Silicon Valley Bank unmasks the hypocrisy of libertarian tech bros

https://www.newstatesman.com/quickfire/2023/03/silicon-valley-bank-collapse-hypocrisy-libertarian-tech-bros

by thm • 3 years ago

475 482 3 years ago

newstatesman.com

favaq• 3 years ago

Everybody is a hypocrite, it will be news when someone isn't one.

dsfyu404ed2• 3 years ago

When people put their money where their mouth is HN shits on them for "voting against their interest".

colesantiago2• 3 years ago

As usual it is the VCs that is the cause of all of this and this entire bank run

Bringing the startups they invest in begging to their knees, putting all their eggs into one bank. It almost works like a ponzi scheme.

socialism for them, capitalism for everyone else.

simonh2• 3 years ago

I agree with the criticism in general, but in this case the restructuring of these banks will be entirely paid for from their assets, and by a levy on other banks. No public funds will be used.

MrMan2• 3 years ago

that money will be stolen from all the other banks customers. this is not a case of "hypocrisy" its theft.

ceejayoz5• 3 years ago

The other banks are most certainly going to pass the FDIC increased premiums along to all of us, though.

gruez2• 3 years ago

As usual it is the VCs that is the cause of all of this and this entire bank run
Bringing the startups they invest in begging to their knees, putting all their eggs into one bank. It almost works like a ponzi scheme.

Why blame the VCs and not the bank itself for its poor investment choices (ie. buying a bunch of long dated bonds/MBS)?

tmaly• 3 years ago

It felt like they only gave one guy as an example and tried to spin a tweet from someone to YC.

It seems mostly a fluff piece with little meat to it.

bsenftner• 3 years ago

Libertarian: an individual lacking in understanding of secondary effects, in effect, actual reality.

parker_mountain• 3 years ago

https://www.newyorker.com/humor/daily-shouts/l-p-d-libertari...

chrischattin• 3 years ago

Is there a political philosophy less understood, or more mischaracterized, than Libertarianism?

Veen• 3 years ago

Maybe, but the people of influence who profess to be libertarians are not exactly committed adherents of a carefully thought-out libertarian philosophy (except maybe Thiel, although his libertarianism has a religious caste). In general, the SV libertarian is an egotist who talks up a poorly understood distortion of libertarian thought because it's a fig leaf for their rapacious amorality, and they cast off its tenets whenever it suits them.

Machado117• 3 years ago

Communism, probably.

stephencanon• 3 years ago

By its own adherents? Probably not.

gitfan86• 3 years ago

In general most people fit the widest definition of Libertarianism which is:

"People should be free to do whatever they want except for these specific conditions which I consider important and do not negatively impact me very much but may negatively impact others a lot"

PedroBatista• 3 years ago

Probably not since even among themselves they can’t agree what it really is.

One thing universally agreed is that everyone should stay away of them at parties.

Between libertarians and Lisp people.. I don’t know man.. :)

yawpitch3• 3 years ago

Sure, Marxism.

mtlmtlmtlmtl2• 3 years ago

To me a libertarian is just anyone who thinks everyone is, and should be, a sociopath, and build their views off of that. Although they prefer the term "self-interested rational actor". Or they might not even admit that terminology, but if you dig into their views they will reduce to it even if they don't realise that themselves.

Of course it's well known by now, and even most modern economists have accepted this: the vast majority of people are not in fact wholly self interested. Though they are still rational in the sense that preferences are transitive.

TheAlchemist6• 3 years ago

You know what I hate the most in all of it ?

There was no panic to begin with - in the worst case scenario, the cut for depositors was definitely less than 10%, most probably 0.

The Jason Calacanis, David Sacks & co, decided that even that small % of losses were enough to start a bank run in order to get government involved - and make sure they are made whole.

Stress on 'THEY'. Just look at their recent tweets - did Mark Cuban said today that unlimited FDIC is a very bad thing - should 'Never' be a thing ? Amazing stuff. (edit: Here is the link => https://twitter.com/mcuban/status/1635282882259476486?s=20 )

Make no mistake - the 3 banks in trouble (there will be more. Once the fire is lit, it's hard to stop it) were extremely specific and were crypto / VCs banks. It's not random banks that failed. They failed specifically because of business they were servicing.

huffmsa• 3 years ago

Gotta keep those 2020-2022 vintages on a slow decline so they can raise the next fund.

nailer• 3 years ago

The bank had long term bets if government bonds that after the rate change massively weakened their value, threatening the bank’s capitalisation levels. This has nothing to do with their clients.

