Now that the blood prophecy of 100,000 americans doing a universal bank run has not come to pass, he’s positioned himself as a messiah that tweeted us all back into god’s good graces.
> In the Y Combinator community, one-third of startups with exposure to SVB used SVB as their sole bank account. As a result, they will fail to have the cash to run payroll in the next 30 days. By that measure, we can estimate that payroll-related furlough or shutdown will impact more than 10,000 small businesses and startups. If the average small business or startup employs 10 workers, this will have an immediate effect of furlough, layoff, or shutdown, affecting over 100,000 jobs in the most vibrant sector of innovation in our economy.
https://www.ycombinator.com/blog/urgent-sign-the-petition-no...
Without the government's actions over the weekend, bank runs probably would have happened, and they still might.
The government did what the VCs recommended. Maybe not because of the tweets, but it still happened because what the VCs recommended was actually the right thing for the government to be doing! The systemic risk identified by the VCs is real!
I'm not attributing it to that.
I'm merely pointing out that the government is doing what the VCs were calling for, because it was clearly the correct move.
VCs ask the government to do a thing and people mock them and say it's a crazy thing to do. Then the government does that thing (whether or not they did it because VCs wanted it is entirely immaterial to my point) and you don't see the same people saying the government was doing a crazy thing.
Since 2013 there have been 71 banks fail according to the FDIC's bank failures in brief Infograph. Those 71 banks had assets totaling 23,399.20 million (or 23 billion). SVB had asses totaling 209,000 million (209 billion).[1]
Where are the 500 banks again and again every year over the last decade?
https://twitter.com/jason/status/1634771851514900480
It did lead me to a really interesting article about audience capture and how it twists “influencers” into saying and doing outlandish things though!
https://gurwinder.substack.com/p/the-perils-of-audience-capt...
I have been noticing this for a while without putting it in clear writing, and I'm glad someone did!
If a child is never allowed to face the consequences of their actions they will never learn.
If there's any ground for further actions against the management of the banks, I'm fully supportive of that, but a bunch of bank runs would've hurt everyone but them more than them.
We need to balance letting the depositors suffer with causing a system wide run, so I think the FDIC/Fed choice was reasonable, but I would have rather seen them, say, guarantee uninsured deposits, less the interest of those deposits earned over the past 18 months.
If government didn’t make it clear they were stepping in here, what do you think would have happened first thing Monday morning? Every small/medium business would have seen the writing on the wall and moved their funds out of small/medium banks and into the handful of “too big to fail” megabanks. Stepping in and making up the cost prevents contagion.
The 250k limit is somewhat of a red herring. If every depositor split their funds up to stay under the 250k limit, it doesn’t actually change the overall risk profile for the FDIC.
So you can get that risk-free extra 2% on your deposit up to 250k, or up to hundreds of millions, and the government will just pay in fine. That opens up new area of business imho.
But even if other bank runs didn't happen, there would be another consequence that I'm sure you wouldn't like either. People would understand that there are now two tiers of deposit safety: small banks where depositors might lose money above $250k if the bank fails, and "too big to fail" banks where that wouldn't happen (because they can't fail!). Everyone would move their deposits to the "too big to fail" banks, which would make those banks even bigger and more powerful.