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Comment by Lionga | Hacker News Reader

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I am not sure why you are so bitter but it’s important do understand that all you do is create more hate with comments like this. The only thing anyone is asking for is to protect the deposits of the people who bank(ed) with SVB. That is it.

Op is not bitter but realistic... Deposits are insured up to 250 thousand. Above they do incur risk..

Both you, op and others are being ignorant on this. Insurance payment or bailout is external money, this is making depositors whole using the bank's assets, not FDIC or government money. Tax payers are not making anyone whole as I understand yellen's proposal.

But this is literally what was going to happen as soon as the FDIC moved in. If that's all they want, why all the extra noise?

Because there are tons of people, including in this very thread, who are confused and calling this a bailout.

Nope. YC and other investors are explicitly asking for something beyond the normal process - no possible haircuts, no delays, $10M guaranteed, whatever. That can't be covered just by SVB assets. (It can be mostly covered. But that's not what they're begging for.)

And that's without getting into the question of whether they should be allowed to still reap the rewards of being a customer of a risk-taking bank for years before the event.

The solvency gap is minuscule and there are known buyers lining up. They will pay a premium to acquire the business of 40k companies (and whatever is left of the brand) and that capital (along with the assets) is ensuring creditors are made whole while shareholders get wiped. There is no bailout; people just seem to project 2007 onto a completely different situation.

From your mouth to god's ears, but this isn't what Tan, Cuban, Sacks, etc. have been asking for. They want a 100% commitment from the government.

Yes, the way I read this request (and Yelen’s response) the government’s “commitment” is meant to provide a floor for private offers so as to immediately address concerns, not as a primary path forward.

What investors are clamoring for and what the government has announced are two different things.

Please keep this subthread's context in mind - it starts with

> The only thing anyone is asking for...

And my comment is about what those people are asking for. They're claiming they're not asking for a bailout, while asking for a bailout. They are confused, or lying, or both.

Fair enough.

When the government has to step in and use money to back things up, that’s a bailout. “Making depositors whole” can only be accomplished if the assets owned by SVB are bought for more than their market value, where the government is on the hook for the delta. That’s a bailout.

When a person doesn't want himself and every other ordinary person to be robbed by millionaires and billionaires, that is not "hate". That is not what "hate" is.

Founders drained the whole Bay Area of anything culturally interesting, tech companies all just did massive layoffs, years of shouting "learn to code" at every other profession, the world's art output fed into an AI meat grinder with "whoops sorry but also it's legally okay" to enrich a few VCs, but you can't imagine why someone might be bitter about demands to compensate their business mistakes from the public purse?

> Founders drained the whole Bay Area of anything culturally interesting…

I grew up in the Bay Area in the 70s and 80s and it wasn’t all that culturally interesting back then either.

I love the AI meat grinder analogy, wow.

Will that not cost anyone anything? If so then sure, let's do it!

If it costs more than a dime, though, let's not.

Define costs, specifically. What are the 'costs' of ensuring that depositors have their money, while taking over long-term SVB investments that the government can wait out? What are the 'costs' of tens of thousands of job losses? What are the specific 'costs' of significant centralization of banking, as any new VC would immediately require a start-up to move it's money to JPM or GS?

The cost is that we keep publicizing risk and privatizing gains. SVB took advantage of Trump-era deregulation to make more profit and now that they've screwed up they want help. The people who deposited money at SVB profited from those choices and now they also want a bailout.

What are the 'costs' of ensuring that depositors have their money, while taking over long-term SVB investments that the government can wait out?

Net present value is a well defined concept. No need for scare quotes.

Define 'cost'. If losing faith in the banking system gets people to disinvest and hoard under their mattress do you count that as 'no cost'?

Making depositors whole is important and should happen. Confidence in the banking system is important. A company that needs banking should not be subject to the same risk as a shareholder.

If depositors gained single penny of interest on their deposits. They should have been certain there is some risk. Including losing money above 250k. And they have less than zero right to cry when risk realises.

a bailout, would mean the bank and its shareholders would survive. Making depositors whole is about not having people lose faith in the banking industry.

SVB probably has enough assets to make most depositors largely whole, but it'll take time. Shareholders are going to wear a total loss. Which sucks for them but this is part of share market game.

I suspect cooler heads will not prevail. And there will be much silliness Monday morning.

This keeps getting repeated, but no, they don’t have enough assets to make depositors whole.

A bond that matures in 10 years does not make anyone whole. That’s like saying “I know I owe you money today, but don’t sweat it, I’ll get you the money in 10 years”. These arguments completely ignore the time value of money.

I didn't say totally whole, i said largely whole. Everyone will get at least 250K, and then probably something like 75-85% of what ever else they had relatively quickly and then who knows.

Exactly. Somebody has to eat the loss, maybe depositors, maybe the taxpayer.

And somewhere, someone (some many), was on the other end of those trades - or not on the other end of trades that should have been made, and has made a gain.

So just fire sale everything and distribute equally to depositors. Time value of money solved. And everyone gets fully what belongs to them.

> they don’t have enough assets to make depositors whole.

They do, if their assets get acquired by other banks who also invest in long term bonds, says at a discount?

> They do, if their assets get acquired by other banks who also invest in long term bonds, says at a discount?

"Hi it's me, rival bank. I'll buy those bonds of yours, buuut my best offer is 70 cents on the dollar".

Hi, it’s me, Uncle Sam, I’ll buy those assets at face value because that’s what I do. No Open Market Committee buying of the stocks, though.

The difference is how the bank’s investors fare.

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