Yellen says government will help SVB depositors but rules out bailout

Absolutely wipe out the equityholders of SVB. They deserve nothing, because that's what you should end up with if you own stock in a company that goes bankrupt. Claw back executive pay if that's something you can do. But kill a bunch of startups because of their choice of financial institution? I just don't get where that comes from.

First stock holders get wiped out (common then preferred), then debt holders (folks who have lent money to SVB won’t get their money back), only then would it hit depositors - and in the case of a traditional bank it usually wouldn’t hit them hard since most funds are FDIC insured.

I can imagine being incensed about stockholders and debt holders being made whole, if that were to happen - since then people would learn the wrong lesson here. But nobody think that’s going to happen.

If depositors aren’t protected, then it’s going to have a lot of downstream impacts (people won’t make payroll, and employees who have no responsibility won’t get paid). And again, it’s not like folks who chose were gambling with a shady bank to get high interest rates, in many ways SVB was considered the least risky and most conservative bank to use as a startup. At least that’s why we chose it.

I think the common sentiment is depositors should not get any more than whatever the remaining assets are worth.

And I think the prominent people asking the government to bailout depositors are worried about only getting 75% of their deposits back, because the remaining assets might not cover all of the deposits, or it might take a while to recover the deposits.

And that is what people are against.

the creditors then take a haircut. It's basic bankruptcy.

What people oppose is taxpayers absorbing the losses beyond $250 000 as promised, and there's a very good reason for this: its another example of privatizing profits and socializing losses. In other words, it encourages risky behavior because they're gambling with the house's money.

Some argue, and they have an excellent point that if SVB's creditors aren't bailed out it could trigger a contagion. Thats a formidable risk. However, we already did mass banking sector bailout less than 15 years ago and it turns out all it did was incentivize irresponsible behavior.

Easy, pay out $250K per account, then distribute the rest pro rata based upon closing balance from when the fed's took over. If they have to wait because assets need to be liquidated then sucks to be them. I'm sure they can get their money faster if they agree to a haircut.

> “This is a bailout”. It would be if shareholders were to get their money back, which doesn’t seem likely. The government will use the bank assets to make customers, not owners, whole.

Money to depositors for amounts greater than $250K is a bail out. They have no right to that money from the Feds.

> Generic screeching against the tech world. I get the schaudenfreude, but this will not hurt big tech and VCs as much as tens of thousands of small businesses, and the people employed at them. Some billionaires will be upset at some relatively insignificant losses, while hundreds of thousands may lose their jobs.

On the flip side, there's nothing special about many of the customers being small businesses, or startups, or big businesses, or really anything else. There's established rules for FDIC insurance and that's what we should be following.

The last I saw from Moody's was they're expecting "eighty-something" percent recovery rate, assuming no bailout or rule flexibility and no last minute forced merger.

This isn't like FTX where all the money is gone and ha ha you're not getting a penny of it back, ever. The SVB situation is a hyper regulated industry and the regulators flipped out when the asset ratio dropped below 95% or something like that, and as such, there will be inevitable expenses of a total shutdown, so figure everyone below $250K gets 100% back via insurance and everyone else gets $250K plus whatever was above $250K paid out at probably around eighty five percent when its all said and done (this is a guess although Moody's usually isn't all that wrong).

Historically when smaller banks collapsed (my hometown bank for example back in '08) the regulators semi-forcibly merge the small bank into a large bank and there's zero loss, you're just magically now a customer of some out of town megabank. The big bank eats the loss in a wink-and-nod agreement where the big bank gets some future favorable regulatory treatment in exchange, semi-informally. The problem with SVB is it is, or was, huge. So finding a huger bank to merge with will be tricky to impossible. Which was kind of the point of regulation intended to keep competition higher by making lots of small banks instead of few large ones.

The worst case outcome according to the last I saw from Moodys was big depositors will take maybe a fifteen percent haircut over $250K. The propaganda claims, of course, that all the money is gone and its 1933 again on Monday morning and the usual workers of the world unite stuff. But its not really THAT bad.

