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> Then the government is bailing out with FDIC, plus the economy explodes. FDIC limits government losses to USD 250k per account or something like that, right?

• onlyrealcuzzo 3y ago
  > This is what we should have done with Silicon Valley Bank. SVB deposits were businesses. You're ensuring every regional bank collapses and all businesses bank with Chase if you let SVB fail and don't bail out the depositors. Maybe that's what you want. It's not what the government wanted. So they bailed out SVB.
  • bigtunacan 3y ago
    I don't want businesses to fail because their bank took undue risk, but the reality is that sufficiently large businesses should have their money spread around multiple banks to reduce the risk to the business.
    • mywittyname 3y ago
      > I don't want businesses to fail because their bank took undue risk, SVB didn't even take undue risk. They merely bought long-term bonds which lost book value due to rate hikes. What crushed them was high-profile people with insider knowledge of their bond holdings spooking the market. Hindsight is 20/20, but what SVB was doing wasn't irresponsible with the knowledge they had at the time. I don't think any expected rates to climb as fast as they did. They were 80% unlucky.
      • mrguyorama 3y ago
        >SVB didn't even take undue risk. Not hedging in ANY way against interest rates going up was explicitly undue risk. EVERY bet must be hedged. SVB said "well surely the government will never raise rates, so we can lock in money for 10 years to gain a small amount of extra profit", ignoring that their depositors were all highly aligned and literally friends that would act in concert. You don't have every dollar you own locked up in a 7 year CD right? Because you're smart enough to know liquidity has non-trivial value! SVB purposefully ignored that in search of a slightly higher profit. It was trivially stupid. >but what SVB was doing wasn't irresponsible with the knowledge they had at the time. If you're a bank, and you think you've found a magic money glitch that requires no hedging, you are wrong. They weren't doing arbitrage, they were gambling.
      • bigtunacan 3y ago
        mrguyorama already did a good job of pointing out how it was in fact undue risk. I wasn't addressing how so because I thought it was so obvious, but that may be just my history in finance and risk management. The point I was trying to make was that unfortunately the businesses were also taking too much risk if they were storing all their money in a single bank. Just as an individual I am spread across multiple banks as a means of derisking myself and ensuring that I'm fully protected by FDIC in the event a bank does something this epically stupid.