Comment by acjacobson | Hacker News Reader

Comment by acjacobson | Hacker News Reader

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This is the most problematic part to me because not only did the VCs exacerbate the run on SVB, they threatened to start runs on other regional banks.

Several said that if SVB didn't get 100% depositor coverage that they would assume any regional bank could fail, and thus everyone should move to something safe like JP Morgan. By the time they started to say this publicly they already instructed portfolio companies move out of regional banks. Many were in the process of doing so.

The Fed / FDIC can see this happening and now are over a barrel. So the VCs managed to start one run, then jump up and down yelling to be saved OR ELSE we are going to actively start a series of runs by undermining trust. It's super cynical, and basically allowed the banking system to be held hostage.

Now I am not someone who thinks there shouldn't be some kind of action to help out depositors. For me the biggest issue is cash flow, and if uninsured depositors can be helped very quickly to make sure their businesses don't fail (because they can, SVB has the assets) then the government should make that happen. But somehow that wasn't good enough for the VCs. They yelled that its 100% secured deposits or nothing. And it's really uncomfortable that we allow them to have that kind of leverage.

I think this is the place where legislation proposed in some countries against bank runs would be good thing. Essentially when you are one manufacturing whole scenario, you should risk some blame...

You and I both know that as messed up as this was, nothing will be done to reign in the power of these VC's. I always vaguely knew that the billionaire class has the government over a barrel, but now they know, concretely, with real world evidence, that this is the case.

> The Fed / FDIC can see this happening and now are over a barrel. So the VCs managed to start one run, then jump up and down yelling to be saved OR ELSE we are going to actively start a series of runs by undermining trust.

You have to wonder if any financial authority will step in order to investigate this. After all screaming "fire!" in a crowded theatre should be punishable, especially if you end up financially profiting from said action of screaming.

>The Fed / FDIC can see this happening and now are over a barrel. So the VCs managed to start one run, then jump up and down yelling to be saved OR ELSE we are going to actively start a series of runs by undermining trust. It's super cynical, and basically allowed the banking system to be held hostage.

That's the risk you run investing in a bank. Better this than the 2008 bailouts when the banks ran themselves into the ground for profit and were still made whole. And, better this than spooking the entire financial system by not protecting deposits.

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