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Comment by mikeyouse | Hacker News Reader

They wouldn't be bailing out the bank here.. at least not in any normal sense of the word. People who owned the bank (equity holders) are going to be zeroed out, people who lent money to the bank (creditors) are going to be nuked too. The people being bailed out are individuals and companies who had deposits with them.

If the government can make all of the depositors whole, take the associated amount of capital off their balance sheet and hold onto it until it matures, thus costing the taxpayers $0, that seems mostly okay to me? There's the opportunity cost of money blah blah but total increase to the deficit would be $0 and all of these companies would be able to continue operating.

What's the point of a Federal gov / lender of last resort if they can't keep depositors in solvent banks whole?

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There is a reason why the FDIC limit is $250k and not a infinity symbol. The Fed's job is not to bail out every single entity that knowingly held assets in a risky manner.

Keeping your money in a bank is acting in a risky manner?

It is if you keep it all in cash, ignoring the FDIC limits. Every single bank can suffer a run, its your responsibility to be able to survive it.

Seems super short sighted - there’s no real world benefit into forcing companies to spread their checking accounts over hundreds or thousands of banks. Also seems like a good way to ensure that all of the business concentrates with the biggest banks.

The only people doing anything risky were the executives at SVB, and they’re going to be wiped out completely. Its a terrible idea to punish depositors for the crime of leaving their funds in a checking account at one of the top 20 largest banks in the country.

I suspect we’ll see a “Fannie Mae” for checking accounts in the future and that seems like a good idea.

If you are risk averse have your money at a big global systemic bank with a big customer base and therefore deposit base, not a bank focused on holding money for high-risk ventures.

There’s nothing unique about SVB - and their customer makeup was only obliquely related to this failure. The “high risk” nature of their customers had nothing to do with why the bank failed. Letting depositors lose money here would send a signal that any bank smaller than something like B of A is at risk.

Funny you mention BofA. They have $116 billion in unrealized losses. What all these banks are doing is very typical. If you've ever worked in the industry, you would know that.

https://twitter.com/zerohedge/status/1634025141540732934

http://www.brooock.com/a/svb-collapse-exposes-cracks-in-econ...

I work in treasury and need to find a safe place for $150M in cash… there’s no universe in which I’ll spread that across $250k tranches in hundreds of other banks, so in your vast experience in the matter that’s evident from your confidence here, what would you recommend we do?

When did I ever say that you should do that? We know that the government will backstop BofA. They aren't going to backstop SVB. FDIC is only intended for regular people as you imply.

It seems like there should be an API for this problem...

There kind of is - formerly called CDARS, but it goes by IntraFi now. You establish a “home” bank and they dump your balance into their network and they set up the hundreds or thousands of other accounts. It’s dumb and expensive and shouldn’t be necessary..

https://www.intrafinetworkdeposits.com/

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