TheAlchemist6• 3 years ago

This has everything to do with their clients. Do you know any other bank recently which faced 42B $ of withdrawals ?

Thing is, this bank was servicing people basically juicing the system of free money. This cut both ways.

colesantiago2• 3 years ago

were extremely specific and were crypto / VCs banks. It's not random banks that failed. They failed specifically because of business they were servicing.

Agree.

Now that the crypto industry in the US have no banks supporting them, perhaps it is time for crypto completely die (and it should) which should reduce the amount of VCs fueling the ponzi scheme.

PretzelPirate• 3 years ago

There are still plenty of banks that serve blockchain and crypto companies: https://cointelegraph.com/news/svb-and-silvergate-are-out-bu...

Most of the scams in crypto probably don't need direct banking services because they aren't running long-term businesses, just quick marketing schemes to pump their token value before cashing out. Unless exchanges world wide are shutdown, this are unlikely to stop.

There are plenty of non-scam blockchain companies that aren't hurting anyone, just building interesting tech. I don't see any reason other than personal bias to want those startups to be debanked since they aren't any worse than the typical startup.

HPsquared2• 3 years ago

In this case it's the banking system having a crisis (perhaps revealing some Ponzi-like elements). Surely that is a boost to the crypto bros, in the abstract at least.

danenania• 3 years ago

"They failed specifically because of business they were servicing."

I don't think so. All banks are facing major markdown issues right now due to the Fed raising rates. SVB and the crypto banks were just canaries in the coal mine.

First Republic also needed a bailout even though they're a lot more diversified in their client base.

Edit: before you downvote, please read this analysis by our friend patio11 - https://www.bitsaboutmoney.com/archive/banking-in-very-uncer...

TLDR: The U.S. banking system (as a whole) has $620 billion in unrealized losses due to the Fed raising rates. This is way bigger than SVB and crypto.

chiefalchemist2• 3 years ago

Right. So the next important question(s) is:

Why didn't The Fed anticipate the downside of their actions?

Follow up by: Isn't The Fed supposed to prevent bank failures, not cause them?

Mind you, there are other (loop) holes that enable such things. Nonetheless, are these random-y bank failure or failures of The Fed and its associated regulatory friends?

throwingrocks2• 3 years ago

In addition to that piece, Matt Levine also did an excellent analysis https://www.bloomberg.com/opinion/articles/2023-03-14/svb-to...

pohl• 3 years ago

…due to the Fed raising rates

Translation: due to the banks not being sufficiently stress-tested to assure resiliency under reasonable rate fluctuations.

nirav72• 3 years ago

unrealized losses due to the Fed raising rates.

so they expected rates to stay at near zero indefinitely? It's obvious the banks did a bad job on their analysis. It seems like everyone but these banks knew the spigot of easy money was going to stop sooner or later. It just wasn't sustainable.

rcme• 3 years ago

All banks have markdown issues, but SVB had liquidity issues due to the businesses they were serving, i.e. they served cash burning machines so naturally hit liquidity issues. The other banks, like First Republic, also have issues but might not have had a problem if not for the loss of confidence caused by SVB's collapse.

drexlspivey• 3 years ago

These guys only started all caps tweeting after the bank was closed on Friday. The bank run started on Thursday when $42B (20-30% of all deposits) were withdrawn.

mateus1• 3 years ago

Yet their sensationalistic tweets probably caused bank runs on other banks, which is the article’s argument.

unityByFreedom6• 3 years ago

The run they were tweeting about was a wider one on all regional banks. Did not happen at time of their tweets, they were speculating about the future.

Why was it the VCs impacted by the SVB collapse, and not the wider banking world, who stood to lose more, who were loudest to make that claim?

afavour• 3 years ago

There are numerous accounts of 200+ group chats between SV CEOs and VCs all deciding to withdraw their money too, FWIW.

cced• 3 years ago

This weekend, J. was Tweeting about:

1. firearms

2. people needing to be terrified

3. bank runs

If you're of the opinion that their Tweets (ignoring what may or may not have happened in certain private chats leading up to) did not lead to the public start of SVB's bank run, maybe? How much pressure did this add on regulators to act NOW to avert an IMMEDIATE and CATASTROPHIC COLLAPSE?

However, is it really a stretch to say that those Tweets may have downstream effects on other banks?

consumer451• 3 years ago

I wonder if this behavior will lead banks to be even less likely to take on startups as clients in the future.

edit: in an attempt to be more clear, I thought the reason SVB was used by startups was because "regular" banks were not open to startup finances. Is this not the case?