Idle speculation I've seen in chats that the solution to SVB being way too f-ing huge to merge with anyone is a forcible separation followed by a forcible multi-merge. So each 1/4 of you will be new customers with 100% rate of return of JP, BoA, Citi, and WF respectively. (off the top of my head those are the four largest banks by assets, I could be wrong) This is just internet chat nonsense I wouldn't plan on it. Although it is an innovative solution to having a "too big to fail" bank failure.

There's some of this, for sure. But there's an equivalent screeching from the tech finance world[1] demanding a full government guarantee. That ain't happening, and I think it's appropriate for the fed to make that clear.

FWIW: the dirty secret here is likely that there's a bunch of internal dealing going on as regards SVB. They were The Startup Bank for some reason, it's not random. And my guess is that we'll discover that a whole lot of big venture players turn out to be extremely exposed[2] to an SVB failure. A lot of VCs are probably losing their shirts here.

[1] Jason Calacanis's caps lock has been stuck down since Friday.

[2] Or worse. Genuine fraud has turned up in previous FDIC seizures. But no evidence exists right now.

It's good for those "businesses" if VC and Big Tech are unharmed because were it not for VC investment and Big Tech acquisitions, these "companies" would have no money to pay the people who "work" at them.

Legitimate businesses that can pay employees from revenues and generate profits are generally not SVB's customers. They can use normal banks.

Arguably a "job" that depends on interest rates being "zero" and investors writing checks cover payroll is not something anyone should be relying on longterm.

"Generic screeching against the tech world" is a red herring. Perhaps it is easy for "tech" companies to dish out hype but difficult for them to accept any negative commentary. The question that must be considered is whether the "tech" company's so-called "business model" really is one. Arguably these "companies" never had a successful business model and never found one, if they remain reliant on VC, SVB and Big Tech. Intermediaries, surveillance, data collection, advertising services, all purely parasitic activity. If this is not something the world really needs and is willing to pay for, entities like SVB and their customers will burn out or fade away.

Big Tech fans commenting on HN have used the phrase, "The market has spoken" in the past to foreclose any debate on the merits of the so-called "tech" industry. Well, here the market is speaking.

if you buy an expensive house or car you generally pay a lot more to insure that asset. not sure why people don’t think of buying insurance on their bank deposits in the same way if you find yourself in a situation where you need to hold much more than $250k in one account for whatever reason.

But even if you’re an individual holding million in cash (and for whatever reason it is not invested), it isn’t exactly difficult to open 10 checking + savings accounts and putting $250k each. In fact that is the prudent thing to do.

The issue here is not about whether the government should seize SVB assets rather than return them to depositors. Hopefully no one is arguing for that.

(The issue is about what the government should do -- if anything -- about (1) shortfalls depositors may face; (2) delays depositors may face in accessing the funds that do remain.)

The reason SVB is in receivership is because they don't actually have the ability to make all their depositors whole. Any scenario where uninsured depositors end up with all their money back is likely to be a bailout.

what we are saying is this should ONLY use the assets SVB has. Nothing more.

I’m not sure why y’all keep making a strawman to fight this.

1) anything beyond 250k is a known risk, you should’ve spread the money around.

2) why should tax payers be on the hook for more than the 250k amount? The companies took the risk and lost.

But if everyone spread their money around and kept each account less than 250k. Then in effect isn’t everyone insured for everything anyways?

Imagine there is a service that seamlessly took your total amount and spread it between various accounts for you to keep each account balance less than 250k. Now the totality of bank deposits are in effect all 100% insured. How is this now different from insuring all deposits regardless of size besides adding a middleman?

Depositors will get their insured money on monday. The FDIC will then dispose of all the banks assets and return the proceeds to its creditors, that is depositors.

Calling for the government to guarantee all deposits unconditionally is exactly calling for a bailout. Calling for the government to follow it's own laws and procedures as usual is redundant.

People implying other things probably don't really understand how banks work.

There’s a procedure to handle this, including dispersing the assets:

“The FDIC will pay uninsured depositors an advance dividend within the next week. Uninsured depositors will receive a receivership certificate for the remaining amount of their uninsured funds. As the FDIC sells the assets of Silicon Valley Bank, future dividend payments may be made to uninsured depositors.”

https://www.theguardian.com/business/2023/mar/11/silicon-val...

https://archive.is/aSx6E

The VCs whose money those startups are built upon, have connections to this bank. This entire back acted like some VC venture, with explicit design of taking the risk of zero return.

