[mike_d]

> it's threatening the quality of life of a certain class of people.

Like the jerks who chose to work for a company that picked a specific SaaS payroll provider. Or those entitled Etsy sellers that expected to get paid. The absolute nerve.

[fumeux_fume]

The money isnt going directly to the workers. It goes to the companies who employ them to make sure the employers are ok. I think the point being made is that when workers ask for protections or concessions it's this massive struggle but when Etsy needs help the money somehow appears literally overnight.

[insanitybit]

> It goes to the companies who employ them to make sure the employers are ok.

No, it's so that payroll continues...

[brazzy]

What you're glossing over is that when the employers suddenly lose most or all of their liquid assets and don't have perfect positive cash flow, then they cannot pay their employees.

[quadrifoliate]

As long as the Fed is making up rules on the spot, they could make up a fund to pay employees of the depositors directly in the short term, and start liquidating any assets of Silicon Valley Bank to pay for those. Call it, say, the Silicon Valley Bank Victims Fund.

Avoids the moral hazard created by propping up SVB while still keeping workers paid. But I bet that would be showcased by the upper class as a "handout".

[zopa]

By Monday morning? With protections in place against fraud or double-dipping? It wouldn’t be as easy as you think.

(And for the nth time, SVB isn’t being propped up. The owners are losing their whole stake.)

[quadrifoliate]

> By Monday morning? With protections in place against fraud or double-dipping? It wouldn’t be as easy as you think.

But you are somehow convinced that this fund [1] created in 1 day by the Fed to solve "temporary liquidity issues" with vague promises of "loans against securities" and "assessment charged on the banks" will be entirely free of fraud or double-dipping?

Everything involving money has the potential for fraud and double-dipping, and the banking sector has a ton of it. We can figure it out and prosecute people afterwards (or not, it's not like senior management at SVB is going to be prosecuted).

> (And for the nth time, SVB isn’t being propped up. The owners are losing their whole stake.)

Oh sure, three Federal departments make a joint statement on the weekend and create a new liquidity fund every time a company goes bankrupt. Nothing to see here!

----------------------------------------

[1] https://www.federalreserve.gov/newsevents/pressreleases/mone...

[insanitybit]

This is such an absurd idea to implement in a weekend, you have to see that, right?

[quadrifoliate]

Sure, but why is it any more absurd than creating a fund out of thin air to guarantee SVB deposits?

Money provided to individuals is highly trackable; ask anyone with student loans. And this would give the former SVB's employees something to do past the current 45-day window. More employment for the win!

[insanitybit]

Creating a system to work with one entity, especially a bank, is far easier than creating one to work with 10s of thousands of individuals, not to mention that you can do this work all abstracted behind the bank without any existing systems (payroll) having to consider anything.

[treeman79]

It’s a government take over of the private sector.

Government official picking losers and winners. Winners will mostly be those who supported government officials party.

Either using money from tax payers. Or creating new money out of thin air. Leading to yet more punishing inflation.

[watwut]

This is not about salaries to employees or risk of companies dying. Neither of those get help when they are unlucky on free market.

[brazzy]

You can spin "what this is about" whatever way you want, but it's simply a fact that for the kind of businesses that typically had deposits at SVB, the overwhelming part of those deposits existed to pay employee's salaries.

[watwut]

Yep. And when other business can not pay salaries because of events they could not control, neither them nor their employees get any extra help. They get mockery from very same people that call for help now. This is about who got it.

The startups did not had all of their money in this particular bank randomly. It was by design.

[sokoloff]

What was the PPP “loan” program if not a direct example of what you claim doesn’t exist?

[creato]

> And when other business can not pay salaries because of events they could not control

Can you give an example of such a company? I can’t think of a way in which an otherwise healthy (long term viable) company could suddenly be unable to make payroll in such a way that assistance would not be available (e.g. inexpensive bridge loan), or the company should not have bought relevant insurance.

Literally the only thing I can think of is if smaller banks failed and companies were stuck with 250k + haircuts and didn’t get this same deal. So did that actually happen?

[ENGNR]

Every depositor is getting $250k back immediately, surely that's enough to make payroll a few times over, factoring in other revenue they must have if their payroll is that large.

For the rest of it, they might take a 20% haircut at most. Even if they had no revenue, and that was say 10 months runway, then it's down to 8 months. It's not like people aren't going to get paid, there's plenty of notice there.

[toyg]

> $250k back immediately, surely that's enough to make payroll a few times over

I'm not sure I follow. A US 60k/Y job means the company has to pay 5k p/m (to employee and taxman). So a company-depositor getting 250k would be enough to serve 50 employees. "A few times over" would only be true for less than 25 employees. If we go Silicon-Valley level, where salaries seem to be twice as high (or more), those numbers would halve again. They seem very small numbers, most SMEs would not fit them.

