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0 pointske88y3y ago0 comments

> 250k is an extremely small amount for a company of any significant or insignificant size.

How does this justify handing out free insurance post facto on everyone else's dime? Running a business involves taking and managing risk. Or at least that's what we are told when founders and VCs are the only ones who get rich during exits. But as soon as they get burned the masses are there to bail them out. Tails you win, Heads I lose.

> Furthermore, the returns at SVB were not that spectacular, I assure you.

Free money/services are free money/services. It's nice that the additional interest and in-kind services are pennies and nickles to you multi-millionaires and billionaires, but lots of Americans could've happily retired on the total actual value of those "not spectacular" returns, so the argument that "it's not that much money" is going to fall on mostly deaf ears.

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4 comments · 2 top-level

borski3y ago· 2 in thread

> How does this justify handing out free insurance post facto on everyone else's dime?

Wasn’t trying to; was stating a fact. I believe the insurance limits should be higher in general. Also, this was paid out of bank-funded insurance, not any direct taxpayer funds.

> It's nice that the additional interest and in-kind services are pennies and nickles to you multi-millionaires and billionaires

You’re making a lot of assumptions here, so perhaps consider checking yourself.

Furthermore, the SVB returns, for a consumer or bank customer, were not out of line with other banks. The unique part about SVB was their willingness to work with startups, where other banks simply wouldn’t consider it.

Nobody said “it’s not that much money.” It being a lot of money doesn’t somehow instantly mean it isn’t worth backstopping a ton of private citizens, most of whom (no matter how loudly you protest otherwise) are not particularly wealthy, and startups that relied on SVB having been the 16th largest bank in the country, and thus “generally regarded as safe.”

pessimizer3y ago

> Also, this was paid out of bank-funded insurance, not any direct taxpayer funds.

It was paid out of unrelated bank-funded insurance. If I insure my cat, and I get a payout when my dog dies, it's not from "bank-funded insurance." Not only was my dog never insured, so I never funded its insurance, but the cat insurance also wasn't somehow transformed by proximity or similarity into dog insurance, although they both lived in the same house and are both pets.

The reason this is clearly true is because if hypothetically a week from now a few banks failed that held enough accounts under the federal insurance limit to deplete the remainder of the insurance fund, the failure of the insurance would no doubt also be backstopped. It's like stealing from the cancer fund to pay for plastic surgery, because you know that if the cancer fund runs out, people are going to be willing to shore it up.

butlerm3y ago

> It was paid out of unrelated bank-funded insurance.

Every insurance system on the planet works like that, or is intended to, and FDIC insurance is no exception. Insurable risks covered by a large customer base. Institutions that present a higher risk pay higher rates.

The FDIC cannot actually go bankrupt under any conceivable conditions because by law FDIC member banks are required to cover the costs, even extraordinary costs as might be presented by a major financial crisis. And fortunately the sector as a whole has ample resources to do so even under conditions as severe as the Great Depression. The $128 billion that the FDIC has on hand is nothing compared to the ~$7 trillion in bank assets in excess of liabilities that are backing it up.

cragfar3y ago

>Running a business involves taking and managing risk.

There's really no decent option for most businesses to mitigate this risk. Most services you find can only do up to a couple million.

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