BlandDuck3• 3 years ago

I agree, and I see three fallouts from this event:

- Yellen folded fast, so the market will test her again (moral hazard)

- Powell will hesitate to raise rates further, concerned about hidden stresses building up in the system. This was basic duration risk, and the fact that they missed it entirely will raise the worry of what else they are missing.

- FDIC will probably have to be reformed. You cannot guarantee everything, all the time. Maybe an opt in system where large depositors can buy individual coverage.

qwytw4• 3 years ago

FDIC will probably have to be reformed

Why? Isn't the guaranteed deposits above 250k mainly 'insured' through Fed offering unlimited loans back by the nominal price of bonds owned by affected banks?

TheAlchemist6• 3 years ago

Agree with 1 and 3.

Not with 2 though. The BTFP (not to be confused with BTFD :) ) program is removing completely the duration risk (for a year). This lets the FED raise the rates as high as they want without putting banks balance sheets at risk (barred some other unforeseen consequences).

apercu• 3 years ago

If we have to buy insurance to insure our money, the financial sector will just game that, too, and make even riskier bets. That we (taxpayers) end up paying for.

logifail• 3 years ago

where large depositors can buy individual coverage

Q: Aren't large depositors already free to buy individual coverage from whomever offers it?

tomp2• 3 years ago

Well then there’s 4:

The regulators failed massively, allowing banks to mask their duration losses. Obviously this needs to change, but they probably need to fix the other banks first (that are still hiding their losses).

pclmulqdq6• 3 years ago

Yellen has always been too quick to fold, and we saw that in her time as fed chair. Wall Street and silicon Valley insiders know this, which might be why they immedieately tried to put their PR campaign's focus on her (rather than Jerome Powell, who is a little bit steadier at the poker table).

kingkawn• 3 years ago

Yellen “folded” bc risking the broader financial system in order to give it hard to a bunch of tech bros is itself a hazard of moralizing.

mihaaly3• 3 years ago

Changing the rules during the game (full deposit insurance, one off advantageous loans to troubled banks) also erodes the moral by standing firmly behind reckless and risky (risky for the masses not self!) behaviour and entities, unlike the rest! For the rest the ordinary rules apply.

Rules don't metter from now on or what?!

User23• 3 years ago

You cannot guarantee everything, all the time.

Why not? What’s keeping the Fed from working with Treasury and the FDIC to provide unlimited liquidity as needed for deposits? No doubt there will be higher order consequences, but I don’t know of any operational reason why it isn’t possible so long as the current monetary regime exists at all.

gizmo4• 3 years ago

Powell and Yellen put a system in place over the weekend where all banks can borrow against their bonds at par, thereby preventing any other bank runs.

The duration problem is that banks have bonds/CDOs on their books marked-to-maturity, but when faced with outflows banks are forced to sell them at market prices (much lower because interest rates went up). This turns an illiquidity problem into an insolvency problem if a bank bought too many low interest long duration bonds.

Last week, when a bank had balance sheet consisting of bonds with a market price of $75 but valued at $100 marked-to-maturity they would get into trouble when faced with too many withdrawals. Today, they can borrow $100 from the Fed at a modest interest rate with the bond worth $75 as collateral. This fixes the bank run problem, because the bank can go to the fed to get the money they need to cover any outflows. This deal only covers quality bonds and only those bought before last week. This fix is not an invitation to start lending recklessly, it's just a stopgap measure to allow banks to lose money slowly on the bad debt they already have.

This all means Powell can continue to raise interest rates without having to worry too much about bank failures.

Ntrails• 3 years ago

- FDIC will probably have to be reformed. You cannot guarantee everything, all the time

You absolutely can (should is the question)?

The second question is whether you want depositors to care about the financial health of their banks or not. I'm on the no side of that conversation. So you let regulation take care of the capital requirements and so on whilst allowing people to feel safe with deposits.

bryanlarsen• 3 years ago

You cannot guarantee everything, all the time.

But it's not everything, not even close. It's only the amounts deposited in the standard class of bank accounts. Companies with large amounts of cash keep very little of that in bank accounts, it's in money market funds and other cash-equivalents.

It's certainly feasible and possible to have the "risk" part of the bottom of the risk-reward curve to be at the same level as the viability of the federal government. The risk isn't quite 0, but if the federal government collapses you have bigger problems anyways.

