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Comment by nthngtshr | Hacker News Reader

I don't understand why so many people have such a hard time justifying this.

* If the bank collapses then many startups shut down. This is bad, but okay, maybe you think startups are net negative. In addition to that thousands of people will lose jobs — please explain how this is a good thing. Plus there's a potential for ripple effects from people not trusting banks anymore.

* You say it's a bunch of rich people profiting. Who are these rich people you're talking about? Bank management? They went to zero overnight. Shareholders? zero. Who's left? Garry Tan? He has the same incentives as millions of Americans whose retirement savings are parked in VC funds.

I want to say I'm one of those people who's not personally profiting from this, but I acknowledge that's not true — the economy is connected and stable economy is good for everyone and we should celebrate people who push for it.

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I actually personally profit from this as a software engineer working at a startup, but I don't agree with it because I recognize it's unfair.

Let's say my house gets burglarized. Everyone agrees this is a bad thing and unfair to me. However, my insurance only covers $2k, and I lost $20k of stuff. Can I expect the government to "backstop" me?

It's bad that the bank got shut down and depositors might have lost some of their money, but it's not fair to expect the government (and the average person indirectly) to reimburse for this, particularly when that's not how the FDIC policy is written.

Garry Tan and all the people I listed have a lot of their value in YC and startups which have direct losses and direct benefit from getting reimbursed for losses. If it weren't for reimbursement, the effective valuation of the startups would go down, and they'd have to invest more money to keep them afloat. So he has much stronger incentives than ordinary Americans.

The stable economy might be good for everyone, but I certainly will not celebrate rich people that push for their own wealth.

The US economy depends on you trusting that your bank account is less likely to disappear than a pile of cash under your bed is.

That's why the US government steps in for one case and not the other.

There is also precident for the government to pay damages above insurance limits after natural disasters, which from the depositor's point of view this basically is.

From what I understand: SVB offered below-market rates on loans and even personal financing for the founders of companies if you, in return, use them exclusively as your bank and put all your raised capital into an account with them.

You buy favorable rates on loans with the increased risk of putting more than the insured amount into the account.

When your house gets damaged in a flood and you've selected to insure it for $250k because that's cheaper, and you've knowingly built it in a floodplain, is the government still going to cover 100% of the cost of building it?

"If the bank collapses then many startups shut down."

No, the equity gets wiped out, and if it's a good idea/good business it persists and gets funding elsewhere.

"You say it's a bunch of rich people profiting. Who are these rich people you're talking about? Bank management? They went to zero overnight. Shareholders? zero. Who's left? Garry Tan? He has the same incentives as millions of Americans whose retirement savings are parked in VC funds."

The VCs and other equity holders of the SVB depositors. Financial markets work: they could have sold their uninsured deposits at a discount, made payroll, with equity eating the loss.

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