Comment by unity1001 | Hacker News Reader

Comment by unity1001 | Hacker News Reader

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> Here, the depositors are being bailed out

There. Now its correct. Rephrasing something does not change its nature.

The 2008 bailouts were done with that excuse too. They were 'too big to fail', and it would 'affect everyone' so that they were bailed out to 'help' the main street.

> It’s absolutely in the interest of the greater economy to have a functioning banking system backing high risk/high reward activities like Silicon Valley.

It is. And its totally against the interest of the greater economy to bail out those who screw it up by taking great risks. Its against the interest of the greater economy to bail out those who didnt take any risk either. Because it socializes the risk while privatizing the reward. That's why people hate bailouts.

All those startups and wealthy entrepreneurs put their money in the wrong bank. The wrong bank was shown as the best bank through a lot of fallacies, ranging from groupthink to obligations pushed on startups by VCs. Nobody came up and tried to raise awareness about how bad this setup was. Those who tried to do it were unheard. Those most affected from this, the rich VCs, all the SV funds, tech ecosystem top dogs, 'thought leaders', investors, are the ones who created this environment and caused this to happen.

Now, when the cows are coming home, asking for a bailout is socializing the risk while privatizing the profits.

The only exception can be made in the case of the state taking a ginormous amount of ownership of everything that it bailed out and not sell its shares out until it milked its money's worth to cover its bailout amount plus an above-market profit rate from that investment...

This statement doesn't make sense to me:

> Its against the interest of the greater economy to bail out those who didnt take any risk either. Because it socializes the risk while privatizing the reward.

In the first sentence you say there is no risk being taken by a group, and in the second sentence you imply there is a risk being taken that a group should not be bailed out of. Could you elaborate? What non-risk taking risky group are you taking about here?

Are you arguing that the depositors were also risk takers here? What were their options to mitigate that risk besides not use a bank?

The public has an interest in enabling high risk ventures, BUT, this must happen through a well designed mechanism that sustains itself. Like how I explained in my comment later: Through the taxes levied for that reason, through insurance fees charged to fund that mechanism and so on.

But none of these apply in this case. High risk decisions were made by all of these actors, including most of the depositors, while privatizing all the profits. The very CEO of the bank is a libertarian and he publicly advocates that government should disappear. All the depositors are either part of the VC crowd, or startups that are practically controlled by those VC crowd. And most of the money (ironically) still belongs to that actual VC crowd indirectly because those VCs control the startups that they gave those funds to.

So basically it was all privatized profits until the risky decisions came home and suddenly a need for socializing the losses came to being, causing even the die hard libertarian CEO of SVB to start publicly demanding that the govt. should bail them out, in a public display of total lack of principles. (then again Ayn Rand did the same).

Yes, the depositors were also risk takers. They took the risk of trusting that high-risk bank that lobbied for watering down regulations for more profit. They took the risk of trusting the VCs who forced them to put their money in that bank. Non startup/VC related clients took the risk of putting their money in that bank for reasons ranging from higher gains to groupthink. Those were decisions taken by them. The public cannot be expected to save them from the consequences of that risk taking without getting back its money's worth. And no - the return cannot be 'a more lively startup ecosystem'. The expected return can only be money. That the public so desperately needs for repairing the society.

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