Especially in a high interest rate environment. Bank accounts essentially have a 0% nominal rate, which in a high interest rate environment is a very negative real rate so there is lots of margin for implicit or explicit insurance.

scotty79• 3 years ago

FDIC will probably have to be reformed. You cannot guarantee everything, all the time.

Why can't you when you can literally print money? Just banks will have to be forced to pick up the tab for that, by limiting their money printing ability so that in case of emergency it can be safely printed.

Dollar deposits in a bank should be 100% safe operation regardless of the amount.

And investors can burn. Every investor is reaponsible for their own risk.

hef19898• 3 years ago

Ever since the initial Covid shock wore off, this whole thing just feels like 2008 in slow motion.

PaulDavisThe1st• 3 years ago

FDIC will probably have to be reformed. You cannot guarantee everything, all the time.

FDIC does not guarantee everything all the time, that's the whole reason for what happened at these banks being controversial.

RayVR2• 3 years ago

Yellen folded? What does this really mean? The “market” will test her how? The market is only interested in pnl. Insolvent banks are a great place to make a trade. Hardline central bank policy (Japan) would be a place to make a trade. Treasury secretary and deposit insurance? I don’t know what you see there.

loonster• 3 years ago

A bank should keep the money secure. Anything >0% loss is unacceptable. They were greedy and had a duration mismatch. Interest rates rise and the value of the longterm bonds go down. The regulators should have stepped in and stopped that. Why didn't they?

No one should be made whole. Looks like the stock holders will have a 0 and bond holders will take a significant cut. Depositors will be safe.

The executives should all be in prison for this. Only have to do this once. The other banks would wisen up and get their act together.

TheAlchemist6• 3 years ago

What about the CFOs and wealthy individuals that where just bailed out ?

Shouldn't they were in prison (the CFOs, for wealthy individuals - it's just their money) too ? They were fully aware of the 250k$ limit of FDIC insurance.

tarsinge• 3 years ago

Dumb question but is just keeping customers funds without investing them (even in bonds) and just collecting fees not a viable business model for banks? Is it a necessity or greed?

hnfong• 3 years ago

A bank should keep the money secure. Anything >0% loss is unacceptable.

You're wrong about this part at least. Borrowing short and lending long is what banks do (among other things). The alternative is either:

- banks asking for 10+ year time deposits to match your 10+ year mortgages , or

- banks only willing to do mortgages that are < 1 year

The risks can be managed somewhat, and SVB *definitely* were too greedy (and stupid), but you're mistaken if you think the other banks are qualitatively different than SVB in their exposures to interest rate risks...

That's why most bank's stocks are down. Most people don't think they will fail, but recent events do highlight that they have a bunch of long term securities that lost value.

qwytw4• 3 years ago

there will be more. Once the fire is lit, it's hard to stop it)

For now bonds yields have come down significantly so most banks in a similar situation should be in a much safer position until/unless yields start going back up again.

spaceman_20203• 3 years ago

SVB was the only bank (or maybe one of the only banks) that allowed anyone to set up a bank account with them without visiting the country - they were a part of Stripe Atlas.

That sounds great in a libertarian, everything goes world. But the reality is that there are plenty of bad actors and they will abuse it to launder money and commit fraud. Every other bank was conservative enough to avoid this by enforcing some basic in-person kyc/aml processes.

But not SVB. If you were banking with them, you should have asked yourself at least once: why is my bank doing something no other bank does? And is my money as safe there as it would be with a more conservative bank?

zaroth4• 3 years ago

Why take a random small program being run at the bank, and imply that it was somehow linked to their failure, when their failure is well understood and has nothing to do with the Atlas program?

toyg• 3 years ago

why is my bank doing something no other bank does?

Well, that's an easy answer in techbro circles: because it's the smartest one, duuh.

tekknik8• 3 years ago

SVB was the only bank (or maybe one of the only banks) that allowed anyone to set up a bank account with them without visiting the country

There are plenty of others, Ally being the next off the top of my head. This doesn’t, at all, free you from AML or KYC.

mathattack• 3 years ago

SVB failed because of an interest rate bet gone bad. If they invested in short duration treasuries instead of long duration, none of this would have happened. The main difference is their bonuses would have been lower the past few years.

throwingrocks2• 3 years ago

They failed specifically because of business they were servicing.

