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Comment by rib3ye | Hacker News Reader

You're not wrong, but the purpose of "moral hazard" is to punish risky investments.

What are you trying to punish here? Founders who didn't want to waste time messing around with multiple banks?

The VCs who advised them to behave this way, if you ask me. In my ideal resolution, the government does their own valuation of the startups, rescues in excess of insurance the ones that seem promising, and proportionally takes the VC equity in these companies that got special rescue consideration. If the investment is getting bailed out, the VCs who started this mess shouldn’t get their equity returns. They can invest again in the next round if they really believe their convictions.

Practically, the VCs should have made some bridge loans to solve the short term problems while we wait to see what comes out of receivership. Some did, and good on them for sticking with it in the hard times.

Interesting perspective, but the flip side is you're rewarding VC who encouraged the run on the bank.

All investments have risk. This is one of the risks associated with meager yields - very rare but possible wipe out. If depositors were always guaranteed then what would prevent high-risk banks that promise huge yields but ultimately just rely on govt backstopping when they go under. Who pays the cost in that case? Even 'guaranteed' investments like cash or treasuries are not guaranteed, there are failure modes.

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