0 dollars should be given to depositors. Absolutely zero. These griefters learned how to use the common people as meat shields. It's the CFO of Lehman brothers. Let the VCs who supported this lose their investments and be forced to raise money now. If those businesses are worth something, investors will buy them. Let the VCs who gave bad advice be wiped clean from the investment. Their choices led to this.

I thought the argument some were making is that depositors should be guaranteed up to $250k and then get a proportionate share of whatever’s left (which is not zero!)

From the broader public's perception, you're splitting hairs. The gov - at taxpayer's expense - *are* ______ing* depositors with deposits over $250k. Depositors who are well aware of the limits of what's covered. Depositors with more advisors than most taxpayers have bank accounts.

Capable and well educated people made poor decisions. Why is The Nanny State the solution? Again??

* call it what you want, but it's special treatment of the very well to do.

1. There should be no bailout.

2. The bank had a ton of assets and those assets still belong to the depositors.

3. The depositors shouldn't necessarily be made whole beyond their $250,000 insured amount, but denying them the bank deposits is also wrong. Getting 80 cents on the dollar for their deposits seems completely fine for example, or whatever that number turns out to be based on remaining assets.

4. Nothing is deserved to the bank owners/shareholders. If there happens to be more assets than there was deposits, then this money can go to owners/shareholders.

I notice several articles and threads derailing into conflations of semantic arguments around what a bailout is with specifics of the topic.

This is a trend (and, I suspect, tactic) on other topics and it only serves polarization. Try to not fall into this trap. It can be possible to call it out in a way which does not further derail the conversation.

(Saying it's a trend does not mean it's merely a recent thing BTW)

https://en.wikipedia.org/wiki/Weasel_word

https://en.wikipedia.org/wiki/Equivocation

https://en.wikipedia.org/wiki/Essentially_contested_concept

https://en.wikipedia.org/wiki/Persuasive_definition

Whether the statement "this is a bailout" is true or not is actually irrelevant.

If the tech community reaction was "wow, this sucks, we're going to have to manage a lot of crap" the general reaction would be very sympathetic.

But when the consensus position is "gimme money to cover my mistake", I have to say "no" rather than "geez, that's terrible".

https://www.youtube.com/watch?v=CEee7dAk25c

"No bailouts!"

Nobody has been (seriously) talking about them. Shareholders in SVB are toast 100%. Debtors too probably.

"We should nationalize banks that fail!"

That's basically what receivership is. We just don't call it nationalizing because the government just wants to make depositors whole and then get their hands out of the pie.

"We need more (or less) regulation!"

The FDIC stepping in right now - where it appears the bank is solvent but can't satisfy liquidity requirements - is exactly when it should. SVB as a business failed but (it appears) depositors are being made whole by the sale of the banks assets. The system appears to have worked while also not cutting the bank prematurely (nobody seems to be complaining that SVB wasnt in major trouble).

Yes this is exactly what I support should happen. The remaining assets can of course be used towards depositors (even beyond $250k FDIC insure). But beyond that, tough luck. In our American systems thousands, millions of people and small businesses fail and the answer is "tough luck". Their failure is too small for anyone to care. But when big banks fail government helps them, which is how this is seen as. If you have more than $250k in a bank account sitting somewhere, you're objective not destitute and you objectively do not need tax money to help you out any further. So, yes "tough luck".

This is not depositors fault, but it's also not tax payers fault. A bailout is a bailout. If depositors are bailed out, it is still a bailout.

To me such statements feel like - either you are with me or against the humanity. Of course, the government should not gobble the money that belongs to the depositors and the fund should be distributed fairly to the depositors post liquidation. But making whole the deposits through the tax payers money will not be right. This is a business failure and what is insured is only what is guaranteed to be paid back. That is the risk business take when they engage in such transactions.

Individuals who had more than $250k sitting in bank account must be well-off and prudent enough to decipher the FDIC insurance limit.

My understanding of what I’ve seen people mention is that depositors shouldn’t get more than the insured 250k from the FDIC insurance fund, not that bank assets shouldn’t be used to make depositors whole.

This sentiment doesn’t come out of nowhere. There have been a few panicked and very angry VCs on social media effectively calling for an immediate and retroactive increase in the limit for FDIC-insured funds.

