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“Privatize the profits”? What are you talking about? The owners of SVB are wiped out, they will not see any profits, they lost their entire equity in SVB.

by xyzzyz 4y ago

ttymck 4y ago
No profits? None, ever? https://www.livemint.com/market/stock-market-news/svb-chief-greg-becker-sold-3-6-million-in-stock-days-before-bank-s-failure-11678493108814.html https://www.livemint.com/market/stock-market-news/svb-chief-...
- celestialcheese 4y ago
  You think that won't get clawed back if there was something illegal? This isn't crypto, you can guarantee that these sales will be investigated extensively.
- xyzzyz 4y ago
  And how much stock he has left that he didn’t sell, and lost entirely a few days later? Is this really the best argument for the “privatize the profits” narrative, that someone picked up a few pennies from in front of $6B steamroller?
  - ttymck 4y ago
    Pennies? I guess we'll agree to disagree.
unity1001 4y ago
> “Privatize the profits”? What are you talking about? The owners of SVB are wiped out The depositors took risks by lending their money to such a risky bank for better returns in lieu of the risk. It doesnt matter whether SVB gave 0% interest. It provided other amenities, services and opportunities instead - things which other banks could not take the risk to do. Now these banks who played by the rules and the rest of the people and businesses who played it safe, will have to foot the bill for the risk that those depositors took. This literally says "If you are big enough you can take any risk to win big and have the public pay for it if you screw it up". That's something not afforded to a small business owner. So people who say that there is one rule for the ultra rich and another rule for the majority, they are right. Additionally removing the burden of the deposits from SVB will allow it to recover some of its lost asset value. The state took over its liabilities now.
- xyzzyz 4y ago
  The depositors “took risks” by literally keeping their cash in a bank? This is ridiculous. What was the safe, responsible thing to do? Put it in one of the “too big to fail” banks instead, given that those are guaranteed to be bailed out should they encounter difficulties? Assume that the entire banking regulatory system is a sham, that the whole Dodd Frank system of regulators overseeing the books and running stress test is not worth shit, and then what? Pay their employees in crypto? Stuff their cash into a mattress? Please. Let’s not pretend that literally keeping cash in a savings account is irresponsible risk taking.
  - noitpmeder 4y ago
    "The depositors “took risks” by literally keeping their cash in a bank?" Yes. They noticed other banks would not take their money, but SVB would. There is a reason SVB was willing to take their money while others would not.
  - unity1001 4y ago
    > The depositors “took risks” by literally keeping their cash in a bank? This is ridiculous Its not ridiculous. Its how the free market works. Its a choice. There were other banks that were compliant with the regulation that !protects! the bank and its depositors. This bank wasn't one of them. People put their money in this bank anyway. It makes little difference if many startups were forced by their VCs to put their money in that bank - they chose to go with those VCs. > What was the safe, responsible thing to do? Put it in one of the “too big to fail” banks instead, given that those are guaranteed to be bailed out should they encounter difficulties? The first thing to do was to put their money in banks that have not lobbied for exemption from the regulations that protect the bank and its depositors' money from exactly what is happening right now. The second thing would be to put it in multiple banks that are not exempt from that regulation to spread around the risk. The third thing would be to spread the risk around many investment tools and banks. It turns out that there ARE startups that did precisely that, and they were not affected by the SVB thing in the slightest manner. > Let’s not pretend that literally keeping cash in a savings account is irresponsible risk taking. It is unless it is a state run bank, period. This is the free market, and if the organization that you are putting your money into is a private organization, you are simply taking a risk. If that does not sound good, then it means that all the rhetoric about free market vs government should be revised.
spaceman_2020 4y ago
you mean to say taht the owners of SVB never sold any of their stock even as the price went up from $15 in 2009 to $750 in 2021?
YZF 4y ago
Aren't lots of us owners of SVB? I really don't get this "it's ok to wipe out the shareholders", i.e. all of us, "but it's not ok to wipe out the depositors" (e.g. Mark Cuban's 10M or so). Why should I lose money because of a run on this bank? If you're already bailing the bank out, oust the management, claw back what you can, but don't wipe out share holders or bond holders.
- xyzzyz 4y ago
  No, this is not how the deal works. We do not reimburse investors for wrong, or just plain unlucky investment decisions. Our financial-regulatory system treats banking and speculative investment differently, and this is by design. > If you're already bailing the bank out, oust the management, claw back what you can, but don't wipe out share holders or bond holders. You don’t get it: the bank is bailed out using funds of shareholders and bondholders. Taxpayers aren’t bailing out SVB, you are. If you don’t like it, well, I recommend selling your investments and keeping your money in regular savings accounts: the deal is, at the basic, very simple: if the company you own screwed up, your entire equity may be used to made those whom it screwed up whole, and you should be happy that your liability is limited to your equity only.
  - YZF 4y ago
    It's not clear whether the assets are enough to make the depositors whole. It sounds like the FDIC is making up the difference. Which it normally would not. That's the bailout part. If the government is stepping in to bail people out via making up for any difference of uninsured deposits from FDIC funds then it's no longer a question of risk/being wrong/luck. The depositors were taking risk just as the shareholders were taking risk. If they didn't like it, well they could have kept the money in their mattresses. I'm totally with you that everyone has to accept the risks they're taking. This is creating a distortion field here for certain types of risk taking. Even if we ignore the bailout, I don't think the story is as simple as you put it. There was a run on the bank with VCs telling companies to withdraw their funds. From a stock market perspective this could be considered manipulation. When I invest in a bank I'm also relying on the government's role as a regulator. If they failed in their role, or the government actions contributed to the failure of the bank, or they had other courses of action, why should I be on the hook for the consequences? Maybe this course of action was necessary to stabilize the situation and protect against more bank runs. It still doesn't feel right. It feels like something we'll pay for in the future.

