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We can absolutely be a society in which checking accounts are a pit of snakes which must be navigated by executive savvy and wit. It’s just going to be a much p

We can absolutely be a society in which checking accounts are a pit of snakes which must be navigated by executive savvy and wit. It’s just going to be a much poorer one. The point is not to “protect jobs in Silicon Valley” per se, it is to maintain banking infrastructure as the sort of thing that just works (or gets urgently fixed) so that the entire economy can continue to rely on it, vs. entering a lower-trust regime where a checking account may as well be a stock portfolio.

wpietri 4y ago
The FDIC already exists to make sure checking accounts aren't a pit of snakes for 99% of the population. The entire economy can continue to rely on it just as it always has. Does this mean that rich people have to be more careful managing gobs of cash? Yes, but that has always been the case. Treasury management is a thing that exists both as a thing people do professionally and as a service you can buy. I understand that some people are young enough that they have either not heard about bank failures or did not feel like it applied to them due to being in a period that was very good for banks. But they are and they do: https://www.fdic.gov/bank/historical/bank/ https://www.fdic.gov/bank/historical/bank/
- closeparen 4y ago
  You mean, personal savers and very small businesses can continue to rely on the banking system. That’s not 99% of the economy. Young people hear plenty about bank failures - specifically as a success story for big government, a problem we solved, such that depositors are secure these days. I recognize that startups are in a bit of a weird place where they might have a lot of money to manage before they are sophisticated enough to have a big finance team. If only there were some sort of entity specialized in dealing with their unique needs… oh wait.
  - wpietri 4y ago
    Yes, that's why I said "99% of the population", not "99% of the economy". But the economy's also going to be fine here. Most businesses with a lot of money understand that bank failure risk is just one of the many financial risks to manage. To the extent a startup wants to have millions of dollars but not hire somebody competent to manage that money, them's the breaks. The same thing would be true for startups that don't take security seriously, for example. I feel bad for the founders here, but no worse than I would for one who experienced hackers getting in and stealing the data. Even if they had hired "sort of entity specialized in dealing with their" security needs. Picking a bad vendor happens, and if you bet your company on a vendor choice in a vital area, well, sometimes those bets don't come out like you hoped.
    - closeparen 4y ago
      > Most businesses with a lot of money understand that bank failure risk is just one of the many financial risks to manage. This is a poorer world than the one where it’s not, is my point. What are you even supposed to do here, open accounts at 40 different banks when you get a $10 million check? That’s pointless silliness. Is this really what we want entrepreneurs to be spending their time on?
      - wpietri 4y ago
        Oh no! A person with $10m in cash might have to put forth a little effort to take care of a vast amount of money! Such horrors have rarely been contemplated. I understand that some see startup founders as delicate smol beans who are too uwu soft to have to actually do some work. But I have been told repeatedly that these people are genius future titans of industry, backed by the most financially savvy people on the planet. So I think maybe they can handle it? If somebody is in the incredibly privileged position of being handed $10m in one go, but is also uninterested in managing the money, then I would expect them to hire a part-time CFO. Or at the very least to split the money up and put it into two different banks, which in this case would have resulted in no payroll disruption and the safety of 90-100% of their money.
        closeparen 4y ago
        It is totally possible to have an economy and public policy based on seething contempt for entrepreneurs. It's probably the case that a majority of voters would prefer to be a little worse off as long as the tech-bros they hate are a lot worse off. I just think this is an ugly, self-defeating basis on which to run a society. >which in this case would have resulted in no payroll disruption and the safety of 90-100% of their money. Why would it have resulted in that? We've already established that any amount above $250k in one bank may as as well be vaporized already, you just don't know it yet.
        wpietri 4y ago
        I am an entrepreneur from a family of entrepreneurs. I have started multiple companies, one of which was venture backed. I like entrepreneurs just fine, so peddle that nonsense elsewhere. > Why would it have resulted in that? Because our modern regulatory regime is pretty good. If you have your money in two bank accounts and have reasonable capital reserves, you'll be able to make payroll from one of them. So the short-term problem is solved. In your example, you've got $5m to work with. For the failed bank, the FDIC will give you $250k right away, and in short order a large percentage gets paid out as they liquidate assets. For SVB, that starts within a week: https://www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/silicon-valley.html https://www.fdic.gov/resources/resolutions/bank-failures/fai... The expectations I'm seeing for that are on the order of 50%. So a week later, you're back up to $7.75 million to work with, with more to come in as assets are sold. Maybe you get everything back, maybe you take a haircut. The estimates I'm seeing are in the 0-20% range, so you end up with $9-10 million back over time. And that's just the FDIC. Functioning businesses have income that they can use to pay salaries or as justification for loans or selling equity. They can also pursue acquisition by somebody who was lucky or smart enough not to have high egg/basket ratios. So in the end, maybe we end up with a few failed companies, but it's not a systemic risk, and it's the sort of object lesson that helps people understand why they need to take cash management seriously beyond a certain level. That surely will suck for some people, but that's how capitalism works.

