Comment by bogomipz | Hacker News Reader

Comment by bogomipz | Hacker News Reader

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>"Did they need to? It's not clear anyone would have lost anything at all because depositors are senior to equity and bond holders."

Do you realize how many tech companies used SVB as their primary banking facility? There were plenty of companies who would not have made pay role. So yes real regular people would have been affected.

>"It's extremely unlikely anyone, anywhere, would be at risk of losing any deposits - insured or uninsured - in this day and age in the US regardless of the FDIC's 'new' position."

The FDIC invoked a "systemic risk exception" in order to make SVB and Signature Bank depositors whole. Federal law requires the FDIC to resolve failed banks by choosing the method the least costly to the Deposit Insurance Fund. Here "resolved" means making only insured depositors whole. The only exception to this is the systemic risk exception. This is law not just some shit you can make up.

>"The only real issue at banks right now is that they're in long-term government debt which has significant mark to market losses "

Uh no, the issue that is that there's a lot of uncertainty. I don't think nobody really knows the extent of it at this point because a lot of midsize banks haven't really been under strong regulatory scrutiny until very recently. A crisis of confidence is still a crisis. A crisis of confidence is precisely what causes a run on banks.

I’m so tired of the fake make pay role canard.

All depositors had $250k guaranteed at the bat. But sure maybe that’s short for 2 weeks of payroll for many companies.

Well FDIC was already cash payout warrants against the size of of their deposit assets (something like 50% would be available). If you need more than 50% of available cash to make payroll, you were already a dead firm walking.

With liquid assets like long term treasuries, they could have been liquidated quickly, and at worst most companies would have seen a 10-15% haircut.

A haircut hurts. But running a business includes all sorts of risks. You could have a lawsuit. You could have a fire. Your cloud provider could shutdown. They knew about the risk of being uninsured (since many companies have corporate treasurers who manage multiple banks and portfolio of treasury bills to manage bank risk), and this was just the one risk their company faced that came to fruition.

I'm not sure how you reconcile acknowledging the reality of companies not being able to make payroll for two weeks and also calling it a "canard" in back to back sentences. A "fake canard" would be a double negative by the way ;)

If you reread the thread and the context of what I was responding to it was the OP stating "It's not clear anyone would have lost anything at all ..."

Perhaps you are well-off but losing a pay check for couple of weeks has real consequences for lots of people.

> Perhaps you are well-off but losing a pay check for couple of weeks has real consequences for lots of people.

They're arguing that companies could already make payroll just fine with access to half their balance. A 100% guarantee was not necessary.

If your payroll plus all other outgoing expenses was greater than $250K then no you would not be able to "make payroll just fine." This is simple math. Arguing against basic math is absurd.

I said half their balance. I didn't say anything about 250k. Please reread the comment thread.

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