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Comment by epistasis | Hacker News Reader

The FDIC insures $200k of deposits because banks are not supposed to be risky. Thats taxpayers bailing out everybody in order to keep banks as "not risky"

In particular the article incorrectly states that the bank was bailed out. It was not. The bank failed. Depositors who were running their non-profit in the Bay Area did not lost all their charitable contributions.

The bank failed because it had placed deposits into US Treasury bonds that were temporarily worth less for sale on the open market than they would be at maturity. When Peter Thiel started a bank run by telling all his investments to pull their funds, that exposed the SCB mismanagement.

When the depositors were bailed out, taxpayers didn't lost anything, it was a wash. We could have paid at bond maturity or now, but it made little difference to us.

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> When Peter Thiel started a bank run by telling all his investments to pull their funds, that exposed the SCB mismanagement.

I think he did more than that. He either has precognition Nostradamus would be proud of or he absolutely had insider information, and a good amount of it.

1. He knew that when the bank closure would be, because despite how the FDIC has very detailed and historically very successful efforts at keeping such plans highly confidential (for obvious reasons), like agents in hotels under fake names, etc., he told his investments on Wednesday night that "all funds must be out of SVB by COB Thursday". FDIC rolled into SVB 8am Friday morning.

2. He had also had instructed another of his companies to build a website and app that was able to handle applications for business bridge loans, and it "needed to be tested, and ready to go live, by noon on Friday".

Also, not for nothing, causing a bank run is a federal felony.

In the end it's a distinction without a difference. The result is the same, and Thiel was building the fire escape before anyone could smell smoke.

I don't think you can credit Thiel with smelling smoke, he lit the fire. He heard the same statements from SVB leadership about the problems with T-bills and higher fed rates, realized that there was a huge spread between current market value and long market value of SVBs T-bills, and threw a match on it.

What about banking regulations that mandated that SBC put those deposits into treasury bonds?

The bailout did not accelerate bond maturity. Those were picked up by other Banks when assets were sold off.

Last, who is the other banks that paid for the bailout, not taxpayers, at least not directly. If you call higher FDIC insurance rates for JPMorgan Chase a taxpayer cost, how does that logic scale to the rest of the economy?

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