> it's threatening the quality of life of a certain class of people.
Like the jerks who chose to work for a company that picked a specific SaaS payroll provider. Or those entitled Etsy sellers that expected to get paid. The absolute nerve.
Like the jerks who chose to work for a company that picked a specific SaaS payroll provider. Or those entitled Etsy sellers that expected to get paid. The absolute nerve.
The startups did not had all of their money in this particular bank randomly. It was by design.
It was a sad attempt at preventing a 5th Ammendment violation, and it was done so poorly that it didn't solve the issue. The 5th was still violated.
Can you give an example of such a company? I can’t think of a way in which an otherwise healthy (long term viable) company could suddenly be unable to make payroll in such a way that assistance would not be available (e.g. inexpensive bridge loan), or the company should not have bought relevant insurance.
Literally the only thing I can think of is if smaller banks failed and companies were stuck with 250k + haircuts and didn’t get this same deal. So did that actually happen?
For the rest of it, they might take a 20% haircut at most. Even if they had no revenue, and that was say 10 months runway, then it's down to 8 months. It's not like people aren't going to get paid, there's plenty of notice there.
I'm not sure I follow. A US 60k/Y job means the company has to pay 5k p/m (to employee and taxman). So a company-depositor getting 250k would be enough to serve 50 employees. "A few times over" would only be true for less than 25 employees. If we go Silicon-Valley level, where salaries seem to be twice as high (or more), those numbers would halve again. They seem very small numbers, most SMEs would not fit them.
In the USA 78% of businesses have fewer than 10 employees. 89% percent have fewer than 20. The typical SMB has only a couple of employees.
When you include sole proprietors (like the typical etsy store) "the share of U.S. businesses with fewer than 20 workers increases to 98.0% and the share with fewer than 10 employees registers 96.0%".
The customers of SVB were quickly growing business in an industry where you can quickly obtain immensely high profit margins. A 20% cut is not the end of it.
I believe the big impact of this announcement is not the money itself, in fact it was the lowering in value of government bonds that caused the bankruptcy in the first place, so the govnernment effectively made money from the 10-year bonds deal they struck with SVB. Maybe in the end it might still be a profit for taxpayers/USD users overall. But this announcement still implies something for banks: they can do the dumbest decisions (like this failure for risk management), and the government will bail them out.
Avoids the moral hazard created by propping up SVB while still keeping workers paid. But I bet that would be showcased by the upper class as a "handout".
(And for the nth time, SVB isn’t being propped up. The owners are losing their whole stake.)
But you are somehow convinced that this fund [1] created in 1 day by the Fed to solve "temporary liquidity issues" with vague promises of "loans against securities" and "assessment charged on the banks" will be entirely free of fraud or double-dipping?
Everything involving money has the potential for fraud and double-dipping, and the banking sector has a ton of it. We can figure it out and prosecute people afterwards (or not, it's not like senior management at SVB is going to be prosecuted).
> (And for the nth time, SVB isn’t being propped up. The owners are losing their whole stake.)
Oh sure, three Federal departments make a joint statement on the weekend and create a new liquidity fund every time a company goes bankrupt. Nothing to see here!
----------------------------------------
[1] https://www.federalreserve.gov/newsevents/pressreleases/mone...
Government official picking losers and winners. Winners will mostly be those who supported government officials party.
Either using money from tax payers. Or creating new money out of thin air. Leading to yet more punishing inflation.
Money provided to individuals is highly trackable; ask anyone with student loans. And this would give the former SVB's employees something to do past the current 45-day window. More employment for the win!
Don't get me wrong, it would suck. But there is a proven way to fix misallocation of capital via the market.
No, it's so that payroll continues...
Lots of people are starving and homeless for as trivial a "decision" as that.
I'd much rather give everybody food and a home, including the Etsy seller, instead of: giving the bankers a ski jolly, people still starving and homeless, less this Etsy seller. Why can't we do that?
Some of those entitled Etsy sellers voted against everybody having food and a home; My heart breaks, but not as much for those who have and hate. Maybe now that they are hungry and homeless too they will be a little more sympathetic. Surely that would be best.
>Lots of people are starving and homeless for as trivial a "decision" as that.
Most homeless are either severely mentally ill, drug addicted, usually both.
>I'd much rather give everybody food and a home, including the Etsy seller, instead of: giving the bankers a ski jolly, people still starving and homeless, less this Etsy seller. Why can't we do that?
You could be running a soup kitchen homeless shelter right now instead of posting on HN. It's always someone elses fault!
>Some of those entitled Etsy sellers voted against everybody having food and a home;
Great analysis and input - if we would all vote x, everybody would have food and home, problem sovled!
I live in a socialist European country, but I'm originally from the USA, and I wish it was better there.
When does it stop?
First Republic Bank isn't looking too good.
You are correct.
What banker got a “ski jolly” here? The bankers in this case are in exactly the same position they would have been in if the bank were allowed to fail without supporting depositors.
Well, this guy for one:
https://www.forbes.com/sites/brianbushard/2023/03/10/svb-fin...
How is selling stock tantamount to a government bailout?
Oh no! Not uncomfortable conversations! Anything but that! Maybe it will be followed up with a strongly worded letter with an implied threat of a performative vote by Congress. How will they cope?! They might even have to show up at a gasp House committee hearing! shudders
Wake me when someone is convicted.
It’s not to protect the existing depositors of SVB - but to shore up the stability of the entire banking sector.
It’s important to remember that SVB lobbied hard to gain an exemption from banking stress test regulations. Their “inherently low risk” business clearly wasn’t, and they failed to defend against the inevitability that was the fed going up from the anomalously low rates of the 2010s.
What is the bad behaviour of the depositors? Trusting that their deposits were safe in a bank? This isn’t bad behaviour, the government wants people to think that bank deposits are safe. Safety of bank deposits is really important to the economy.
Yes, it is exactly this bad behavior. The gov has only guaranteed safety up to $250k. Any entity exceeding this limit does so at their own risk. By depositing far above the insured limit, you are allowing that bank to transact with your money. The banks loans it out. So by definition those consumers thay ignored the limits incentivized the bad behavior.
Had this bank started losing customers because they faced insolvency risks, they may have changed their behavior. The market provides a feedback loop.
Actually I think you'll find out if you look at the bank failure list that most deposits are paid out in full even if above the insured limit.
Socialism doesn't mean "when the government does stuff"
Technically, your "jerks" don't lose capital (wealth) while the people with deposits in those banks do.
Yes, losing a job is a bad thing but a job is a mere right to a transaction (we exchange labor for money in the future) and not lost capital.
And you are correct! Silicon Valley Bank was the first bank this year for whom the Fed is paying for uninsured deposits. The second bank is Signature Bank of New York, which regulators shut down one day later, on Friday March 10th. They are being protected as well. https://www.nytimes.com/2023/03/12/business/signature-bank-c...