This is so disingenuous. They failed because they made risky investments, interest rate hikes put their investments in jeopardy, and when they tried to raise extra capital (responsible thing to do), people were alerted of the problem and left the bank (responsible thing to do).

worrycue2• 3 years ago

IMHO it’s both. Although the risky investing probably played a bigger part.

pclmulqdq6• 3 years ago

I used to think that it was entirely about the risky investments, but $42 billion left SVB (which managed about $200 billion in total) in 2 days. Literally no bank today could withstand a bank run for 20% of its asset base.

atchoo• 3 years ago

It's part of the story. They had a non-diverse group of interconnected customers prone to herd behaviours led by a small influencer elite. Few banks represent such a high risk of a run.

BurningFrog2• 3 years ago

There is always no panic until the panic starts!

Even if the worst case scenario was only losing 10% of deposits, that's a very good reason to remove your money.

But in reality, everyone knows this will trigger a bank run, which will lose much more, so the only thing that matters is to get out ahead of it.

This is just the inherent logic of the situation, not the fault of whoever realized it first.

bena• 3 years ago

"This will cause a bank run, so you gotta a make a run on the bank to get your money first."

I mean, I kind of get it. That first 10% could very likely be people who know something you don't. So you use it as an indicator. But then the very perception of instability causes that same instability.

nova220332• 3 years ago

Jason Calacanis had a personal interest in SVB

https://twitter.com/one4thecashbag/status/163533710637676953...

dundarious• 3 years ago

They couldn’t afford to keep treating founders and VCs like personal royalty[0]: the yields were too low. But they feared what would happen if they stopped. So they made a bad bet to cover the extra expense.

[0] Video of Jason Calacanis expounding on his love of royal treatment by SVB: https://twitter.com/one4thecashbag/status/163533710637676953...

Rapzid3• 3 years ago

This just looks like the system working. California swiftly pulled the plug and FDIC is sorting it out. Lessons will be learned, buy the dip, move on.

usrbinbash2• 3 years ago

No! Yes! Oh.

But rest assured, it's not just the libertarians and not just in the US.

Europe is currently facing shortages of skilled labour in many sectors of industry and business, what with the baby boomers entering retirement age in droves. Market forces of supply and demans would dictate that since the resource (skilled labour) demand increases, and the supply decreases, the price (wages) has to go ... upwards.

Basic economic theory of free markets.

So, does that happen? With few exceptions, nope. Wages continue to stagnate. Instead, lobbyists clamour for slashing social security to make part time jobs and retirement less desirable.

Tade02• 3 years ago

Is this the reason behind France trying to increase retirement age despite having a balanced budget in this regard and protests?

DeathArrow3• 3 years ago

Basically yes.

Sharlin• 3 years ago

Yes, absolutely.

yardie• 3 years ago

You can imagine you’ve worked your whole life chasing the brass ring. And then the government goes, “lol, just kidding!”, and moves the goal posts 50 meters. And this affects millions of people who are very pissed off and vocal about it.

suddenclarity2• 3 years ago

No, it's because we live longer, have fewer children to support us and increase the population size that doesn't contribute net positive to the welfare state. It's pure economics.

HDThoreaun4• 3 years ago

France's pension does not have a balanced budget. It will soon run out of money without the proposed changes.

jen202• 3 years ago

The retirement age must rise with life expectancy. Anything else is a transfer of wealth from the young to the old, which I assume sounds great if one is a boomer who destroyed the golden-egg-laying goose.

However, you’re right about market forces in European salaries.

sokoloff• 3 years ago

HSBC bought the company’s British arm, which was still largely solvent, for £1.

I suspect “insolvent” is probably an adequate synonym anytime you have to use a qualifier word on “solvent”.

tomesco• 3 years ago

True. Expected to remain solvent would be more clear.

DeathArrow3• 3 years ago

https://archive.is/rqRII

pshirshov2• 3 years ago

In general I agree, but weren't libertarians pushing for physical golden money?

frankreyes8• 3 years ago

There's no general agreement among libertarians on what's the best money.

I'm against a gold standard because it's dumb. Gold standard worked in a time of industrial revolution, which cancels out the negative side of gold standard. Costs and prices went order of magnitude down and then there was more gold for everyone.

Literally the steam engine and electricity and light bulb and radio were brought at the time of gold standard.

pshirshov2• 3 years ago

Okay then, how would you build a trustable banking industry without some certain central authority?

KHRZ• 3 years ago

Then again, what they invested their money in was government bonds, which lost value due to the government increasing the interest massively after selling those bonds at a low fixed interest. If a business did that, they would win the scumbag of the year prize.

martythemaniak• 3 years ago

https://study.com/academy/lesson/duration-risk-definition-ex...

