[mikekij]

The sentiment on Twitter seems to be “tough. You, Etsy seller, took a risk by selling on a platform that used a bank that made a bad investment. The tax payer shouldn’t bail out a bunch of rich pottery artists.”

These sorts of effects (Etsy sellers not getting paid) are going to show up all through the ecosystem if 25% of venture backed companies can’t make payroll next week.

SVB equity holders should go to zero. But it’s in our collective best interest to make sure that depositors have timely access to some meaningful portion of their deposits.

[swatcoder]

You’re mischaracterizing what’s happening at Etsy and at most responsibly managed businesses that worked with SVB. There’s an inevitable operational issue when a bank fails and this causes delays in normal process as funds, accounts, data, and workflows need to be shuffled around. These organizations will get some, but probably not all, of their money back out and were prepared to weather this sort of event regardless.

That’s a different issue than companies thinking they didn’t need to prepare for bank troubles. Some of those were naively managed by people who didn’t understand the scale of wealth they were tasked to manage and its risks, nor understood that they needed to hire someone who could manage it for them safely. And some of those were managed or advised by people intentionally betting that the government would bail them out of the tail risk that they did know about.

We need to be extremely wary of encouraging that latter group, even if it comes at the expense of burning a few inexperienced startup founders.

[qqqwerty]

The days of keeping you money under your mattress are long gone. The vast majority of modern day economic activity takes place electronically, and as such requires partnering with a number of different financial organizations to make that happen.

The government created this mess by lowering the regulations on community banks[1]. They should be the ones to clean it up. There are literally zero reasons why we can't have fully insured deposits. Even better, there are literally zero reasons why we can't have zero risk deposit accounts (hello fed), but they choose not to give it to us so that the bankers can make a profit on our money.

Small and medium size businesses are the life blood of our economy. And modern economies work on trust and specialization. You shouldn't need an advanced degree in financial engineering just to run a small cat sweater shop on etsy.

[1] https://www.cnbc.com/2018/05/24/trump-signs-bank-bill-rollin...

[celticninja]

This is a pure panic run on the bank though, irrational and counter-productive. The bank was not insolvent and could have been fine if everyone didn't withdraw all at once. The issue I have is that this was started by a group of VCs who told their startups to withdraw, that caused others to withdraw and the slowest are the losers. But they didn't have to be. It's a shame that the VCs that caused this will think they were forward thinking enough that they prevented a problem, when they actually caused it. It seems like the best thing SVB could have done was not sell their assets at a loss to make cash available, if everything went into the receivers then eventually everyone would have been made while. Right now there is at a minimum a $2.1bn loss that all remaining depositors will have to eat.

[halayli]

Your tone insinuates that you're a genius and everyone else is dumb. Hindsight is 20/20.

[mlyle]

> There’s an inevitable operational issue when a bank fails and this causes delays in normal process as funds, accounts, data, and workflows need to be shuffled around.

Yup. But if the FDIC is reasonably sure that they'll get many cents on the dollar for depositors, they should free up more than the FDIC insurance limit for large depositors quickly (e.g. Monday). It's in everyone's interest to limit the amount of chaos, and acting relatively quickly and incurring some small amount of risk isn't exactly inviting moral hazard.

[urbanhole]

Given that it’s literally as simple and inconvenient as using various financial tools to avail oneself of FDIC insurance for one’s entire portfolio, what even is the difference?

[armchairhacker]

Look at this post on Reddit: "NO BAILOUTS for Silicon Valley Bank - which lent exclusively to the ultra rich" (https://www.reddit.com/r/WorkReform/comments/11om9o5/no_bail...)

Fortunately, some of the top commenters are pointing out that some of these "ultra-rich" are actually small business owners who don't live lavishly but whose income depends on having >$250k in the bank. And also that flat-out "no bailout" affects employees who aren't getting payed and Etsy sellers. Unfortunately, many others are openly saying things like "Maybe they should cut back on the avocado toast?" which is very ironic if you (perhaps mistakenly) consider "they" to be the lower guys.

OP actually makes an excellent reply in the comments:

> How about we setup a $150 billion bailout fund through Congress?

> The prioritization should be:

> - Priority 1: workers

> - Priority 2: pensions

> - Priority 3: small busineses

> Can we agree the way we bailed out the banks in 2008 was wrong? So many lost their jobs & their retirements while the banks lived to see another day.