[gizmo]

> They seem very small numbers, most SMEs would not fit them.

In the USA 78% of businesses have fewer than 10 employees. 89% percent have fewer than 20. The typical SMB has only a couple of employees.

When you include sole proprietors (like the typical etsy store) "the share of U.S. businesses with fewer than 20 workers increases to 98.0% and the share with fewer than 10 employees registers 96.0%".

Source: https://sbecouncil.org/about-us/facts-and-data/

[est31]

Yeah that is probably wrong but I think a notion of "omg all my money is gone" is also wrong. As long as the bank run is stopped in time, people with uninsured deposits would lose who didn't make it out of the bank in time will only a minority share instead of everything. That's what a bank run basically is, if you have 102$ in liabilities and 100$ in assets, and the FDIC steps in, everyone who holds 1$ at the bank gets 0.98$ out. Not bad. If 99$ exit the bank then the owners of the remaining 3$ only get 1$ out, a 66% loss.

The customers of SVB were quickly growing business in an industry where you can quickly obtain immensely high profit margins. A 20% cut is not the end of it.

I believe the big impact of this announcement is not the money itself, in fact it was the lowering in value of government bonds that caused the bankruptcy in the first place, so the govnernment effectively made money from the 10-year bonds deal they struck with SVB. Maybe in the end it might still be a profit for taxpayers/USD users overall. But this announcement still implies something for banks: they can do the dumbest decisions (like this failure for risk management), and the government will bail them out.

[op00to]

I'm amazed at how inexperienced the average hacker news commenter is with money.

[eppp]

I am amazed at how inexperienced the average banker is with interest rates.

[carlosjobim]

50 employees should cover most of startups.

[TheCoelacanth]

Understood, but where is the protection for workers who suddenly lose their job and can't pay rent?

[hellojesus]

Their emergency funds.

Don't get me wrong, it would suck. But there is a proven way to fix misallocation of capital via the market.

[cto_of_antifa]

Or, said anorher way, it becomes more difficult for them to profit off of the labor of others.

[geocar]

I mean, yeah.

Lots of people are starving and homeless for as trivial a "decision" as that.

I'd much rather give everybody food and a home, including the Etsy seller, instead of: giving the bankers a ski jolly, people still starving and homeless, less this Etsy seller. Why can't we do that?

Some of those entitled Etsy sellers voted against everybody having food and a home; My heart breaks, but not as much for those who have and hate. Maybe now that they are hungry and homeless too they will be a little more sympathetic. Surely that would be best.

[justsayinstuff]

Rather than prop up a bank that support x number of businesses that support y number employees, you'd had the government prop up xy employees? For how long? And if another z number of banks fail? Support xyz employees?

[feraloink]

This! Exactly this, because the government is also doing a backstop for a second bank, Signature Bank of New York. Silicon Valley Bank is the 2nd largest bank failure in U.S. history, and one day later, Signature Bank was also closed and its uninsured deposits guaranteed by the FDIC.

When does it stop?

First Republic Bank isn't looking too good.

You are correct.

[geocar]

Yes. Forever. Yes those too. All of them.

I live in a socialist European country, but I'm originally from the USA, and I wish it was better there.

[ameister14]

I was unaware that there were any socialist countries in Europe. Where do you live?

[tremon]

All of Europe is regularly dismissed as socialist whenever the EU enacts regulations that a certain part of the HN population does not like. I would consider the label "socialist" an epitheton ornans here.

[creato]

> giving the bankers a ski jolly

What banker got a “ski jolly” here? The bankers in this case are in exactly the same position they would have been in if the bank were allowed to fail without supporting depositors.

[geocar]

> What banker got a “ski jolly” here?

Well, this guy for one:

https://www.forbes.com/sites/brianbushard/2023/03/10/svb-fin...

[xmcqdpt2]

That happened before the fdic got involved. If it turns out he was hiding something, the SEC might get involved but otherwise he was fully allowed to sell his own stock based compensation. That's how stock based compensation works.

[op00to]

... and that trade will certainly be investigated. If the trade was not part of an existing trading plan, it's highly likely the CEO will have some very uncomfortable conversations.

How is selling stock tantamount to a government bailout?

[eppp]

Ill be glad to have an uncomfortable conversation for a few million dollars.

[sidlls]

The "uncomfortable conversation" can mean a conversation about breaking insider trading regulations, the penalties for which include huge fines and potentially jail time.

[ModernMech]

> the CEO will have some very uncomfortable conversations.

