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This is the exact lack of nuance that OP is talking about. Do you understand what is actually happening here? A bank is going under and potentially taking a ton

This is the exact lack of nuance that OP is talking about. Do you understand what is actually happening here? A bank is going under and potentially taking a ton of startups with it, not because of any poor decisions or lack of legit business model by the startups. It’s purely due to an internal implementation detail of the (until now) we’ll respected bank that holds their money. I swear if it was called “generic bank” instead of “Silicon Valley Bank”, we wouldn’t be seeing all of these knee-jerk “good because they’re bad” responses.

youngtaff 4y ago
Putting the money in SVB rather than another bank can be seen as a poor business decision by the startups - yes, they may have be forced to by their VC backers, or they may be just following the crowd But reality is SVB isn’t a normal bank and it had the highest percentage of deposited funds that weren’t covered by FDIC amongst US banks
matheusmoreira 4y ago
> Do you understand what is actually happening here? Do you have an actual argument that falsifies what I've said? I'm all about owning up to my mistakes but right now I have no reason to believe I'm being stupid. I thought stuff like this was going to happen the second I saw the Fed raising interest rates to combat inflation. Looks like time proved me right. > A bank is going under and potentially taking a ton of startups with it, not because of any poor decisions or lack of legit business model by the startups. It’s purely due to an internal implementation detail of the (until now) we’ll respected bank that holds their money. Yeah sure. A "minor implementation detail" of the bank... Honestly, this isn't even the real issue at play here. It's really simple to me. People put their money in the bank. The bank couldn't bear to watch the pile of money just sitting there. So it "invested" the money. Then it lost the money. Then they went under. Now everybody is losing their minds and the bank is getting liquidated in an attempt to make everybody whole again. I'm sorry but I just don't feel any sympathy at all. It's not the first time a bank fails but people never learn not to trust them. > I swear if it was called “generic bank” instead of “Silicon Valley Bank”, we wouldn’t be seeing all of these knee-jerk “good because they’re bad” responses. Nope. I say the exact same thing every single time some bank-like institution fails: we warned you. When it's some crypto exchange, everybody here on HN gets a kick out of it. Now that it's some startup's bank, I'm supposed to feel sorry for them? No.
- mind-blight 4y ago
  > Do you have an actual argument that falsifies what I've said? I'm all about owning up to my mistakes but right now I have no reason to believe I'm being stupid. There are two key things that I think you're misunderstanding: 1) the bank didn't lose the money. A lot of it is locked up in long-term securities that would have to be sold at a loss to access the money now. But, at maturity, all of the money would be paid back. The money is there, but it's illiquid. A bank with the same investment but more liquid assets would have no problem 2) The investors are going to get screwed, and the depositors will likely be made most of the way whole. This is without a government bailout. Given that the assets are there, I'd be surprised if a big bank didn't gobble them up for the goodwill of future tech unicorns. I'd be upset if there was an investor bailout. I'd question why we needed a depositor bailout. I don't think either are necessary or going to happen
  - matheusmoreira 4y ago
    > 1) the bank didn't lose the money. A lot of it is locked up in long-term securities that would have to be sold at a loss to access the money now. But, at maturity, all of the money would be paid back. The money is there, but it's illiquid. A bank with the same investment but more liquid assets would have no problem Also known as being literally insolvent. They can't pay back what they owe. People have bills to pay tomorrow, so nobody really cares that the money is gonna be there 10 years from now. Peopld want their money, and the bank can't pay it back. They might as well have taken the money and thrown it into a black hole. > 2) The investors are going to get screwed, and the depositors will likely be made most of the way whole. This is without a government bailout. Given that the assets are there, I'd be surprised if a big bank didn't gobble them up for the goodwill of future tech unicorns. I suppose it's moral as long as not one cent of public money is used to pay anyone off. That includes "backstopping" bank runs or whatever it is the Fed does. That also includes literally any measure that could conceivably increase inflation which is an indirect way of making us all pay for it.
    - mind-blight 4y ago
      > They might as well have taken the money and thrown it into a black hole. It entirely depends on the circumstances, and those circumstances are extremely important to this discussion. A bank with sufficient liquidity wouldn't have a solvency issue holding these assets - they would exist and be paid out in time, and nobody would no the difference but the bank's accountants. That is extremely important because it means the money exists - it was not lost. That makes purchasing SVB viable for a bank that can handle the securities' long maturity. That would not be the case if they head actually lost the money. > That also includes literally any measure that could conceivably increase inflation which is an indirect way of making us all pay for it. I would encourage you to read about Spain's economy during the late 1500s. Specifically, why they were advertising across Europe to convince Jews to move to Spain - you'll get to learn why the Jewish banker stereotype exists (racism meets fiscal policy meets religious doctrine) and see an interesting example of how a society changes with proto-moderm banking introduced. In my experience, most proponents of "inflation is theft" propose financial systems that fail to account for critical problems that were addressed in modern finance so long ago that they've been mostly forgotten