wpietri 4y ago

The FDIC already exists to make sure checking accounts aren't a pit of snakes for 99% of the population. The entire economy can continue to rely on it just as it always has. Does this mean that rich people have to be more careful managing gobs of cash? Yes, but that has always been the case. Treasury management is a thing that exists both as a thing people do professionally and as a service you can buy. I understand that some people are young enough that they have either not heard about bank failures or did not feel like it applied to them due to being in a period that was very good for banks. But they are and they do: https://www.fdic.gov/bank/historical/bank/ https://www.fdic.gov/bank/historical/bank/

closeparen 4y ago
You mean, personal savers and very small businesses can continue to rely on the banking system. That’s not 99% of the economy. Young people hear plenty about bank failures - specifically as a success story for big government, a problem we solved, such that depositors are secure these days. I recognize that startups are in a bit of a weird place where they might have a lot of money to manage before they are sophisticated enough to have a big finance team. If only there were some sort of entity specialized in dealing with their unique needs… oh wait.
- wpietri 4y ago
  Yes, that's why I said "99% of the population", not "99% of the economy". But the economy's also going to be fine here. Most businesses with a lot of money understand that bank failure risk is just one of the many financial risks to manage. To the extent a startup wants to have millions of dollars but not hire somebody competent to manage that money, them's the breaks. The same thing would be true for startups that don't take security seriously, for example. I feel bad for the founders here, but no worse than I would for one who experienced hackers getting in and stealing the data. Even if they had hired "sort of entity specialized in dealing with their" security needs. Picking a bad vendor happens, and if you bet your company on a vendor choice in a vital area, well, sometimes those bets don't come out like you hoped.
  - closeparen 4y ago
    > Most businesses with a lot of money understand that bank failure risk is just one of the many financial risks to manage. This is a poorer world than the one where it’s not, is my point. What are you even supposed to do here, open accounts at 40 different banks when you get a $10 million check? That’s pointless silliness. Is this really what we want entrepreneurs to be spending their time on?
    - wpietri 4y ago
      Oh no! A person with $10m in cash might have to put forth a little effort to take care of a vast amount of money! Such horrors have rarely been contemplated. I understand that some see startup founders as delicate smol beans who are too uwu soft to have to actually do some work. But I have been told repeatedly that these people are genius future titans of industry, backed by the most financially savvy people on the planet. So I think maybe they can handle it? If somebody is in the incredibly privileged position of being handed $10m in one go, but is also uninterested in managing the money, then I would expect them to hire a part-time CFO. Or at the very least to split the money up and put it into two different banks, which in this case would have resulted in no payroll disruption and the safety of 90-100% of their money.
      - closeparen 4y ago
        It is totally possible to have an economy and public policy based on seething contempt for entrepreneurs. It's probably the case that a majority of voters would prefer to be a little worse off as long as the tech-bros they hate are a lot worse off. I just think this is an ugly, self-defeating basis on which to run a society. >which in this case would have resulted in no payroll disruption and the safety of 90-100% of their money. Why would it have resulted in that? We've already established that any amount above $250k in one bank may as as well be vaporized already, you just don't know it yet.
        wpietri 4y ago
        I am an entrepreneur from a family of entrepreneurs. I have started multiple companies, one of which was venture backed. I like entrepreneurs just fine, so peddle that nonsense elsewhere. > Why would it have resulted in that? Because our modern regulatory regime is pretty good. If you have your money in two bank accounts and have reasonable capital reserves, you'll be able to make payroll from one of them. So the short-term problem is solved. In your example, you've got $5m to work with. For the failed bank, the FDIC will give you $250k right away, and in short order a large percentage gets paid out as they liquidate assets. For SVB, that starts within a week: https://www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/silicon-valley.html https://www.fdic.gov/resources/resolutions/bank-failures/fai... The expectations I'm seeing for that are on the order of 50%. So a week later, you're back up to $7.75 million to work with, with more to come in as assets are sold. Maybe you get everything back, maybe you take a haircut. The estimates I'm seeing are in the 0-20% range, so you end up with $9-10 million back over time. And that's just the FDIC. Functioning businesses have income that they can use to pay salaries or as justification for loans or selling equity. They can also pursue acquisition by somebody who was lucky or smart enough not to have high egg/basket ratios. So in the end, maybe we end up with a few failed companies, but it's not a systemic risk, and it's the sort of object lesson that helps people understand why they need to take cash management seriously beyond a certain level. That surely will suck for some people, but that's how capitalism works.