“Privatize the profits”? What are you talking about? The owners of SVB are wiped out, they will not see any profits, they lost their entire equity in SVB.

by xyzzyz 4y ago

“Privatize the profits”? What are you talking about? The owners of SVB are wiped out, they will not see any profits, they lost their entire equity in SVB.

ttymck 4y ago

No profits? None, ever? https://www.livemint.com/market/stock-market-news/svb-chief-greg-becker-sold-3-6-million-in-stock-days-before-bank-s-failure-11678493108814.html https://www.livemint.com/market/stock-market-news/svb-chief-...

celestialcheese 4y ago
You think that won't get clawed back if there was something illegal? This isn't crypto, you can guarantee that these sales will be investigated extensively.
xyzzyz 4y ago
And how much stock he has left that he didn’t sell, and lost entirely a few days later? Is this really the best argument for the “privatize the profits” narrative, that someone picked up a few pennies from in front of $6B steamroller?
- ttymck 4y ago
  Pennies? I guess we'll agree to disagree.

unity1001 4y ago

> “Privatize the profits”? What are you talking about? The owners of SVB are wiped out The depositors took risks by lending their money to such a risky bank for better returns in lieu of the risk. It doesnt matter whether SVB gave 0% interest. It provided other amenities, services and opportunities instead - things which other banks could not take the risk to do. Now these banks who played by the rules and the rest of the people and businesses who played it safe, will have to foot the bill for the risk that those depositors took. This literally says "If you are big enough you can take any risk to win big and have the public pay for it if you screw it up". That's something not afforded to a small business owner. So people who say that there is one rule for the ultra rich and another rule for the majority, they are right. Additionally removing the burden of the deposits from SVB will allow it to recover some of its lost asset value. The state took over its liabilities now.