Oh no! Not uncomfortable conversations! Anything but that! Maybe it will be followed up with a strongly worded letter with an implied threat of a performative vote by Congress. How will they cope?! They might even have to show up at a gasp House committee hearing! shudders

Wake me when someone is convicted.

[op00to]

So edgy. Let’s just bypass investigations and go directly into summary execution. Eat the rich!!!!!

[raspberry1337]

What a weird post.

>Lots of people are starving and homeless for as trivial a "decision" as that.

Most homeless are either severely mentally ill, drug addicted, usually both.

>I'd much rather give everybody food and a home, including the Etsy seller, instead of: giving the bankers a ski jolly, people still starving and homeless, less this Etsy seller. Why can't we do that?

You could be running a soup kitchen homeless shelter right now instead of posting on HN. It's always someone elses fault!

>Some of those entitled Etsy sellers voted against everybody having food and a home;

Great analysis and input - if we would all vote x, everybody would have food and home, problem sovled!

[codeddesign]

We don’t live in a socialist society. These companies chose not to diversify their risk. If they didn’t know their accounts had a max insurance rating of $250k, then they deserve to fold. FDIC insurance is intended for consumers not to be instantly without. If you are a corporation, you are responsible for you own financial risk. 9 banks have failed in the last 5 years. The fed is treating this special and that’s why it’s an issue. Essentially they are telling the public “as long as you are with a large bank that holds large assets, we will protect you”.

[initplus]

They are treating it differently because the alternative is a run on every small/medium bank with high numbers of business customers.

It’s not to protect the existing depositors of SVB - but to shore up the stability of the entire banking sector.

[pdpi]

The problem is that that shoring up comes at the cost of enabling bad behaviour. Banking right now seems to run on the assumption that you’re allowed to erode the stability of the system for your personal gain, because governments world-wide will shore it up from the other side.

It’s important to remember that SVB lobbied hard to gain an exemption from banking stress test regulations. Their “inherently low risk” business clearly wasn’t, and they failed to defend against the inevitability that was the fed going up from the anomalously low rates of the 2010s.

[initplus]

What bad behaviour is being enabled here? The people who stand to gain from taking risks here (bank owners) have lost everything and are not being bailed out.

What is the bad behaviour of the depositors? Trusting that their deposits were safe in a bank? This isn’t bad behaviour, the government wants people to think that bank deposits are safe. Safety of bank deposits is really important to the economy.

[hellojesus]

> What is the bad behaviour of the depositors? Trusting that their deposits were safe in a bank? This isn’t bad behaviour, the government wants people to think that bank deposits are safe. Safety of bank deposits is really important to the economy.

Yes, it is exactly this bad behavior. The gov has only guaranteed safety up to $250k. Any entity exceeding this limit does so at their own risk. By depositing far above the insured limit, you are allowing that bank to transact with your money. The banks loans it out. So by definition those consumers thay ignored the limits incentivized the bad behavior.

Had this bank started losing customers because they faced insolvency risks, they may have changed their behavior. The market provides a feedback loop.

[RandomLensman]

This policy could also encourage deposit flight at the slightest notion of risk - if everyone is made whole anyway the stability of a bank isn't any consideration for any of the depositors anymore. There is no game theory to moving deposits then.

[psychlops]

That's what you are told. A bad bank went down due to risky investments and no hedging against obvious interest rate hikes. Yes, more will fail as a result and they should and the losses should not be socialized to the rest of us.

[xmcqdpt2]

https://www.fdic.gov/bank/historical/bank/bfb2019.html

Actually I think you'll find out if you look at the bank failure list that most deposits are paid out in full even if above the insured limit.

[egberts1]

Except that FDIC considers SVB to be a non-bank financial institution and thusly are not insurable.

[CapstanRoller]

What does any of that have to do with socialism (an economic system where the working class owns and control the means of production)?

Socialism doesn't mean "when the government does stuff"

[dmichulke]

What OP might mean:

Technically, your "jerks" don't lose capital (wealth) while the people with deposits in those banks do.

Yes, losing a job is a bad thing but a job is a mere right to a transaction (we exchange labor for money in the future) and not lost capital.

[codeddesign]

It’s the fed protecting a bank with a large financial interest. This isn’t the last bank this year…but one of few that will be protected.

[feraloink]

How fair is that? You aren't suggesting that it is fair, I realize.

And you are correct! Silicon Valley Bank was the first bank this year for whom the Fed is paying for uninsured deposits. The second bank is Signature Bank of New York, which regulators shut down one day later, on Friday March 10th. They are being protected as well. https://www.nytimes.com/2023/03/12/business/signature-bank-c...