4 ms·

If we have to back them on the downside I want profit on the upside. Private profits and public losses cannot be the rules of the game.

hanklazard 4y ago
This is referring specifically to deposits not equity or corporate bond holders, management, etc. The depositors are not making a sizable returns, they’re just wanting to keep their money in a bank account.
- tome 4y ago
  The problem is that continuing to bail out depositors means that they'll never do due diligence on their banks and therefore bank executives will keep trying risky strategies that increase their bonuses.
  - chernevik 4y ago
    And then the regulators have to approve EVERY asset and of course anything looking slightly weird (hint: a startup) will be "risky" and unloanable. The only way an SVB can exist is if banks are allowed to take risk.
  - grogenaut 4y ago
    what kind of due diligence are you imagining that I, a depositor with under 250k should / am doing on a bank? What do you believe, I, as a single depositor of 250k CAN DO to audit a bank or otherwise make sure it's safe for my deposit?
    - tome 4y ago
      Oh, when I say "bail out" I mean bail out of depositors with more than $250k of deposits, less than $250k already being well-understood to be covered. You, as a single depositor of $250k are fine. If you have $1m then you spread it out amongst 4 banks and are fine. If you have more then you'd better use your own nous or hire a financial advisor.
      - grogenaut 4y ago
        thanks for clarifying... that nuance wasn't clear. I literally thought you were going on the true libertarian bent of I as some dude with $100 needs to be responsible for all parts of the system.
    - blockwriter 4y ago
      Others have mentioned here, although I am not sure if or to what extent this is true, that depositors may have had an exclusivity relationship with SVB in order to secure loans or other financial services, which might account for depositors maintaining more the $250k in their accounts. If this is the case, then the risks of their banking relationship was manifest, and I feel there is an argument for taking no special action to reimburse depositors in the full amount. If not, then I agree with you. There is a level of due diligence that is simply unrealistic for individual depositors to perform.
    - grogers 4y ago
      The only DD you as a depositor with less than 250k USD in deposits needs to do is check that it is FDIC insured. When you sign up for the account it will be prominent and I doubt there are many accounts that aren't. So, basically you don't need to do anything special.
  - Ekaros 4y ago
    Or start running ponzi schemes. Why not offer high rates to depositors even pay them out and join in with some of your own companies. And then when it inevitably comes crashing down have the tax payer bail it all out.
- frgtpsswrdlame 4y ago
  Why should it matter whether it's deposits or equity or bonds? The instrument is irrelevant to the logic - if I have to back it on the downside then I want a piece of the upside too.
  - hanklazard 4y ago
    Businesses aren't making upside by putting their working capital in a bank checking account. Mine was making like 0.1%, it's negligible. I would be happy to socialize that upside for higher limits on deposit protection. Equity and bond holders are a totally different group of people, they are investors in that bank. They are explicitly taking risk on the bank as an investment, not as a basic piece of their financial plumbing.
    - frgtpsswrdlame 4y ago
      >I would be happy to socialize that upside for higher limits on deposit protection. Glad we agree then, that's pretty much all I'm looking for.
- paxys 4y ago
  Why does it matter? These depositors trusted someone they shouldn't have with their money knowing fully well that the government only insures 250k worth of it. Any other consumer or company in this situation wouldn't be made whole by taxpayers. Why is this cohort special?
icegreentea2 4y ago
The upsides are: * Customers (both individuals and companies) get to generally continue to view banking as a high confidence, high trust activity. Consider the existing cost and friction of KYC and other due diligence measures which are imposed asymmetrically. Reduction to a low-trust environment would seem to double up the friction. * SBV bought a shit load of longer-term US debt (which is apparently what did them in). Based on current fiscal habits, the US government needs to keep this debt attractive, especially to domestic buyers. There's nothing it can do about the risk of interest rates changing, but the last thing it wants is for depositors to put pressure on banks to avoid long-term US debt.

hanklazard 4y ago

This is referring specifically to deposits not equity or corporate bond holders, management, etc. The depositors are not making a sizable returns, they’re just wanting to keep their money in a bank account.

tome 4y ago
The problem is that continuing to bail out depositors means that they'll never do due diligence on their banks and therefore bank executives will keep trying risky strategies that increase their bonuses.
- chernevik 4y ago
  And then the regulators have to approve EVERY asset and of course anything looking slightly weird (hint: a startup) will be "risky" and unloanable. The only way an SVB can exist is if banks are allowed to take risk.
- grogenaut 4y ago
  what kind of due diligence are you imagining that I, a depositor with under 250k should / am doing on a bank? What do you believe, I, as a single depositor of 250k CAN DO to audit a bank or otherwise make sure it's safe for my deposit?
  - tome 4y ago
    Oh, when I say "bail out" I mean bail out of depositors with more than $250k of deposits, less than $250k already being well-understood to be covered. You, as a single depositor of $250k are fine. If you have $1m then you spread it out amongst 4 banks and are fine. If you have more then you'd better use your own nous or hire a financial advisor.
    - grogenaut 4y ago
      thanks for clarifying... that nuance wasn't clear. I literally thought you were going on the true libertarian bent of I as some dude with $100 needs to be responsible for all parts of the system.
  - blockwriter 4y ago
    Others have mentioned here, although I am not sure if or to what extent this is true, that depositors may have had an exclusivity relationship with SVB in order to secure loans or other financial services, which might account for depositors maintaining more the $250k in their accounts. If this is the case, then the risks of their banking relationship was manifest, and I feel there is an argument for taking no special action to reimburse depositors in the full amount. If not, then I agree with you. There is a level of due diligence that is simply unrealistic for individual depositors to perform.
  - grogers 4y ago
    The only DD you as a depositor with less than 250k USD in deposits needs to do is check that it is FDIC insured. When you sign up for the account it will be prominent and I doubt there are many accounts that aren't. So, basically you don't need to do anything special.
- Ekaros 4y ago
  Or start running ponzi schemes. Why not offer high rates to depositors even pay them out and join in with some of your own companies. And then when it inevitably comes crashing down have the tax payer bail it all out.
frgtpsswrdlame 4y ago
Why should it matter whether it's deposits or equity or bonds? The instrument is irrelevant to the logic - if I have to back it on the downside then I want a piece of the upside too.
- hanklazard 4y ago
  Businesses aren't making upside by putting their working capital in a bank checking account. Mine was making like 0.1%, it's negligible. I would be happy to socialize that upside for higher limits on deposit protection. Equity and bond holders are a totally different group of people, they are investors in that bank. They are explicitly taking risk on the bank as an investment, not as a basic piece of their financial plumbing.
  - frgtpsswrdlame 4y ago
    >I would be happy to socialize that upside for higher limits on deposit protection. Glad we agree then, that's pretty much all I'm looking for.
paxys 4y ago
Why does it matter? These depositors trusted someone they shouldn't have with their money knowing fully well that the government only insures 250k worth of it. Any other consumer or company in this situation wouldn't be made whole by taxpayers. Why is this cohort special?

icegreentea2 4y ago

The upsides are: * Customers (both individuals and companies) get to generally continue to view banking as a high confidence, high trust activity. Consider the existing cost and friction of KYC and other due diligence measures which are imposed asymmetrically. Reduction to a low-trust environment would seem to double up the friction. * SBV bought a shit load of longer-term US debt (which is apparently what did them in). Based on current fiscal habits, the US government needs to keep this debt attractive, especially to domestic buyers. There's nothing it can do about the risk of interest rates changing, but the last thing it wants is for depositors to put pressure on banks to avoid long-term US debt.