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Comment by garyclarke27 | Hacker News Reader

He’s correct. The $250k limit is stupid - Deposits at highly regulated banks should be insured in full. Shareholders should loose everything but not depositors. Bank executives should also be regulated like lawyers and accountants they should be fined heavily and never work in Finance again.

If SVB is not saved quickly the consequences are likely to be dire, there will a run on many more banks and many small companies will go bankrupt if they can’t make payroll. It was a massive mistake not to bailout Lehman Brothers unfortunately Janet Yellon is so useless that I expect they’ll probably repeat it.

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The $250k limit is not stupid, it is deliberate. The point is to protect normal people and small companies. Not to provide federal coverage against irresponsible behavior for corporations and billionaires.

What irresponsible behavior are you talking about? Having $4M of operating cash held in an account at a medium-sized bank? A company that can comfortably get by with < $250k of cash reserves is small indeed.

The actual irresponsible behavior here seems to have been on the part of SVB in treating T bonds and excessively correlated business loans as low-risk assets, and on the part of regulators for allowing this because SVB wasn’t quite big enough to have to follow the real rules. But there was no good way for SVB’s depositors to know any of this.

Heck, SVB was older than a decent fraction of its depositors and their executives. It’s was an institution around here. You can wander around a few towns and find their branches. What were people and businesses supposed to do? Walk around, point to the SVB branch and say “nope, not those folks — they don’t understand interest rate risk”?

What is irresponsible about placing cash on deposit at a regulated bank?

Capitalism will be much less efficient if businesses can’t trust banks to perform their most fundamental function of keeping their money safe.

> What is irresponsible about placing cash on deposit at a regulated bank?

What's irresponsible about under-insuring your business-critical equipment in an inspected building that meets code?

Answer to both is regulations can only prevent some failures, and the solution to unexpected failures is insurance, which the Free Market(tm) is adept at providing - and businesses should be paying for to keep all of their money safe, not the bare minimum afforded by the FDIC

I'm finding the commentary on this issue from different parts of the web interesting. Obviously many people here are directly or only one degree of separation away from being directly effected, therefore this place seems to be most sympathetic in demanding bailouts.

Wallstreetbets are happily egging on the chaos for lols. Crypto bros are seeing a mix of opportunity and/or potential market collapse in the few lucid moments they get day to day. And the wider public either dont know, dont understand or dont care.

personally im happy to let it burn to the ground. Risk and reward only works when unmitigated risk is punished. Asking the adults to step in every time a banker is irresponsible cant continue.

Maybe so. But the flip side of that is that (IMO) a bank that qualifies for FDIC insurance on any sort of scale should have to follow the same risk-controlling rules (Basel III, etc) as any other large bank.

The government has a strong interest in making money be money — someone who holds USD and uses it for transactions should be able to be confident that it won’t evaporate. Currently, one does so in an FDIC-insured bank or by purchasing short-dated [0] treasuries.

And if the government backs a guarantee like this, it should exercise a corresponding amount of control over what becomes of that money.

[0] Hey SVB, you forgot the short-dated part.

Why would anyone with less than $250K pull out their deposits? Seems like these "bank runs" only make sense for individuals worth more than $250K to get their "uninsured" money out.

Honest and naive question - how safe is the FDIC $250k? I have seen so many situations in life where the rule was one thing and the result was "well sorry, it didn't work that way this time"

In theory? The cushion is about 1.2% or so of the total deposits [1]. In practice: Short of the federal government collapsing the 250k$ per depositor per institution will be paid.

[1] https://www.fdic.gov/analysis/quarterly-banking-profile/fdic... unless I'm misunderstanding the number

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