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Comment by seo-speedwagon | Hacker News Reader

This is 100% a bailout and the wording that “no losses […] will be borne by the taxpayer” is a shameful misrepresentation. Just because a bunch of VCs and founders didn’t realize they were at risk of this happening if they kept all their money in one bank, they still bear the responsibility of their losses. Looking forward to this new future where uninsured deposits are actually 100% backed by the FDIC, so actually if your company spends any money to diversify or de-risk your banking posture based on how the rules are written, you’re a rube and potentially being irresponsible towards your shareholders

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One of the key components of a bailout is that the company still exists. In this case, the company does not exist any more, and all shareholders have lost their stock.

So whilst there may be some superficial appearance of a bailout (and we don't yet know how much that is, as we don't actually know the value of the assets that are recoverable), it is inaccurate to say that this is "100% a bailout".

I'm talking about the uninsured depositors. Who are first in line after the DINBoSC liquidates SVB's assets. And it doesn't matter what actually shakes out in the end; even if some miracle occurred and the FDIC convinced some other bank to buy out the rubble of SVB, or they managed to sell off SVB's assets without taking a loss (virtually impossible), that does not change whether or not this was a bailout.

Because before any of that was announced, the FDIC and Treasury said that no matter what, they will guarantee uninsured depositors will be made whole. That is not what the rules are, those depositors are getting special treatment not afforded to anyone else. They gambled (and most apparently didn't know it), lost, and the FDIC are going to make sure they don't take a haircut.

It's been fun watching the special pleaders redefine "bailout", as if the term could only apply to equity or bonds.

It can apply to any interested party. As in "The depositors were bailed out".

You’re being bailed out too. You just don’t understand how.

Signature Bank failed and they didn’t tell anyone. A half dozen more would be dead by noon on Monday. Good luck to rest of the financial system, and good luck to the rest of the economy.

We're not bailed out if we're under $250k.

What about your employer? Would they still have money to pay you?

If your employer doesn't pay you, then you find a another job.

Bold of you to assume that work will be available to you.

The alternative is the rich forever get bailouts.

This isn’t bailing out the rich this is businesses. If you want businesses to not exist, fine. I suggest you find some communist utopia and go live there.

One of these times where you can see how the concentration of quality reasoning on HN decreased with time and popularity. People think hurting businesses will not affect them. Incredible.

You're right, this place is just Reddit now.

The US has over $9tn of deposits and the entire FDIC insurance fund is only $121bn, which is less than the total assets of SVB alone. FDIC insurance can cover a few bank failures, but not dozens.

Not really. If 5 or 6 more regional banks fail next week due to depositors seeking the safety of big banks there won’t be enough money to guarantee deposits for more banks.

If they didn’t guarantee the SVB depositors that outcome would have been almost guaranteed, the train wreck would have impacted de-risked companies too, because the entire regional banking system would implode.

Not acting now to stop contagion because of some idea of fairness is short sighted.

And if it doesn't then what?

I am also confused about where the money is coming from to cover SVB’s losses, if not from the taxpayer.

The FDIC can tell banks they need to pay more into it to cover the losses.

The pay is then collected from depositors by banks.

1. FDIC reserve fund (from the premiums they collect)

2. "a special assessment" aka a tax on member banks directly

3. SVB’s assets. They actually have enough assets to pay, but it will take time for those bonds to mature.

Having to wait for the bonds to mature is arguably a haircut. Otherwise you can for example, justify a 10% haircut by saying that you can take that 10%, buy some 5 year treasuries with it, and get back your money once those bonds mature.

> 2. "a special assessment" aka a tax on member banks directly

And if some bank doesn't have enough to cover everything they can get freshly printed USD courtesy of BTFP: https://www.wsj.com/livecoverage/stock-market-news-today-03-...

What’s the moral hazard in the FDIC insuring a much larger number than 250k?

exactly what the parent comment said - an incentive to not take steps to reduce your risk, leading to more situations like this

How do we know this is a "shameful misrepresentation" until we see how it pans out?

Seriously, I really wished this were an inflammatory hippie talking point but unfortunately it isn't: the truth is that for saving the rich, the whole system moves. When the financial world is at risk, there is never ever a lack of money for bailing it out.

Now on the other side, the federal govenment has no money for paying its own employees decently: https://www.govtech.com/em/preparedness/low-pay-high-risk-le...

I'm not even american, but it looks like it's like that everywhere.

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