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Comment by prepend | Hacker News Reader

> just don’t understand why folks on the internet are so passionate about the depositors being hit by this.

I think most of America can’t even imagine having over $250k in an account. So people with this much wealth asking for a bailout is literally rich people asking for coverage because they did something dumb (banked with a bad bank, didn’t account for risk, didn’t insure, didn’t manage funds).

It’s not hate so much as it’s apathy and surprise as the ask for money. It’s like those millionaires who wept because they lost money with Madoff and they wanted the payout for all their earnings they had “made” over the years.

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> So people with this much wealth asking for a bailout is literally rich people asking for coverage because they did something dumb

Not people. Businesses.

SVB, to my knowledge, mostly consisted of businesses with some well-off individuals mixed in.

If we want to punish rich people for the crime of being rich, SVB is likely a bad battlefield because zero-ing out its customers will almost entirely hurt employees who are generally not wealthy.

Depositors aren’t being zeroed out, they will just maybe take a haircut. I do hope FDIC finds a way to unfreeze at least meaningful fraction by tomorrow so payroll/etc can be met.

Businesses owned by rich people.

I don’t think we should punish the rich for being rich. But we should reward the rich for being stupid (ie, not managing cash risk).

These companies with cash flow issues have rich investors. YC and other VCs. They have ways to deal with this loss in the private sector. Or they can go out of business.

> It’s like those millionaires who wept because they lost money with Madoff and they wanted the payout for all their earnings they had “made” over the years.

Are you genuinely making this comparison or projecting what this looks like to the average American?

The people who will be hit hardest by this aren't "dumb" depositors of SVB, they're employees and businesses that "banked with a bad bank".

Blame the cowardice of the VCs that triggered the bank run and the arrogance of the bankers at SVB, blame to a lesser extent the businesses that banked with SVB maybe, but don't tell me "serve's 'em right" for the employees who face furlough or layoffs.

People asking for money back from Madoff were investors, which is completely different from depositors asking for their deposits back.

It's mostly businesses though, not people. If you have >1 employee you def. should have at least 250K in the bank.

Not really. If you have 25 employees, you probably need $75-150k to make payroll every two weeks.

You would cover this through rotating receivables through accounts. And you’d likely have multiple accounts to avoid the $250k threshold.

My local bagel store owner talks about this and has different accounts for different purposes. And he banks with some national level bank and still splits money across accounts.

It’s not a good idea to have large amounts of cash sitting in single accounts.

If you have two employees then you don’t need much cash in an account at all.

People don’t think businesses have more than 250k in accounts? How do restaurants buy inventory, pay workers etc?

Almost everyone in America works for a company with over $250k in their coffers. The point isn’t making depositors whole for the sake of uberwealthy individuals, it’s for the sake of ensuring that companies are able to pay their thousands of regular employees.

It seems to be only a question whether they will receive 80-90% or the full 100% though.

That makes a big difference though. The risk of losing 10-20% (or even of getting back the full 100% but only after a few months) with no reward for the risk taken would be enough to drive depositors away from regional banks and into the mega-banks.

If deposits aren't backstopped quickly, it won't be startups taking the main brunt of this - it will be other regional banks that see bank runs.

This cannot be said enough times. FDIC insurance is only the absolute floor on recovery. SVB depositors might (might!) face a haircut, but it’ll be one worth of the name.

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