> I think this plan helps correct the mistakes of 2008. The only way a bailout of any company is acceptable is if the bailout of workers is of equal or greater value.

But...you titled the post "NO BAILOUTS", not "Bailout WORKERS AND SMALL BUSINESSES ONLY". This is like "defund the police" and "dissolve ICE": the underlying motive is genuinely great, but the messaging is terrible.

[gruez]

>But...you titled the post "NO BAILOUTS", not "Bailout WORKERS AND SMALL BUSINESSES ONLY". This is like "defund the police" and "dissolve ICE": the underlying motive is genuinely great, but the messaging is terrible.

I'm convinced that the reason this stuff happens time and time again is that within activist circles, everyone is trying to outdo each other in terms of ideological fervor, leading to the most extremist policies being put out.

[sithlord]

I think that there is misconceptions on what most people think as "bailouts". I think what a lot mean is that the usgov should just buy up all the deposit assets, and fund out the money, since its fairly certain that the assets are pretty close to deposits, but just wont mature for a long time, and in turn the bank is still dead, no more SVB.

A true, "bailout" would basically be that the bank survives, they are given moneys to make it through and then all the workers/deposits are screwed. ie. 2008

[tedunangst]

Why in the world would anyone think SVB needs $150 billion?

[jasonlotito]

> But...you titled the post "NO BAILOUTS"

"NO BAILOUTS for Silicon Valley Bank..."

It wasn't "NO BAILOUTS"

> but the messaging is terrible.

If your point was the messaging is terrible because people can just make stuff up about the message, sure. But no amount of messaging can people willing to just make stuff up. I mean...

> the underlying motive is terrible

Why do you think bailing out workers and small businesses is terrible????

[makestuff]

Another thing people aren’t realizing is all of these SAAS companies just sell their tools to each other. No one will be paying the bills (that includes their cloud bills too). IMO it is going to put a huge damper in any tech recovery this year.

[UncleOxidant]

> if 25% of venture backed companies can’t make payroll next week.

That percentage seems really high. Is it likely that 25% of all venture backed companies had all of their money in SVB? Of the ones that did, many of the smaller ones could still meet payroll next week and possibly for a few weeks based on $250K that they'd still have access to.

We found out that Roku, for example, had a large amount of money in SVB, but it was only about 25% of their cash meaning they had cash in other banks as well that are still liquid. Will Roku even lose all of that 25%? Probably not. They won't be able to access it for a while, but in the end they'll probably end up getting at least some of that back.

[Beaver117]

>Will Roku even lose all of that 25%? Probably not. They won't be able to access it for a while, but in the end they'll probably end up getting at least some of that back.

How will they get it back? The bank is gone. FDIC will only give them $250k right?

[bpicolo]

Etsy's statement makes it seem like this is just a payment rails issue, not a funds issue

[tedivm]

Yeah same thing happened with Rippling- they had to push through some changes so they could handle payroll through another company, but ultimately got it all out.

I remember Gusto having an issue a year or two ago, but since they already had code in place to use a backup they ended up making all payments on time.

[bigiain]

That might be true.

But they never explicitly said that, so I’m unconvinced that they’re not just buying time, and hoping that on Monday FDIC will release a pile of now-locked-up-funds that are an existential risk to Etsy.

[chernevik]

> make sure that depositors have timely access to some meaningful portion of their deposits.

The FDIC has said they will do exactly this, as expected by anyone familiar with prior bank failures.

This will ultimately a hassle to manage and perhaps a very modest loss on deposited funds. Some companies will find their runway to the next equity event shortened by 5% or 10%.

[shkkmo]

There is no reason companies can't make payroll next week besides incompetence. The insured balanced will be available Monday and additional dividends on uninsured balances will land by the end of the week.

There is not indication in this article that sellers will not get paid, but those payments be delayed by a week or two as things get sorted.

It SVB causes some companies to go bankrupt, they were in a precarious financial position already and did a bad job of managing their risks.

While I would support some legislative effort to support customers of tech companies that ate hurt by this collapse, bailing those tech companies out is not the way to do that.

[mikekij]

Incorrect. I have friends with $500k payroll deposits due at noon Monday. Fdic has made no guarantees that they’ll have access to a sufficiently large amount to cover.

[mediasavvy]

Did I miss Etsy declaring bankruptcy?