Essentially there are some folks that want the government to step in to make depositors whole will leaving bank assets to be divvied up to make investors whole.

Some folks see this crisis and immediately jump to “how can I take maximum personal advantage?” It is those people that are creating confusion and pushback wrt the FDIC’s involvement here.

Commentator can only rail against "the tech world" in this instance if they've failed to grasp that supporting large depositor here this isn't a tech world issue but a financial system issue. And that goes with a generally decline in how knowledgeable the average HN commentator is.

At this point, large bank deposits are implicitly guaranteed and if one pulls that away, the world's financial system would likely fall apart. You can argue this system is terrible and talk about how to change but no one who knows the impact of this stuff want "1929 on steroids" and neither is anyone with power going to implement it.

FDIC pays out the $250,000 insurance to SVB depositor accounts. FDIC recoups those costs from the SVB assets, and then pays out depositor account holders as much % as possible from liquidating the remaining SVB assets. It sounds like the latter will be disbursed in several increments as the assets are liquidated. All of that assuming no buyer by Monday.

If there is anything left after depositors are made while, then that might go to shareholders.

Did the depositors (we're talking companies here) not know that the FDIC limit was $250K? If they did, why didn't they hedge accordingly by opening accounts at other banks? Was this not an unreasonable expectation of a company to do?

If I did the same thing, would I expect the government to cover the difference between the asset sale value and the insured amount?

On the other hand, if the bank had sufficient assets to make their depositors whole, how did they fail in the first place?

Except shareholders suffered massive or total losses in 2008, such as AIG or Washington Mutual, despite it being a bailout. A bailout means all depositors are made whole, not the shareholders.

It's a the perfect opportunity to be angry at a group; in this case "tech bros", VCs, and anyone attached to Silicon Valley. Hey, it is right there in the name of the bank!

The usual suspects have been trying to frame it in terms of the regular old startup workers that will be affected.

But what about these entrepreneurs, the taxi drivers who were completely fucked by the onslaught of Uber and Lyft using financial engineering to lose money on each ride and undercut their livelihood:

https://www.nytimes.com/2019/12/23/nyregion/nyc-taxi-suicide...

Or these ones, who saw VC funded delivery services stealing their tips:

https://www.nbcnews.com/business/business-news/why-instacart...

And so on. We would also like to see social media held accountable for the harms done to children and communities and for our existing laws against anti-competitive behavior and collusion to be enforced against search and software platforms.

The chutzpah of the Silicon Valley influencer crowd over this weekend has become seriously fucking unbearable. My feeds are full of sociopathic libertarians calling for government to make sure they never suffer any consequences for their failure to adequately manage risk?

Many of the people expressing this frustration are in favor of having the government heavily involved in preventing this kind of thing and helping if it ends up happening.

But if we’re going to regulate let’s fucking regulate.

To the tech people unhappy with screeching my reply is that there is nothing special about your humanity here. Your lives aren’t more important than the lives of the children of employees at the Carrier plant in Indianapolis, or the workers at the Amazon faculty on Staten Island.

If your values system only applies to you and your friends it’s not much of a values system.

Move fast and break things, banking edition. Can I sign something somewhere to opt out of responsibility for these kind of things?

This is why direct democracy can't work for long. The average voter has a hazy and sometimes downright broken model of reality. I don't know how else to describe someone who wants to get back at Facebook by ganking the paycheck of some engineer at a 10 person startup.

The majority of people in the world don't have those connections or opportunities, so there's definitely hate.

No one seriously thinks there’s only $250K/client available. People are saying the same thing you are, just gleefully.

If depositors see strong signs of support they won’t run. They may very well be saving other banks without even having to deal with them with this move. No bank can survive a bank run beyond a certain point.

It would be a bailout of SVB shareholders if shareholders got their money back. But its a bailout of someone in any case.

Framing bailout with a different word like 'make whole' does not make it not a bailout. The bank played with those people's deposits and screwed it up. Rescuing all the deposits would just exonerate the bank of all its wrongdoing and set a bad precedent. "There are no repercussions for bad business management".

