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Comment by senttoschool | Hacker News Reader

I think the depositors should get a bit of a haircut if selling the assets don’t cover all deposits. For example, 5%. If it’s more than 5%, then the government steps in and pay for the rest.

5% seems like the right balance between the two extremes.

Companies and people should pay a small penalty.

At the same time, we shouldn’t rock the financial system further. We need to have confidence in the system.

After this, the government should make new regulations to prevent this scenario from happening again.

For those wishing to just follow existing rules exactly as is, bear in mind that a contagion will likely reach your personal finances.

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Government steps in and pays the rest? No, change the laws if this is the case. Why special treatment to help out but in any other scenario where tragic financial mishaps of regular folks you are given a pat on the shoulder and “good luck”. Pretty sure they have a write off tax wise for any additional loses.

A bailout is within the law if that’s what they want to do.

It’s just a matter of whether you think the ROI is worth it.

5% is still going to cause bank runs elsewhere. No one is going to stay at any bank where they might take a 5% hit.

Make the depositors whole and let things calm down. Then, at leisure, on a case by case basis, claw back a few percent to cover the moral hazard of people getting better loan terms or whatever.

> 5% seems like the right balance between the two extremes.

No it's not. If they get a single cent above the bank's remaining assets (after administrative costs of the FDIC action), I don't think I will be the only one losing any remaining trust in the system.

Seems likely it’s all there.

https://www.fdic.gov/news/press-releases/2023/pr23016.html

> As of December 31, 2022, Silicon Valley Bank had approximately $209.0 billion in total assets and about $175.4 billion in total deposits. At the time of closing, the amount of deposits in excess of the insurance limits was undetermined. The amount of uninsured deposits will be determined once the FDIC obtains additional information from the bank and customers.

"assets" are the dollar amounts of the loans you have issued. what those "assets" are actually worth is a completely different number.

Yes, issue for the depositors is how long it might take. Digging through the closed banks history at the FDIC is fascinating - https://closedbanks.fdic.gov/dividends/

Sometimes up to ~75% of the funds is paid out within weeks of collapse, but for some banks it’s only 10 or so percent. Most of the time it seems to end up with over 90% being paid out (sometimes it’s 100%), but the payments can come over ten or more years!

Often seems to be one within weeks, one in the next month or two, and then the payments seem to start coming every three or so years.

Well, if depositors can wait 10 years, they will absolutely get 100% back. The assets are worth more than the deposits right now if they aren’t sold in a fire sale.

The problem now is that startups need the money quicker than 10 years. But to sell everything now means a giant haircut.

That’s fine if you don’t.

I don’t have any money in SVB nor anyone I know.

However, I have a vested interest to lower the risk of a contagion.

I think the ROI to the US economy should make sense for a bailout.

It sucks. And I’m once again paying with my tax dollars. But a deposit bailout, while shaving a few percentage off seems to make sense.

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