xyzzyz 4y ago
The depositors “took risks” by literally keeping their cash in a bank? This is ridiculous. What was the safe, responsible thing to do? Put it in one of the “too big to fail” banks instead, given that those are guaranteed to be bailed out should they encounter difficulties? Assume that the entire banking regulatory system is a sham, that the whole Dodd Frank system of regulators overseeing the books and running stress test is not worth shit, and then what? Pay their employees in crypto? Stuff their cash into a mattress? Please. Let’s not pretend that literally keeping cash in a savings account is irresponsible risk taking.
- noitpmeder 4y ago
  "The depositors “took risks” by literally keeping their cash in a bank?" Yes. They noticed other banks would not take their money, but SVB would. There is a reason SVB was willing to take their money while others would not.
- unity1001 4y ago
  > The depositors “took risks” by literally keeping their cash in a bank? This is ridiculous Its not ridiculous. Its how the free market works. Its a choice. There were other banks that were compliant with the regulation that !protects! the bank and its depositors. This bank wasn't one of them. People put their money in this bank anyway. It makes little difference if many startups were forced by their VCs to put their money in that bank - they chose to go with those VCs. > What was the safe, responsible thing to do? Put it in one of the “too big to fail” banks instead, given that those are guaranteed to be bailed out should they encounter difficulties? The first thing to do was to put their money in banks that have not lobbied for exemption from the regulations that protect the bank and its depositors' money from exactly what is happening right now. The second thing would be to put it in multiple banks that are not exempt from that regulation to spread around the risk. The third thing would be to spread the risk around many investment tools and banks. It turns out that there ARE startups that did precisely that, and they were not affected by the SVB thing in the slightest manner. > Let’s not pretend that literally keeping cash in a savings account is irresponsible risk taking. It is unless it is a state run bank, period. This is the free market, and if the organization that you are putting your money into is a private organization, you are simply taking a risk. If that does not sound good, then it means that all the rhetoric about free market vs government should be revised.

spaceman_2020 4y ago

you mean to say taht the owners of SVB never sold any of their stock even as the price went up from $15 in 2009 to $750 in 2021?

YZF 4y ago

Aren't lots of us owners of SVB? I really don't get this "it's ok to wipe out the shareholders", i.e. all of us, "but it's not ok to wipe out the depositors" (e.g. Mark Cuban's 10M or so). Why should I lose money because of a run on this bank? If you're already bailing the bank out, oust the management, claw back what you can, but don't wipe out share holders or bond holders.

xyzzyz 4y ago
No, this is not how the deal works. We do not reimburse investors for wrong, or just plain unlucky investment decisions. Our financial-regulatory system treats banking and speculative investment differently, and this is by design. > If you're already bailing the bank out, oust the management, claw back what you can, but don't wipe out share holders or bond holders. You don’t get it: the bank is bailed out using funds of shareholders and bondholders. Taxpayers aren’t bailing out SVB, you are. If you don’t like it, well, I recommend selling your investments and keeping your money in regular savings accounts: the deal is, at the basic, very simple: if the company you own screwed up, your entire equity may be used to made those whom it screwed up whole, and you should be happy that your liability is limited to your equity only.
- YZF 4y ago
  It's not clear whether the assets are enough to make the depositors whole. It sounds like the FDIC is making up the difference. Which it normally would not. That's the bailout part. If the government is stepping in to bail people out via making up for any difference of uninsured deposits from FDIC funds then it's no longer a question of risk/being wrong/luck. The depositors were taking risk just as the shareholders were taking risk. If they didn't like it, well they could have kept the money in their mattresses. I'm totally with you that everyone has to accept the risks they're taking. This is creating a distortion field here for certain types of risk taking. Even if we ignore the bailout, I don't think the story is as simple as you put it. There was a run on the bank with VCs telling companies to withdraw their funds. From a stock market perspective this could be considered manipulation. When I invest in a bank I'm also relying on the government's role as a regulator. If they failed in their role, or the government actions contributed to the failure of the bank, or they had other courses of action, why should I be on the hook for the consequences? Maybe this course of action was necessary to stabilize the situation and protect against more bank runs. It still doesn't feel right. It feels like something we'll pay for in the future.