Per capitalist philosophy, the bank should sink, along with whatever deposit was in there - "Buyer beware". If you dont agree with that principle, it means that you are not subscribing to capitalism, but to social democracy in which capitalist principles are overridden by socialist principles to protect the public. And the moment you go that way, you open the door for questioning a lot of the setup that rules the modern economy.

The entire business world could use a hard lesson here

Ironically most small to mid non tech businesses will be just fine.

“This is a bailout”. It would be if shareholders were to get their money back, which doesn’t seem likely. The government will use the bank assets to make customers, not owners, whole.

If the bank had sufficient assets to make all depositors whole the FDIC wouldn’t have stepped in. It doesn’t.

I assume, then, you agree uninsured deposits ought to take a haircut proportional to the shortfall?

If so, you have the same position as all the “salty” posters.

Funny how language is being used to frame all this. For depositors it's made whole, not bailed out, when of course it's no less a bail out.

The quote in the rather short article is:

> “But we are concerned about depositors, and we’re focused on trying to meet their needs.”

I don't think "trying to meet their needs" is the same as ensuring they will "be made whole".

The biggest issues around people with uninsured accounts (the vast majority) is both how much and how long. This will be a mess if either the amount is significantly less than "whole" or if the time to be made whole takes months not days.

If anybody gets an extra penny more than $250K from the Feds than that is by definition a bailout.

> But moreso, when we invest in companies, we deep down know there is a possibility of the investment going to 0. We often don't think when I put money in a bank it can go belly up, this would obviously hurt the trust in our banking environment if depositors not made whole.

FDIC insurance is not infinite. Not understanding that is no fault of the rest of society.

And who knows what perks, direct or indirect, those depositors were getting for having that cash at SVB?

Whether it’s stupidity or greed doesn’t matter. No hand outs.

If all depositors are made whole at no cost to them then there is no incentive to avoid a repeat.

Remember that those depositors are not random members in the public, their are insiders of the SV microcosm.

Why in 2023 after other similar events is this special?

Accounts are insured to the specifed limit. That applies to all of us. Full stop.

What (read: who) makes this a special case in need of special treatment?

We can talk about a depositor bailout if you want, but let’s not pretend it’s the same thing, not pretend it’s what the term “bailout” commonly refers to.

In terms of discussing risk, startups should minimize all risks possible because their core risk is to find a business model and product that works. Putting cash into a bank account isn't a "strategy" nor is it an investment. Much like choosing to incorporate in Delaware, it's something you do because it's standard and adds no unnecessary risk to the business. It's not smart to try to get fancy with boilerplate company things–you have enough risk already.

Anyway, at the core of your argument seems to be two beliefs: 1. VCs had the capability to stop this from happening with private means (no) 2. People who start companies or work at them just generally deserve bad things to happen to them, regardless of how proximal or not the causes are of their misfortune.

I am biased because I've sacrificed years of my life and probably the vast majority of my potential earnings to try to build a good business. It's been the hardest thing I've ever done, no one's impressed by it, it's not yielded any financial benefits, it's harmed my personal and social life, and by all likelihood I'll never see any significant success. But I keep trying because I like our customers and my coworkers and I care more about the possibility of building something great than I do all the rest.

It's hurtful to chalk up the (potential) death of companies like mine to being "weak and entitled". Of all the risks to account for in building a business, having our bank accounts disappear overnight didn't even crack the top 100 of risk factors. Things like losing customers, failing to grow revenue, keeping employees happy, etc. are at the top; below that are changes to the market, competition, and the death of co-founders or myself. It's not possible to account for every conceivable risk.

Anyway, it looks like we'll get some help here so it's not over for us yet. On behalf of companies everywhere, I'd like to apologize that you've been deprived the opportunity to dance on our graves.

Right or wrong sometimes your own maturity gets called into question by the words you use and how you treat others who disagree.

Idk why I'm even bothering making an argument when your opening argument is ad hominem.

Dignity and an empty sack are worth the sack.

Interesting new world folks are suggesting here, where depositors can't trust the highly regulated banks they bank with.

No one is nor can argue that. But you’re presupposing it’s a bailout.

It's like all of the tech misbehavior packaged neatly up into one story.

So no, if the government and the fed would actually let the market set interest rates then this doesn’t happen. If the UST had to sell bonds at the real market rate for them then this doesn’t happen.

