What do you think of YC asking for SVB depositors to be made whole?

I don't like the way the fear button is pushed ('jobs at risk') because start-ups should not be so dependent on a single bank, especially not start-ups funded by wealthy backers such as YC. It also would be good to know how much of YCs own funds are in SVB deposits to see whether or not they are arguing for 'others' when in fact they are arguing for themselves.

In Europe a bank account does not have an unlimited guarantee and it is up to you as the depositor to make yourself aware of this and to ensure that you have your funds stored in such a way that a single bank going out of business isn't going to kill you. I have my funds spread out over multiple such accounts 'just in case'. I've always done this since well before the financial crash. The problem for very large depositors is that they will have more money than it makes sense to spread around, the guarantee here is for up to 100K euros so if you have a million to deposit then that would mean 10 bank accounts. This isn't really workable for really large amounts.

All that said: banks falling over is bad for society. The FED making SVB depositors whole puts the burden on all of society and this in turn is yet another form of externalization: those people who would never even get near $100k worth of deposits are now expected to pay along to bail out parties that are much wealthier than they are in order to avoid a knock on effect that might be even worse for society.

There is something fundamentally broken here but I can't put my finger on it.

First they yelled fire in a crowded theater, then they want to tax payers to clean up the mess. Disgusting.

But this take really misses the forest for the trees. Bailout or not, this is the nail in the coffin for the SV tech startup ecosystem. The whole thing runs on a major helping of fairy dust. Saudi royal family, let us give your money to a collection of bright seeming kids. Trust us, one of them will turn into the next Airbnb. We are the smartest guys on the planet. We have a winning formula and know how to advise these startups.

But now that the groupthink and systemic risks have been exposed, now that the smartest guys on the planet don’t look so smart anymore, don’t expect the next funding round to arrive soon, or ever. These startups will burn through whatever amount of cash they have left in an atmosphere of startup winter, then will shut down and the VC partners will move on to their next grift.

SVB successfully lobbied Congress to get bank safety rules weakened for their operation, on the grounds that it would hurt the economy if they were regulated like other banks.

https://www.theguardian.com/business/2023/mar/11/silicon-val...

My guess is YC agreed with this. Then when it blows up, YC lobbies for everyone to come to SVB's rescue or it would hurt the economy.

No thanks. "It would hurt the economy too much" is getting as old as "we need to monitor everything because of child porn".

I have a kneejerk aversion to this, the line between a petition and lobbying is rather vague, especially when the petition is signed by CEOs acting as CEOs. But it is kneejerk, we can't just offload everything onto the election process as long as lobbying exists unless we want to give up control of government to the lobbyist. Having to consider that a line even needs to be drawn bothers me.

I guess I am conflicted and accept it.

A lot depends on how bad the situation is, that is, how big the financial hole is.

The Fed is very sensitive to the concern of economic and operational disruption and they’d like to restore as much as they can as soon as they can, it might be relatively easy to do, it might not.

The bear case I see is that the SVB failure wrecks the companies that have loans to it, so it is a self-fulfilling prophecy which could turn a somewhat bad situation into an unmitigated disaster.

I think they should've waited a day to see if a buyer materializes. (Although ironically, if the government "backstops" SVB's deposits, it might make it easier to find a buyer...)