from Hacker News

Big VC, Tech Got Backstop for Billions in Uninsured SVB Deposits

by minzi on 6/23/23, 11:10 AM with 102 comments

  • by djoldman on 6/23/23, 12:28 PM

  • by fosk on 6/23/23, 12:52 PM

    The Fed first said it would not increase rates, then it said inflation was transitory, then all of a sudden they did a 360 and increased the rates the highest in more than a decade, then they are saying they will keep increasing, then something will inevitably break, and then they will start cutting again despite their original plans.

    Sure the banks should have managed risks better and this whole fiasco falls on SVB, but to be fair the Fed is doing a horrible job at setting expectations. Whoever trusted them in the past, got screwed. They are fundamentally a reactive organism that for some unknown reason talks as if they are the ones in charge.

    Obviously they are not.

  • by pc_edwin on 6/23/23, 3:30 PM

    These articles and comments are to put politely, very silly.

    Banks and the government have an agreement where banks operate as if deposits are stable in order to buy long-term assets, while the government insures deposit stability.

    These assets primarily comprise of lending to governments, businesses and mortgages. In other words, the banking system essentially acts as a quasi-arm of the government, enabling the welfare state to function both explicitly by buying government debt and implicitly by expanding the monetary supply.

    You can prevent the bank runs and massive economic booms/busts by simply prohibiting banks from monetising deposits. We wont do this because it will collapse the nation-state as we know it.

    The reality is that we haven't had a free market for banks since the Federal Reserve Act of 1913, so it wasn't a battle between "evil bankers" and "poor poor lidl workers," but rather a game of king-making.

  • by taeric on 6/23/23, 2:07 PM

    How do folks think this could have gone down otherwise? The assets that backed these deposits didn't disappear, they were lowered in value. As such, they got sold to someone else that can afford to hold on to them to maturity and wait for them to possibly even go up in value.

    Assuming the world doesn't go to zero, that means a, by definition, very rich entity would get even richer by holding on to these.

    Worse, it would have created a race to get your funds out before you couldn't. At which case, it would have certainly screwed up other fundamentals.

    Worse still, if you do start auction devaluing of treasury bonds, that will reach so far into the economy that it is hard to really state.

  • by rvnx on 6/23/23, 1:51 PM

    It was a great deal for VCs,

    and also a great deal for politicians who are connected with startups,

    and a great deal for startups as well (they had the high fixed-rate deposit, without having to carry the risk).

    It's just a loss for everyone else who pay taxes.

    This is the real moral hazard.

  • by xyst on 6/23/23, 1:48 PM

    > Some critics said that making all depositors whole at the lender and Signature Bank, which failed March 12, created a moral hazard.

    It’s a bit late to be talking about “moral hazard”

    https://www.usatoday.com/money/blueprint/personal-finance/go...

    https://www.propublica.org/article/government-bailouts

  • by remote_phone on 6/23/23, 1:14 PM

    Where was the “courage” to quote this article while it was happening? This was exactly what I was saying but it was drowned it by people saying it was for the “little guys” which was lies.

  • by sharts on 6/28/23, 10:11 PM

    This is a transfer of wealth upwards which is the only acceptable wealth re-distribution in society.