Stepping in to smooth out systemic problems is another valid function— like Reagan did with the air traffic controllers, like the FDIC does with bank failures, etc.

Anyway, I don’t think folks are asking for a handout. They’re just asking the FDIC to do their jobs more quickly than usual because so many businesses are tied up here. This is the reason there is an FDIC in the first place. I don’t think it’s unreasonable to ask them to smooth the process out to help meet payroll. None of this requires handouts— just proper management and metering out of the assets under consideration.

If you had >250k in SVB and you managed to get it out before it was shut down, you'd be pretty happy with yourself right now. If you run a business and have an obligation to share-holders, it would be negligent not to try this at least.

Individual depositors don't need to conspire to reach the conclusion that in a bank run scenario, it is virtually always in each depositor's own best interest to withdraw their money.

When and how much money is returned is going to make the difference between life and death for some of these companies. And the difference between having a job and healthcare or not for a lot of people.

Don’t forget that this is happening to depositors / companies after weathering a pandemic and in a really shitty economies where things are already very challenging. Having additional cash flow problems and/or additional debt to service all the sudden may be the proverbial straw that sends companies and people into bankruptcy.

Edit: I read the article. Yellen says "“But we are concerned about depositors, and we’re focused on trying to meet their needs.”

She says NOTHING about depositors getting 100% back. It could be that they get the share of deposits back faster.

Making all depositors completely whole is not insurance. That was not a risk that premiums were paid for. It’s a government bailout.

Please leave me and my tax dollars out of it. I'm not just hard-hearted, BTW. Unlimited depositor insurance is an awful idea.

Deal?

Honest question: why? I.e. why can't the capitalists invested in this business absorb the reasonable haircut? (I assume it's "reasonable" based on the information we have been provided with until now). Depositors (especially those holding more than 250k) were also investors, they were getting back more money than they had put in.

Keep in mind those loans are largely being paid by SVB customers that are very likely scrambling to make sure they can pay their employees right now.

It’s pretty assured that more SVB loans will be defaulting in the coming weeks than if their depositors didn’t lose access to about half of their money.

Having been a bank for 40 years with a great reputation, no one who held their money there expected a meaningful risk the bank would collapse. The same with AIG and any other major bank collapse for a long time player. Sure let those responsible have repercussions, but innocent account holders of America’s future trillions of GDP, investment funds holding onto the money of pension accounts, farmers and wineries shouldn’t bear the brunt of investments gone sour leading to a liquidity crunch.

Note that 3 VCs taking out their cash quickly allowed the bottom to fall out.

Any sources for this? This seems like an opinion with nothing backing it up.

> Isn’t it these same folks who remind us all the time that most startups fail?

There is a big difference between a single startup being able to fail at any time and many of them failing all at once.

They weren’t calling for a bailout of SVB. They were calling for protection of depositors, which is what Yellen is trying to make happen.

? The truth is that the vast majority of this cash was dry powder for acquisitions, staying liquid for new new investments, fresh VC money for advertising.

You seem confused. The "cash" you're talking about here is the deposited cash, which Yellen is saying will get funded. I think you're confusing that with bank equity.

If the Fed came out and said "We have reviewed all the depositors and their situations and we are funding 100% of payroll and basic operating costs needs for the next 90 days" The VCs would immediately come up with another reason why ALL depositors need to be made whole immediately.

SIVB is 100% at risk of bankruptcy/collapse. Saving SIVB would be a bailout for sure.

SVB was a financial institution outside of that sector which catered to that class of customer and regrettably took on risks that made them exceptionally vulnerable to interest rate increases. Add that with their clients mostly having uninsured deposits and belonging to one industry, and we're in this mess.

Im not sure how this is evidence of a tech or vc pyramid scheme, it's just a regrettable series of choices by a financial institution.

And while most of the time they can make good on it, sometimes the investments they make with your money are risky, short sighted, or just unlucky.

In any case, don’t put yourself into jeopardy by not having other options.

Is it just because the friction of starting a non-physical business is so much lower? I'm not quite satisfied with that as an explanation, because that provides a competitive advantage to tech vs other industries regardless of interest rate levels.

