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Comment by garry | Hacker News Reader

These are deposits at a bank. We're advocating for protection of 37,000 small business accounts, a small number of which are YC.

We discovered about 30% of YC companies would not be able to make payroll even after the $250,000 insured amount if they were to wait months for their payments. That is detailed on the FDIC website currently as the process for remediation.

This petition represents the lived experience of thousands of founders, and this is how we are communicating this is a real problem that DC needs to be aware of.

Again, this is not about saving SVB, the bank that made decisions that led to this, nor their equity holders. This is about saving innocent depositors.

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These are not small business accounts. These are businesses who took a risk, and put all their eggs in 1 basket.

A small business is the donut shop down the street, owned by a woman and employs 3 kids.

NONE of the SVB clients come even close to that. Startups are not small businesses. Startups take on an intrinsically large financial risk, whether funded by the founder, with his/her own money, or via VC.

This is on them for not having identified this risk and/or not hedged against it.

I looked at the list of signers of your petition. All CEOs.

How about ya'll put in 1,000,000 of your bonus into this. Then we'll talk.

Sounds like a problem.

Can you comment on what the many billionaires associated with the SV ecosystem are doing? Sounds like they have personal risk plus social responsibility, and (collectively) enough billions to bail out SVB.

I like how you explained that in the note. But my question stands. What do I get for bailing out those 37,000 small business holders?

It also seems odd that all 37k didn’t insure against bank collapse. That seems like systemic risk that they all took on.

I’m sure DC is aware of this problem. The issue is what to do.

It seems more fair to request that the government invest in these companies and in exchange for government cash, equity is given out. Or something of value. Otherwise it seems like the taxpayer is just covering the losses of lots of small business owners choosing to save money by taking on too much risk.

You are in the top 1% and you are asking for a government bailout.

Everyone knows that amounts over $250K were not insured. These are not "innocent depositors".

A lot of my portfolio companies are affected, but I will not lobby for a government bailout on their behalf.

It's not the right thing to do.

I 100% agree with you on lobbying for an expedient process, but if these companies have to take a haircut, they have to take a haircut. The strong will survive (and learn a lesson about risk management).

> Everyone knows that amounts over $250K were not insured.

This is technically true, but I think there's a feeling that traditional banks are de-facto safe places to keep money. Depositors losing money in bank runs feels like a 1920's problem.

Because 2008 was so long ago? What were the CFOs of these companies doing.

They were counting the days till the next bonus

I don't think depositors lost money in 2008.

The lessons from 2008 were to look out for risks of an asset class failing and that packaging risky, correlated assets doesn't make them much safer. The lesson here is sudden interest rate increases can cause bank failures. This was a mostly unknown unknown.

LOL! Neither "packaging correlated assets doesn't make them magically AAA, so we'll also commit ratings fraud", neither "uninsured money at a bank can be lost in sudden market shifts (or simply mismanagement or fraud)" are/were unknowns. These people took risks KNOWINGLY, because they were rewarded handsomely by it. Now and then it rears its ugly face and we're supposed to pay the check? Give me a break.

I'm struggling to understand how taking the risk of "uninsured money at a bank can be lost in sudden market shifts" can reward one handsomely. Is there some way I can make spectacular gains by depositing money in a mismanaged bank?

> The lesson here is sudden interest rate increases can cause bank failures. This was a mostly unknown unknown.

What? It's only unknown if all you know about financial crises are from 2008.

A google search on "borrowing short and lending long" gives this in the first page:

http://www.bondeconomics.com/2015/09/banks-borrowing-short-a...

> I think there's a feeling that traditional banks are de-facto safe places to keep money

Where were the financial advisors for these companies, then? A big part of their job is to strip away "feelings" and talk cold, hard facts.

> These are not "innocent depositors".

Let's be fair. They were innocent in the sense that the failure wasn't their fault.

What they aren't is naive. To the extent that they had deposits exceeding FDIC insurance, they were knowingly taking a risk.

Honestly, you should be going back to the lobbying drawing board. This is going to be enormously unpopular with the general public. VCs are already very rich, even if they take a haircut. They already have huge resources to be able to extend bridge loans to the companies they‘re partial owners in. What does the tax payer get out of absorbing the costs of this systemic risk taking? Are you going to give the public a stake in your companies, or do you want to just take our money and give nothing back?

I do think it's good that you are doing that. What would be even better (and perhaps you are already doing this, and I've missed it or don't know where to look) is publicly calling on the investor class to put their hands in their pockets and make a charitable contribution to the next wave of up and comers. I specifically mean charitable, not for equity.

It seems to me that there's a lot of investors who could individually pitch in a few million without really missing it, but whose collective action would go a long way to mitigating the knock-on effects of a bank failure on small firms that are not themselves int he investment/financial engineering/risk management space, and can't be blamed (much) for trusting that a conservative-seeming brick-and-mortar bank would safeguard their cash deposits.

I think it's laudable that you're going to bat on behalf of YC companies, but you've got to be conscious of how it reads to the casual onlooker. 'Chastened investors rally round to help startups make payroll' is a much better headline than 'VCs beg Uncle Sam for cash lifeline'.

>We discovered about 30% of YC companies would not be able to make payroll even after the $250,000 insured amount if they were to wait months for their payments. That is detailed on the FDIC website currently as the process for remediation.

They'll get 40% back next week, enough to make payroll for a while, and another 50% later (possibly much later), and for that second part they can find someone with big pockets to buy them out early at a discount.

This is a pathetic reply

I don’t think that’s fair. I like how he’s at least engaging. And prefer how they are at least being honest about what they are doing and seem to be avoiding weasel speak more than other companies (ie, “we want to unleash the value of empathetic communities to resiliently respond to government billion bailouts”).

I dunno man, saying "these poor companies need money for payroll" to actually mean "we want a multi-billion dollar bailout to cover the risks that we profited from, funded by the people who would never and will never see a dime of those profits", sounds pretty weasely to me.

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