anyone who "deposits" money at a bank without expecting profits in return has been fooled twice. Thrice if they tolerate "administrative fees" for the "service". > And do you really expect, and want to live in a world where there is such an expectation (due to unreliable financial institutions), the average startup founder to spend time hedging bank risk? Looks like we live in such a world already.
    - noisenotsignal 4y ago
      I understand the mechanism that occurs in reality, but also in practice the average person puts money in the bank primarily for storage. If you ask someone why they have a bank account, odds are the answer is not “to make money”. They do it because it’s commonly held financial advice that this is better than putting cash in a box under their mattress (not just for returns, but for safety and ease of access). It is not fair to lump these people in with shareholders, in terms of profit expectation, and say they have just as little right to their money back. But perhaps this is a learning opportunity for me. I’m sure you have a stash of money somewhere for paying bills; obviously you need relatively quick access to this stash. You probably also have a larger stash as an emergency fund, which doesn’t need to be as immediately accessible but still needs relatively quick access (so a CD won’t cut it). Where are you putting these stashes? (I guess your personal stashes might be small enough to be FDIC insured, so maybe pretend to be a small startup with a couple millions in cash.) And regarding your point on banks hating to sit on money - they have to make money somehow as they have bills to pay. They can either charge a fee to hold your money or try to make money off deposits. The latter is obviously riskier, but the former is on average worse for consumers (they lose money by having money..?). If you would rather not pay money to have someone hold it for you, fractional reserves are a necessary construct. Edit: > Looks like we live in such a world already Not if the FDIC successfully makes everyone whole without spending taxpayer money! Which, again, seems like a positive outcome no one should be rooting against.
- louloulou 4y ago
  They're not shareholders, they are creditors, by definition. That's why bank statements have a little "CR" next to the balances. In a bankruptcy, shareholders get wiped out first, then creditors start taking haircuts... it's worked this way since forever.
wpietri 4y ago
There is more than one kind of bailout. Any taxpayer money going in is a bailout. Giving taxpayer money to rich depositors is a bailout.
- lanstin 4y ago
  Mostly the money comes from fees levied on banks in the FDIC program.
  - wpietri 4y ago
    Yes, but plenty of people are calling for going beyond that. And it's not clear to me that other banks would be excited to pay higher insurance premiums to bail out Silicon Valley Bank's customers here. If you see something otherwise, please let me know.

matheusmoreira 4y ago

I don't see "depositors" as a special class of people at all. They're equivalent to shareholders to me. They all poured money in and expected dividends. The true reality of the situation is that these people lent their money to the bank. To bail them out is equivalent to bailing out shareholders.

wrs 4y ago
You’re expecting dividends from your checking account?
- matheusmoreira 4y ago
  I do expect interest payments from any money of mine that's not in my physical posession. Checking accounts don't pay interest so I don't use them. They're just a temporary register for my "pay bills" and "invest" operations.
  - wrs 4y ago
    I don’t know where you’ve been banking for the last ten years or so, but I wish I did — interest payments on liquid deposits weren’t a thing for a long time. And startups don’t “invest”, they only “pay bills”.
    - matheusmoreira 4y ago
      I'm brazilian so I use brazilian banks. Some of my banks pay me interest on liquid accounts. I don't allow money to accumulate in the accounts of those that don't. I also spread my investments over as many banks as possible: my accounts are independently insured for up to some amount. I also move money off of the banks as soon as humanly possible by buying real property instead. I don't trust them.
      - wrs 4y ago
        You do this for your business accounts?
        matheusmoreira 4y ago
        You bet. My father did too. It's one of many reasons why he was highly successful in responsibly managing the money of every institution he was ever put in charge of.
noisenotsignal 4y ago
Depositors don’t put money in a bank expecting profits!! Yes they might get interest, but the main goal is safe storage of easily accessible money. Where exactly do you expect people to put money if not a bank?! And do you really expect, and want to live in a world where there is such an expectation (due to unreliable financial institutions), the average startup founder to spend time hedging bank risk? Not to mention that depositors can get their money back without taxpayer money being used. That’s the whole point of the FDIC stepping in. SVB’s assets have value and can be used to give money back; if another bank buys SVB, odds are depositors will get the vast majority of their money back. It’s not a bailout if the government is not spending money and I don’t know why even a positive, non-bailout outcome seems to be viewed unfavorably.
- matheusmoreira 4y ago
  > the main goal is safe storage of easily accessible money Absolute bullshit. If that was the goal, banks would be 100% solvent at all times. Every single dollar people ever deposited in the bank would be sitting there in the bank's safe. That's NOT what happens in practice. Banks simply cannot bear to watch a huge pile of money just sitting there safely doing nothing. So they do fractional reserve banking. People deposit 100 dollars at the bank, the bank stores like 10 dollars only and then loans out 90 dollars to anyone in need of cash. Then the bank literally lies to people's faces when they provide a statement saying they have $100 in their "account" when in fact they only have 10 dollars with $90 being tied up in outstanding liabilities and therefore exposing them to risk. Anyone who "deposits" money at a bank without expecting profits in return has been fooled twice. Thrice if they tolerate "administrative fees" for the "service". > And do you really expect, and want to live in a world where there is such an expectation (due to unreliable financial institutions), the average startup founder to spend time hedging bank risk? Looks like we live in such a world already.
  - noisenotsignal 4y ago
    I understand the mechanism that occurs in reality, but also in practice the average person puts money in the bank primarily for storage. If you ask someone why they have a bank account, odds are the answer is not “to make money”. They do it because it’s commonly held financial advice that this is better than putting cash in a box under their mattress (not just for returns, but for safety and ease of access). It is not fair to lump these people in with shareholders, in terms of profit expectation, and say they have just as little right to their money back. But perhaps this is a learning opportunity for me. I’m sure you have a stash of money somewhere for paying bills; obviously you need relatively quick access to this stash. You probably also have a larger stash as an emergency fund, which doesn’t need to be as immediately accessible but still needs relatively quick access (so a CD won’t cut it). Where are you putting these stashes? (I guess your personal stashes might be small enough to be FDIC insured, so maybe pretend to be a small startup with a couple millions in cash.) And regarding your point on banks hating to sit on money - they have to make money somehow as they have bills to pay. They can either charge a fee to hold your money or try to make money off deposits. The latter is obviously riskier, but the former is on average worse for consumers (they lose money by having money..?). If you would rather not pay money to have someone hold it for you, fractional reserves are a necessary construct. Edit: > Looks like we live in such a world already Not if the FDIC successfully makes everyone whole without spending taxpayer money! Which, again, seems like a positive outcome no one should be rooting against.
louloulou 4y ago
They're not shareholders, they are creditors, by definition. That's why bank statements have a little "CR" next to the balances. In a bankruptcy, shareholders get wiped out first, then creditors start taking haircuts... it's worked this way since forever.

wpietri 4y ago

There is more than one kind of bailout. Any taxpayer money going in is a bailout. Giving taxpayer money to rich depositors is a bailout.

lanstin 4y ago
Mostly the money comes from fees levied on banks in the FDIC program.
- wpietri 4y ago
  Yes, but plenty of people are calling for going beyond that. And it's not clear to me that other banks would be excited to pay higher insurance premiums to bail out Silicon Valley Bank's customers here. If you see something otherwise, please let me know.