youngtaff 4y ago

Putting the money in SVB rather than another bank can be seen as a poor business decision by the startups - yes, they may have be forced to by their VC backers, or they may be just following the crowd But reality is SVB isn’t a normal bank and it had the highest percentage of deposited funds that weren’t covered by FDIC amongst US banks

matheusmoreira 4y ago

> Do you understand what is actually happening here? Do you have an actual argument that falsifies what I've said? I'm all about owning up to my mistakes but right now I have no reason to believe I'm being stupid. I thought stuff like this was going to happen the second I saw the Fed raising interest rates to combat inflation. Looks like time proved me right. > A bank is going under and potentially taking a ton of startups with it, not because of any poor decisions or lack of legit business model by the startups. It’s purely due to an internal implementation detail of the (until now) we’ll respected bank that holds their money. Yeah sure. A "minor implementation detail" of the bank... Honestly, this isn't even the real issue at play here. It's really simple to me. People put their money in the bank. The bank couldn't bear to watch the pile of money just sitting there. So it "invested" the money. Then it lost the money. Then they went under. Now everybody is losing their minds and the bank is getting liquidated in an attempt to make everybody whole again. I'm sorry but I just don't feel any sympathy at all. It's not the first time a bank fails but people never learn not to trust them. > I swear if it was called “generic bank” instead of “Silicon Valley Bank”, we wouldn’t be seeing all of these knee-jerk “good because they’re bad” responses. Nope. I say the exact same thing every single time some bank-like institution fails: we warned you. When it's some crypto exchange, everybody here on HN gets a kick out of it. Now that it's some startup's bank, I'm supposed to feel sorry for them? No.

mind-blight 4y ago
> Do you have an actual argument that falsifies what I've said? I'm all about owning up to my mistakes but right now I have no reason to believe I'm being stupid. There are two key things that I think you're misunderstanding: 1) the bank didn't lose the money. A lot of it is locked up in long-term securities that would have to be sold at a loss to access the money now. But, at maturity, all of the money would be paid back. The money is there, but it's illiquid. A bank with the same investment but more liquid assets would have no problem 2) The investors are going to get screwed, and the depositors will likely be made most of the way whole. This is without a government bailout. Given that the assets are there, I'd be surprised if a big bank didn't gobble them up for the goodwill of future tech unicorns. I'd be upset if there was an investor bailout. I'd question why we needed a depositor bailout. I don't think either are necessary or going to happen
- matheusmoreira 4y ago
  > 1) the bank didn't lose the money. A lot of it is locked up in long-term securities that would have to be sold at a loss to access the money now. But, at maturity, all of the money would be paid back. The money is there, but it's illiquid. A bank with the same investment but more liquid assets would have no problem Also known as being literally insolvent. They can't pay back what they owe. People have bills to pay tomorrow, so nobody really cares that the money is gonna be there 10 years from now. Peopld want their money, and the bank can't pay it back. They might as well have taken the money and thrown it into a black hole. > 2) The investors are going to get screwed, and the depositors will likely be made most of the way whole. This is without a government bailout. Given that the assets are there, I'd be surprised if a big bank didn't gobble them up for the goodwill of future tech unicorns. I suppose it's moral as long as not one cent of public money is used to pay anyone off. That includes "backstopping" bank runs or whatever it is the Fed does. That also includes literally any measure that could conceivably increase inflation which is an indirect way of making us all pay for it.
  - mind-blight 4y ago
    > They might as well have taken the money and thrown it into a black hole. It entirely depends on the circumstances, and those circumstances are extremely important to this discussion. A bank with sufficient liquidity wouldn't have a solvency issue holding these assets - they would exist and be paid out in time, and nobody would no the difference but the bank's accountants. That is extremely important because it means the money exists - it was not lost. That makes purchasing SVB viable for a bank that can handle the securities' long maturity. That would not be the case if they head actually lost the money. > That also includes literally any measure that could conceivably increase inflation which is an indirect way of making us all pay for it. I would encourage you to read about Spain's economy during the late 1500s. Specifically, why they were advertising across Europe to convince Jews to move to Spain - you'll get to learn why the Jewish banker stereotype exists (racism meets fiscal policy meets religious doctrine) and see an interesting example of how a society changes with proto-moderm banking introduced. In my experience, most proponents of "inflation is theft" propose financial systems that fail to account for critical problems that were addressed in modern finance so long ago that they've been mostly forgotten