YC: We ask for depositors to be made whole | Hacker News Reader

YC: We ask for depositors to be made whole

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19 pointsmgl40 comments

Privatize the gains, socialize the losses. Before the government supplies anything, the wallets of those at the top of SVB should be first to be liquidated. Otherwise, it's equivalent to just randomly awarding those top guys with millions of taxpayer money. Easy scheme, honestly. Set up a bank, get some deposits, gamble it away, walk away with gains you periodically skimmed off the top. Let the government deal with the fallout.

That's not what happened though. SVB did not gamble with the money.

They did put money on a "sure bet", bonds and mortgage backed securities. Due to the fuckery with interest rates, those sure bets were suddenly unfavorable (at least if you have to cash them in early, which they did). The fact that stocks were sold tells me they knew about this going belly up eventually.

What I would like to see come out of this is the banking system offer risk tiered accounts. No-risk tiers are FDIC insured, but the bank is not allowed to move that money anywhere. Higher tiers offer higher levels of risk, deposits are not guaranteed but receive better internet rates, and the banks are able to “gamble” in whatever way they choose. The current structure is fundamentally broken and no amount of regulation layered on top of that structure will provide the stability and security for customers while driving market innovation.

We already have this: it's called a "brokerage account", or various other names: "mutual fund", "ETA", "company stock", etc.

If you want higher interest (gains) and risk, you buy stock, or a fund.

Finally, if the bank can't move money anywhere, there's no reason for the bank to exist, and there's no way for it to pay interest (in fact, they'd have to charge you to keep your money). The whole way a bank works is by investing your money somewhere, then giving you a fraction of the proceeds (as interest). You seem to not understand at a fundamental level how a bank works.

That's not what I'm suggesting at all. A tiered structure would be normal banking (checking/savings) accounts with differing levels of risk depending on the owner's tolerance and willingness to pay (no/low risk, charged something like 0.5% per year) or be paid (very high risk, and paid to store money there because the bank is lending it out at higher rates).

Garry also posted this to HN and forced it to the front page, and readers roundly told him to get knotted and flagged the post: https://news.ycombinator.com/item?id=35114009

Garry is calling for a regulation. Many respondents cited the precise regulation that would have stopped this happening, which the CEO of SVB had lobbied to remove in 2018: https://www.theguardian.com/business/2023/mar/11/silicon-val...

Garry hasn't addressed those responses as yet that I've seen.

> and readers roundly told him to get knotted and flagged the post:

Was it flagged by people critical of it, or by people who wanted to suppress the critical comments/backlash?

Both.

According to Bloomberg, YC was amongst the ones encouraging the bank run.

https://www.bloomberg.com/news/articles/2023-03-09/svb-ceo-b...

I say claw back that money and distribute it to debtors equally. Fair game? Socialize the losses among all who held money above the 250k.

A VC asking gov't for more corporate welfare. The gov't owes these companies nothing. VCs & Big Tech is free to pool some of their cash reserves to make these depositors whole beyond the standard FDIC insured amount of $250K.

Where was YC when thousands of tech workers have been laid off in recent months? Where will YC be when Meta lays off the 10,000+ more they are rumored to be preparing?

It is extremely disingenuous to pretend they care about how the individual is affected. They only care right now because their investments are on the line.

Also YC seems like it should be able to muster the resources to help its companies whether this storm. Where is the rugged, exceptional individualism championed by PG and others when something bad happens?

YC probably is encouraged by the recent BigTech layoffs as it frees managers and engs from the Vortex, and that they may now start companies.

> They only care right now because their investments are on the line.

Of course YC cares more about its startups and founders than others. How is this controversial?

> Also YC seems like it should be able to muster the resources to help its companies whether this storm.

We don't know that, but isn't the tweet you're critiquing is also YC clouting up to help its companies?

Not without taxpayers receiving equity. And not without restrictions.

I’d like to know if the startups were forced to bank as a requirement of accepting funding. That dumb shit needs to be fixed.

I know from personal experience that you were "coached" to do so. You could choose another bank, it is "your company", however it was clear that it was frowned upon and could quickly put you outside the circle of trust. Also, for the most part, when you get your real funding, a CFO is "brought in", as most founders teams do not include a CFO from the start.

Similar for various services, technical and otherwise, if there was a portfolio company that offered these services.

