I don't get it. What are people crying about? In the 08 crisis, everyone complained that the execs and investors were bailed out to save the system but the homeowners were wiped.
This is the exact opposite. Execs and investors are wiped but the average depositor is saved.
I can understand the anger at the bank run orchestrated by "sophisticated" VC group-think. But given that it happened, this is the BEST OUTCOME that the government could have come up with.
People are crying because this is just another case of the rules not applying to the wealthy. What's the point of FDIC caps if they magically don't matter when your balances sufficiently exceed them? How is that not the epitome of too rich to fail?
Mark Cuban says he has $8-10M at SVB via his funded startups. Rich guy bailout to be paid by increased FDIC fees and reduced Fed 'earnings' paid to USA. Everyone is forced to pay so billionaire Mark Cuban gets his millions.
The startups are the ones that get the funds now, right? The startup now is guaranteed to have the funds to pay their employees etc. Mark Cuban gets money if his investment in the startup is a success, and only then. I’m happy the startup can now survive. What exactly is the issue?
The issue is the US public paid into the startup via the bailout and doesn't have the corresponding shares. It's making the general public pay for the down side while having the rich VCs get the upside
> The issue is the US public paid into the startup via the bailout and doesn't have the corresponding shares. It's making the general public pay for the down side while having the rich VCs get the upside
There is no tax payer money in the bailout because there is no bailout.
Iirc SVB’s assets aren’t enough to cover all withdrawals, esp if sold now. FDIC is either taking of the risk or covering the diffs. Money has to come from somewhere.
It’s indeed very complicated in any case. My understanding is a vast majority of the funds to cover the depositors is/will be coming from (1) the eventual sale of SVBs assets, which is worth an unknown amount given the FDIC must sell all assets within a few years (3-5?), and (2) the $250k insured amount from FDIC’s DIF. Short term the FDIC is providing an advance dividend to cover as much of the depositors as they can.
Where the remaining amount is coming from, however much that ends up being (an unknown), is an unknown as far as I understand. It could come from a “special assessment” (a way for the FDIC to collect additional money from banks)… of which some could possibly be passed down to consumers eventually I think, indirectly, or just worse terms. If so it might be a relatively small amount of the total assets, but I have no idea - depends on the sale of SVB’s assets.
> Mark Cuban says he has $8-10M at SVB via his funded startups. Rich guy bailout to be paid by increased FDIC fees and reduced Fed 'earnings' paid to USA. Everyone is forced to pay so billionaire Mark Cuban gets his millions.
Did Mark Cuban mismanage the bank? Why should his deposits get penalized?
The issue is that the "average depositor" is a Silicon Valley venture capital funded startup, or in other words, an investment vehicle for wealthy venture capitalists. SVB was not a "mom and pop" banker.
Of course some of the startups banking there were not themselves wealthy (yet), though some of them were. But in general, that's the goal of these startups, for both the investors and the founders, to go big or die trying, in contrast to a small business, which may remain relatively small forever. The ultra-wealthy are the primary beneficiaries of this startup system, regardless of whether any particular startup happens to be making a lot of money at the moment.
There's a reason the FDIC only guarantees $250K. That's enough to cover mom and pop. Moreover, depositors who were over $250K were very likely to get a substantial portion back, sooner (with advanced dividends) or later. It was never going to be a total loss, regardless of bailout.
Making every depositor whole comes at a cost. It's a bit of a copout to say that taxpayers are not funding this, because taxpayers are customers of the more responsible banks who have to pay a fee to cover the cost. The costs will get passed along, just via a more indirect route that attempts to cover the political asses of Biden, Yellen, et al.
The lesson here isn't that individual startups should have chosen a bank more wisely. It's unclear how that was possible, or how they could have predicted what would happen. The lesson is that the entire SV VC community is too small and insulated, both geographically and culturally. There are too many eggs in one basket.
The average depositor does not feel like someone with over 250k in the bank. No one will save those people if they hit a difficult situation like this.
That said, I personally do not have an opinion on the svb matter, just stating what I feel the sentiment to be.
> The average depositor does not feel like someone with over 250k in the bank.
The average depositor might not have $250k in the bank but the average small business does? These small businesses pay their employees from those deposits.
> It should be spread out in order to mitigate risks like this.
Even after that, companies could still need the money to make payroll literally on March 15. How would they know which of their spread out accounts will fail tomorrow?
Think about your own accounts. You are paying for your own car loan from one account. Imagine it gets frozen tomorrow. There are 2 scenarios:
First, you miss the first few payments and your car gets repossessed. Isn't it rather unfair that you had the money but your bank fucked up so your car got repossessed?
Second, you switch your bank for loan payments but that you were already using the other account for mortgage payments. Now your deposits are leaving faster than your savings are building. Why should you, the depositor, be put in this precarious situation - if the failure was from the bank management?
A bank failure cannot be prepared for in the best of times, for a simple individual. And you are asking large companies with accounts payables and payrolls to switch asap before market opens on Monday and these companies get crushed - for not fault of their own?
Imo, the outcome of saving no-fault depositors but not saving the bad management is more than fair.
I'm not saying that the rules are reasonable -- I am just saying that is how it works. You don't get to change the rules of the game even if you have a good argument, which is what is essentially happening now. At the end of the day, YOU are responsible for your money and the bank you entrust it to -- no one else. YOU are responsible for putting your money in the bank that failed -- no one else. Even more so -- you are responsible for putting money in over the insured limit. You took that risk.
It is hard to have sympathy for a company like Roku in this situation.
I also imagine that if some of these massive deposits were spread out it would create for a healthier environment where smaller banks could compete better.
Fair? Where will the money come from -- the tax payers? Other depositors ? That is not a fair outcome.
Let's see SVB's board of directors and C-level have all their pay and stock option sales clawed back for the past couple years. Somebody is responsible for having signed the monthly reports to the regulators ... or doesn't that signature come with consequences?
these VCs and tech billionaires increasingly show themselves to be the enemies of the rest of us. they will control the AI, and will become increasingly brazen in their efforts to enslave those who are not in YC or open AI or which ever cliques the cartels maintain. this is real survival stuff, but the people who need to regulate SV and tech are asleep at the switch and dont understand how dangerous the SV people are. if you work for them, good for you, but this is the beginning of a very bad chapter for the US.
> these VCs and tech billionaires increasingly show themselves to be the enemies of the rest of us. they will control the AI, and will become increasingly brazen in their efforts to enslave those who are not in YC or open AI or which ever cliques the cartels maintain. this is real survival stuff, but the people who need to regulate SV and tech are asleep at the switch and dont understand how dangerous the SV people are.
But none of this happened in this specific SVB collapse. You can hate on billionaires but that doesn't mean it is ok for hundreds of thousands of payrolls of average people should go poof.
If SVB didn’t get bailed out, there would be a run on small banks. Unfortunately, the government can’t bail out every small bank, so there may still be a run on the banks. Time will tell.
> Unfortunately, the government can’t bail out every small bank
Well, they could adopt a new program providing cash loans against a variety of term investments to deal with liquidity crunches of the type SVB faced for all banks. That would be equivalent to a bailout (at negative expected cost) of all small and large banks with similar issues to SVB.
You don't think that the banks aren't going to be passing along the burden of the FDIC special assessment to customers, do you? That's not at all how finance tends to work.
This is the exact opposite. Execs and investors are wiped but the average depositor is saved.
I can understand the anger at the bank run orchestrated by "sophisticated" VC group-think. But given that it happened, this is the BEST OUTCOME that the government could have come up with.