Seems a reasonable use of governmental power to me.


I basically agree. You hear a lot of people saying "they privatize the profits and socialize the losses", but that's a bit of an exageration, I think. The irresponsible bank owners lose everything, both shareholders and bondholders, as it should be. The silicon valley startup customers get their deposits back, even beyond the $250,000 that is FDIC guaranteed, which I guess is what people are upset about, and I guess if I had one thing I would change in this plan, it would be to have some penalty, even if it is minimal, for these corporate clients having not done their homework about how reliable the Silicon Valley Bank was. Like "you get your deposits back, but with a 10% haircut, and you'll get the 10% over the next year or two if the liquidated bank ends up having been solvent enough to cover that."

Rationalwalk thinks a startup with $10 million should have had guaranteed $250,000 accounts in 40 different banks, or set up treasury bond ladders, and should have been reading the bank's balance sheets, rather than just plopping their cash into an SVB savings account, and while I admire all these ideas, I don't think they are realistic expectations, and it is probably not what bank customers should be focusing their attention on.

At least the principal that bank owners don't get bailed out (the way GM and Chrysler shareholders got bailed out, for instance) will be reinforced by this weekend's actions. The idea that bank customers would lose funds beyond the $250,000 FDIC-insured limit was probably toast already. And the feds have indicated they want a higher guarantee (like $10m) that would make this guarantee explicit rather than just implicit and unfair to bank customers who exercised more diligence in choosing their banks. I would give the government an A- on this one.

dtb