Cover $250K then stop. You know, the actual contractually obligated about of insurance and not a penny more. I don't know why this is controversial or difficult to understand!
> OK but the banks were punished.
The banks weren't the only ones who benefited from risk taking, though.
The account holders were getting attractive returns on their cash, made possible by the bank's risks. Clients got to enjoy unlimited upside of the bank's risks while having the rest of society bailout their downside.
> 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.
> 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.”
> 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.
> 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.
Quite literally a bank is not required to make you a business account. A bank is not required to give your business a loan. The list goes on.
SVB was much more willing to do things other banks wouldn't for startups; this is what people mean.
Now, there are a bunch of claims that SVB gave startup founders discounts on personal mortgages for having their business accounts there. This is just gravy on top of the fact that SVB may have been the only bank to accept the business account anyways.
> Quite literally a bank is not required to make you a business account.
Banks actually want deposits, so unless you are involved in a shady enterprise, are penniless or insolvent, or are the type of business that presents an outsize risk of demanding your deposits all at once, you are highly likely to be granted the privilege of lending the bank your money. Not to mention being paid relatively little for the risk you are taking.
Cover $250K then stop. You know, the actual contractually obligated about of insurance and not a penny more. I don't know why this is controversial or difficult to understand!
> OK but the banks were punished.
The banks weren't the only ones who benefited from risk taking, though.
The account holders were getting attractive returns on their cash, made possible by the bank's risks. Clients got to enjoy unlimited upside of the bank's risks while having the rest of society bailout their downside.