This is from almost two decades ago, things may be different now.

With YC’s deep and broad connections in the VC, tech company, and ultra high net worth communities why doesn’t it organize a private bailout instead of asking for a handout?

Because all the money is in the same bank; can't do a private bailout if you can't access your money.

(I'm half joking, I'm sure there's a lot of money there not at those banks. Also, the big companies have so much money, they can buy this bank and get a chunk of all the startups easily enough).

The music stopped. Hopefully some of the people that got out of their chairs went to a real bank.

Why is this flagged? Garry represents YC and his ridiculousness should not be suppressed from HN.

It could have been flagged because there was a very big discussion of it earlier: https://news.ycombinator.com/item?id=35114009 (369 points, 743 comments)

If that's the case, why is that one flagged then?

Some people flag because they think that asking for a bailout is ridiculous. Other people flag because they want to hide the shame.

Seems a lot of stupid rich people (as in stupid and rich) who made their money on unfettered capitalism now want the taxpayers to pay for their mistake.

Who puts millions of dollars in bank deposits ? Especially an undiversified bank where the limit of security is $250K.

You put your money in short term treasuries and transfer what you need to pay bills. Lazy or ignorant does not mix well with large amounts of money.

Back in the day when I had a VC startup (top tier valley VC), SVB was the place you were "coached" to use, as well as which companies to buy your "services" from (needed or not). Incest never works out too well.

If the billionaires want a bailout, they can simply buy the bank and run it. Of course, they were the ones who added the kindling by encouraging people to take their money out, but now that they missed that opportunity, they are now asking for the public to bail them out.

Garry, are you going to allocate some shares of each of the companies to some public purpose in exchange for the gift you are requesting?

Large percentage of shares.

Now the post is flagged?

Well, this is a YC website after all, and this post doesn't seem to go according to plan.

It sounds about time for a community shakeup.

This post should not be flagged it’s an important and current topic with thoughtful and substantive disagreements to learn about.

Not going to happen. Supreme court has ruled depositors as investors. The pecking order after 250K is just slightly better than unsecured loan and shareholders. Who would have though Lehmans 2.0 replay itself again.

I ask for all the taxi drivers who were completely fucked by Uber and Lyft to be made whole:

https://www.nytimes.com/2018/12/02/nyregion/taxi-drivers-sui...

I ask for VC funded delivery services to stop stealing tips from gig workers:

https://www.nbcnews.com/business/business-news/why-instacart...

I’d also like to see social media held accountable for the harms done to children and communities and for our existing laws against anti-competitive behavior and collusion to be enforced against search and software platforms.

The chutzpah of the Silicon Valley influencer crowd over this weekend has become seriously fucking unbearable.

My feeds are full of sociopathic libertarians calling for government to make sure they never suffer any consequences for their failure to adequately manage risk? I mean GTFO.

I’m all for regulation and I in fact do think the government should be heavily involved in preventing this kind of thing and helping if it ends up happening.

But if we’re going to regulate let’s fucking regulate. Any answer to this tweet should start with a quick review of this guy and his friends campaign contributions and lobbying involvement.

There’s nothing special about you. Your lives aren’t more important than the lives of the children of employees at the Carrier plant in Indianapolis, or the workers at the Amazon faculty on Staten Island.

If your values system only applies to you and your friends it’s not much of a values system.

Yeah they can all burn

> sociopathic libertarians calling for government to make sure they never suffer any consequences for their failure to adequately manage risk

FYI libertarians typically do not want the government / taxpayers to bail out companies for bad decisions.

You would think so but go check out Twitter.com they seem to have had a change of heart on this topic all of a sudden.

No True Scotsman fallacy

I see your point that the quality of discourse is very low and that most ideological labels are worn haphazardly without the wearer really understanding what philosophy he/she is claiming to support.

Many sloppy "pro business" kinds of people claim to be libertarians but they really want a lot of government intervention in some markets and not others. This is just an example of typical hypocrisy and not proof that people who actually do support libertarian philosophies are like that.

The problem is you're looking for ideological purity, and such a thing doesn't really exist. Poll everyone who identifies as "libertarian" and you'll find that almost none of them meet your standard.

So then what is the point of using the label the way the OP did?

Ridiculous Shameful

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