Having $1M in 10 years is the same as having $680k today, as you could buy 10Y treasuries that will pay out $1M

So saying "The FDIC should take on the bills and loans, and pay out the cash now. They will collect the entire balance eventually" is the same as saying "They have lost 30% of depositors money but FDIC should pay that 30% out of their own pocket"

Those numbers are from December 2022. They had $161B in deposits prior to Thursday's $42B in withdrawals. And that $206B figure is somewhat fictional hold-to-maturity accounting. The $80B in 1.5% bonds aren't actually worth $80B at market prices.

They were shut down for being insolvent on Thursday ($950M in the hole). It's not just a liquidity problem.

They would never have been able to sell enough to not be able to cover their deposits - that’s when regulators stepped in.

This is effectively what you are hiring a bank to do for you, but with them determining over large sets of depositors what the cash flow needs are expected to be. The focus of your company isn’t building these investment instruments for your cash. Spending time on this is a distraction for most start ups.

I think it's a little insulting to assume these people just don't understand the system. I think you have to nearly totally politically ignorant to not understand why people would feel this way. I don't know how you don't see the irony of complaining that ex-McKinsey founders shouldn't have to do due diligence on their bank, but that 18 year olds "know what they signed up for" and should have known that student loans were un-bankruptable. Many of the VCs who are now going hat in hand to Yellen are the same who opposed any sort of socialization. Why wouldn't that cause resentment?

I am curious, though, as to whether or not this general ignorance is new, or if it’s just that I’ve become more aware of it over the years.

The governance of Credit Unions tends to be very transparent, at least for the two that my family uses.

Seriously, you are promoting giving business to the major Wall Street banks? I would argue this is against your personal long term interests.

by providing emotional support, therapy, free adderall and opportunity to buy some long term government bonds at a discount...

Which is ... everybody?

Resting in my armchair, I think they're trying to make deals with several other banks to absorb the SVB clientele. Maybe there's one bank that agrees to buy up a large chunk of the deposits and a couple smaller ones that participate as well. If there are multiple buyers, it spreads out risk and doesn't just give assets to a big big, and may help raise the price floor. The FDIC might cover the gap.

I don’t believe the FDIC has the legal authority to do so, but it’s highly possible that the treasury and/or Federal Reserve can cobble together some ad hoc legal justification.

So, even if we do learn lessons, don't expect them to last very long.

However you and your spouse each get $250K worth of insurance, so in this case it'll be $500K.

But I don't think the Fed engaging in QE constitutes a bailout.

A law was put in place in 1933 with a limit. If it didn’t have a limit, we wouldn’t be having this discussion.

Where were all these billionaires and VCs any time prior to this calling for uncapped FDIC insurance? This is special pleading.

This is a service banks provide transparently. Not sure how much paperwork is required, probably could be optimized to a couple of clicks.

Government sees industry with a different lens to the markets.

"Taxpayer Subsidies Helped Tesla Motors, So Why Does Elon Musk Slam Them?" - https://www.motherjones.com/politics/2013/10/tesla-motors-fr...

MARGARET BRENNAN: For those depositors, about 85% of SVBs accounts were uninsured. And, as you were saying, a lot of different tech firms relied on them. Do you believe that depositors should be paid back in full? Will they?

SECRETARY YELLEN: Look, I'm not going to comment on the details of the situation at this point. I simply want to say that we're very aware of the problems that depositors will have, many of them are small businesses that employ people across the country. And of course, this is a significant concern, and working with regulators to try to address these concerns.

So that means (if the other numbers above are correct) that there should be approximately $150 billion in assets that are currently uninsured. The risk of contagion may be less than during the 2008 financial crisis if there is less counterparty risk (banks owing other banks assets and no one understanding who owns the underlying). There would be a problem to the extent that VC firms may go bust and this trickles up to hedge funds and larger institutions. That risk is hard to assess and asset holders have every incentive to claim that risk to be high.

".... Banks are intermediaries between depositors (who lend money to the bank) and borrowers (to whom the bank lends money)..."

I feel like putting your money in a bank should not be considered an obviously bad decision. The risk profile your bank takes on with your deposits is largely opaque to you, and it’s not feasible to expect every depositor to do due diligence on it. Even if you understood their portfolio you might not be able to understand the implications as market conditions change. It’s also not feasible to expect people to split up their deposit into multiple 250k accounts.