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Comment by 462436347 | Hacker News Reader

And before any more midwits play the "Prisoner's Dilemma" card to defend this:

https://en.wikipedia.org/wiki/Prisoner%27s_dilemma

> Two members of a criminal gang, A and B, are arrested and imprisoned. Each prisoner is in solitary confinement with no means of communication with their partner.

The guilty parties here could communicate with each other, and could cooperate, just like the banks did today by aiding First Republic. Instead, it appears that while they did communicate and cooperate, it was only towards the end of running on SVB. And as others have pointed out, even if the framing of it as a Prisoner's Dilemma is correct, it's not a single iteration variant: if the VC community could have come to some sort of an agreement, any party that refused to cooperate, or worse, that pledged to and then betrayed the others, would suffer a substantial loss of trust from other VCs and startups going forward.

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In a textbook prisoner's dilemma, the prisoners both get a hefty sentence if they failed to cooperate and both defected. They had a lot to gain from cooperating.

In the SVB situation, most of the losses are borne by the bank, investors of the bank, and the general public (in the sense that it caused financial instability across the nation). It's not a prisoner's dilemma because the downside to not cooperating is mainly borne by other people. The VCs and the startups who decided to "defect" are fine.

I'm personally unable to understand the anger here and finger pointing here, the bank was obviously in a bad shape due to their assets being underwater, why would bank clients have a moral responsibility to continue depositing in a bad and failing bank?

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And btw, the fact that parties could communicate with each other doesn't really change the game much. And nobody in their right mind would sign an agreement to keep assets in a bank or face penalties just because of some moral obligation to protect shareholders of a bank that made risky bets. That's just nuts IMHO. Anyone is free to create a time deposit if that's what they want to do.

The VCs started the bank run. They were the primary depositor base of SVB. It wasn't a question of whether it was rational or ethical to join a bank run already in progress. Instead it was they, the rational, enlightened VCs, who started the bank run in the first place, becoming prisoners of a dilemma of their own making.

It was in their best interest to cooperate to not run on their bank, and they failed to do so, which in turn brought down SVB, risks bringing down other regional banks in a domino-like fashion, and has already resulted in government bailouts that have made people outside of the SV bubble hate them even more than they already did.

Furthermore, the supposedly "evil" big banks, as I've repeatedly noted, have shown a comparatively greater ability to cooperate for the greater good of their industry and the wider economy, which is embarrassing given how these VCs posture.

I think it's really ridiculous for anyone to assert with a straight face that bank customers have a moral responsibility to keep money in a bank that's failing and under water. It's even more ridiculous for a bunch of tech VCs to be responsible for a country's financial health and stability of the banking system.

I don't think banks are "evil" and I don't think anyone has commented to that effect here. They're just responsible for this mess.

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