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Shareholders lost all the money they spent on capital. That’s a lot. Exec employees extracted a lot, and in a just world that would be clawed back.
by lupire 4y ago
Shareholders lost all the money they spent on capital. That’s a lot. Exec employees extracted a lot, and in a just world that would be clawed back.
- rvnx 4y agoBut wait, I see that SVB was paying 4.50% of interest per year to depositors (cf. https://www.svb.com/account/y-combinator https://www.svb.com/account/y-combinator ) Even if depositors lose 5%. 5% that they shouldn't have earned because of the ultra high-risk position taken, maybe it's from them it should be taken...
- khuey 4y agoA "money market" account means the money is invested in extremely short term government or corporate bonds. SVB probably wasn't paying that 4.5%, they were just passing through what the market is paying for money market funds right now.
- mlyle 4y agoImagine this scenario: You invest $1. Other people deposit $50. You take $51 to a Las Vegas roulette table and bet it all on black. 50-50 chance there's $102 afterwards and shareholders and employees get to share most of the $51 gain; 50-50 chance there's $0. Taking outsized risks with other peoples' money is a great gig for both stockholders and executives. We normally prohibit financial services firm from engaging in this kind of behavior, because the economic incentives favor outsized risk.