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Comment by version_five | Hacker News Reader

As others have said, if depositors are bailed out, it's a bailout. Pretending that changing the definition makes a difference is childish.

Whatever the government decides to do, this makes the VC and startup industry look really weak and entitled, and knocks them down from risk takers building the future to the same status as a bunch of bankers looking for a handout.

There was an opportunity here for VCs with lots of clout, YC included, to come up with a private solution to backstop this. It would have shown independence, maturity, and that more government oversight and intervention is not needed. That adults can take care of themselves.

Instead they went whining to the government, made a petition, tweeted sadly, and whatever else. It's unbecoming of an industry that's supposed to be scrappy and have an appetite for risk.

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Respectfully, I think you are the one playing with definitions. “Bailout” refers to shareholders. It refers to bailing out the institution, not it’s depositors.

We can talk about a depositor bailout if you want, but let’s not pretend it’s the same thing, not pretend it’s what the term “bailout” commonly refers to.

Multiple sources attest to the contrary - very consistently a "bailout" is taken to refer to any kind of financial assistance provided to a failing institution (not just to the shareholders). For example, Investopedia:

    What Is A Bailout?

    A bailout is when a business, an individual, or a government provides money and/or resources (also known as a capital injection) to a failing company. These actions help to prevent the consequences of that business's potential downfall which may include bankruptcy and default on its financial obligations.

All the major English dictionaries, and Wikipedia will tell you same thing.

To call this action anything other than "bailout" is to mince words, plain and simple.

Except that’s still not really what happened. The depositors are being made whole with a mix of SVB’s capital and funds previously paid to the FDIC by the banks, and pooled for related purposes. Taxpayers aren’t footing the bill.

It’s not meaningfully a bailout. Certainly, it’s different from 2008 in an important way.

Again, we can talk about “bailing out” depositors, if you really want to use that word, but let’s not be misleading.

Taxpayers aren’t footing the bill.

Even if the transaction turns out to be cash-neutral for the government - or even provides a small profit, as with TARP - it is still providing very considerable resources in the form of liquidity, coercive muscle - and sheer gravitas.

It’s not meaningfully a bailout.

Tomato, Tomah-to.

In the same ways as if you go driving cross country with inadequate money in the bank (and inadequate insurance), and then have a major breakdown -- forcing you to ask your parents or your friends to wire you money -- they are unambiguously bailing your sorry ass out, even you promise to sell your precious vinyl collection that pay them back, once you get home.

We’re changing the (very well) known rules in the middle of a crisis and acting like we didn’t know what happened could happen, when we did. This is a bailout

The only reason you and others seem so desperate to redefine bailout so you can call it a bailout is because you want to attach the negative connotations to that word to “hurt” the people you want to be hurt.

It’s embarrassing, shortsighted, and destructive.

Yeah, that's (still) not what "bailout" means.

Dispensing with all the hand-wavy, moral grandstanding about being "unbecoming", "mature", showing "independence", being "weak and entitled" etc etc... None of this is even remotely relevant, you'd be equally reasonable to tell us you wish startups were comprised of more handsome and charming individuals or that they should attend church more frequently.

In terms of discussing risk, startups should minimize all risks possible because their core risk is to find a business model and product that works. Putting cash into a bank account isn't a "strategy" nor is it an investment. Much like choosing to incorporate in Delaware, it's something you do because it's standard and adds no unnecessary risk to the business. It's not smart to try to get fancy with boilerplate company things–you have enough risk already.

Anyway, at the core of your argument seems to be two beliefs: 1. VCs had the capability to stop this from happening with private means (no) 2. People who start companies or work at them just generally deserve bad things to happen to them, regardless of how proximal or not the causes are of their misfortune.

I am biased because I've sacrificed years of my life and probably the vast majority of my potential earnings to try to build a good business. It's been the hardest thing I've ever done, no one's impressed by it, it's not yielded any financial benefits, it's harmed my personal and social life, and by all likelihood I'll never see any significant success. But I keep trying because I like our customers and my coworkers and I care more about the possibility of building something great than I do all the rest.

It's hurtful to chalk up the (potential) death of companies like mine to being "weak and entitled". Of all the risks to account for in building a business, having our bank accounts disappear overnight didn't even crack the top 100 of risk factors. Things like losing customers, failing to grow revenue, keeping employees happy, etc. are at the top; below that are changes to the market, competition, and the death of co-founders or myself. It's not possible to account for every conceivable risk.

Anyway, it looks like we'll get some help here so it's not over for us yet. On behalf of companies everywhere, I'd like to apologize that you've been deprived the opportunity to dance on our graves.

Bailout implies that the individual/business being made whole *should* have made decisions to prevent the situation from occurring in the first place. What responsibility did a SVB depositor have in SVB's decision to purchase billions of MBS in 2021?

If the depositor wasn’t ok with that (presumably public) decision they should have pulled out then. Or pulled out when treasury rates started ticking up and the writing was on the wall. Alternatively, they should have bought private insurance for their money or structured their money in multiple banks.

I can only partially agree to this, they did a lot of creative accounting and weren't hedging their interest rate risk. Do you really expect a retail depositor to understand fully the implications of a large bank not holding adequate interest rate swaps? This seems like the perfect example where government oversight is needed as not everyone is an expert in this

Yeah although it's strange to assume something is "not risky" when you don't what it is. If you're ignorant of what it is, and your money depends on it, that seems like cause to be worried and want to hedge the risk.

> What responsibility did a SVB depositor have in SVB's decision to purchase billions of MBS in 2021?

Was this decision public and announced in a regulatory filing?

> Pretending that changing the definition makes a difference is childish.

Right or wrong sometimes your own maturity gets called into question by the words you use and how you treat others who disagree.

Banking isn't intended to be a risk, though. That's literally the point of FDIC insurance.

Idk why I'm even bothering making an argument when your opening argument is ad hominem.

I’m not willing to lose a dime to avoid looking “unbecoming.” I doubt they are either.

Dignity and an empty sack are worth the sack.

have you read the financials of the banks you bank with? have you read the source code of every app/other software that you use?

Interesting new world folks are suggesting here, where depositors can't trust the highly regulated banks they bank with.

I know how much money I have at risk and how much is insured. It would be pretty irresponsible for me to not and just assume someone will step in and give me their money if I lose mine.

I'm personally a conservative investor, which means amongst other things I forgo notional returns by making safer investments. So it definitely makes my angry to see people that had a less responsible money management strategy get to participate in all the upside and not have to take the downside.

If you have over $250k in a single account then you probably should do some due diligence…

Its too much to expect from VCs, they are each trying to maximize their gain. Creating consensus and cooperation is very hard, especially in bad times. It's exactly why governments exist, In some cases a web of self interested parties will produce horrible results and central authority can be more effective.

This is fine, but when things are rosy the VCs and startups can’t claim that government regulation is communism and choking off their ability to do whatever they want

If you want the backstop if the government you have to be willing to play within its rules during the good times too

Companies will always look to (a) maximize the amount of available decision power and (b) externalize decision risk as much as possible.

Indeed. The bank was trying to raise money and recapitalize itself several days before this and instead of investing, VCs panicked, told their portcos to withdraw immediately, and started a bank run.

Right, they told their clients to run for the exits, caused a collapse on their uninsured deposits - and now expect a handout (and will get it).

By and large, the ones who ran aren't the ones who were hurt.

The VC's who told their portfolio companies to withdraw will be fine. The ones who didn't cause the bank run will be hurt the most.

> As others have said, if depositors are bailed out, it's a bailout.

No one is nor can argue that. But you’re presupposing it’s a bailout.

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