This is a separate concept from Credit Risk, which is how risky the borrower is. The bank did not manage its risks, but it was salvageable, they just needed to raise money, but then the VCs organized the bank run.

neilwilson2• 3 years ago

The bank run should have been neutralised by the Fed lender of last resort function.

The problem was that the bank didn't have the collateral or the income to pay the Fed's rate.

The assets the bank had were poor quality and didn't generate enough income. If the Fed won't lend, why would anybody invest in the bank. Far better to turn up at the auction and pick up the assets for cents on the dollar.

makomk3• 3 years ago

Yes, and government banking regulations seem to have been almost entirely focused on credit risk rather than duration risk because they were focused on the last crisis - banks were effectively actively penalised for keeping their money in higher credit risk but lower duration risk investments like corporate bonds instead of minimal credit risk but high duration risk ones like long-term treasury bonds and government-backed MBSes. There's been an entire wave of articles in the left-leaning parts of the press blaming this all on libertarians and corporations convincing the government to lift regulations created in the wake of the 2008 crisis and causing a repeat of it by doing so that just completely ignore this distinction.

TechBro86154• 3 years ago

In the interest of fairness, David Sacks makes some compelling counterpoints here: https://twitter.com/DavidSacks/status/1635747517752283137

synu• 3 years ago

Woke did it, in collision with Biden! Who could have ever seen that coming from Sacks.

beefield• 3 years ago

Funny. First "its collapse was first and foremost a result of its own poor risk management and communications" and then a looong rant how it actually was fault of Biden, Democrats and loose monetary policy.

So far I have not seen any evidence that the real reason was anything but "poor risk management and communications" A couple of percentage points change in interest rates is not a thing that should bring your bank down. If it does, you have failed, no excuses.

pdpi• 3 years ago

A couple of percentage points change in interest rates is not a thing that should bring your bank down. If it does, you have failed, no excuses.

In context, it's even more egregious — Rates after that "couple of percentage points change" are still historically quite low, it's just that we've had a completely aberrant run of near-zero rates for the last decade or so. It was a matter of time until this correction happened, so preparedness was about "when", not "if", it happened.

sonotathrowaway3• 3 years ago

The democrats and minorities forced them to hire conservative lobbyists to weaken regulation, then forced them to refuse to hedge their interest rate risk.

Semaphor• 3 years ago

The main counterpoint (to this article, he seems to mainly talk about others) seems to be "it was no bailout", and "insuring 100% of deposits is small government and totally logical for me as a stance". The former I can see, the latter I’ll have to put clearly in the article’s column.

sonotathrowaway3• 3 years ago

It makes more sense when you realize they define small government as when the government makes them money, and big government is when they lose money.

zeroonetwothree6• 3 years ago

How much money does the government spend on insuring deposits? Seems like it’s less than one day of social security or military spending. So I find it hard to argue that deposits insurance alone makes the government ‘big’

IMTDb• 3 years ago

From the twitter thread you linked:

Any depositor who could read the WSJ or watch the stock ticker could understand that there was no upside in waiting to see what would happen next.

The whole point of regulations is precisely that I don't have to read a journal or scrutinise a stock ticker to watch my money. As it turns out I have more productive and useful ways to spend my time. Maybe he doesn't have anything better to do all day; but pretending that regulation are not needed because there is some way for some people to get some insight about what's going on under the hood is just not a receivable argument.

_trackno53• 3 years ago

but pretending that regulation are not needed because there is some way for some people to get some insight about what's going on under the hood is just not a receivable argument.

What are you going on about?

If you listen to the All-in-podcast, where Sacks and the other guys talked about what happen, they actually point out that the problem was improper regulation that allowed banks to get in that state in the first place.

jmyeet4• 3 years ago

The points Sacks makes there contain some truth but, make no mistake, they are selectively chosen and completely self-serving.

1. Talk of inflation doesn't mention a way more effective tool for tackling it: taxation. Inflation is offhandedly blamed on the government too for not being "transitory". Sacks is actually torn here. Non-zero interest rates hurt the VC model but as a rich guy he certainly doesn't want, say, a corporate windfall profits tax;

2. He claims he wanred about pumping trillions of dollars into the economy. Why 2 years ago and not 14-15 years ago when the zero-interest QE started? What's the difference? Oh, who got the money in 2020? This is part of a consistent narrative from rich people that it's only ever a problem when poor people get government money. Then it's a moral hazard.

3. Further to the "2 years ago" narrative, we should remember that Covid relief started under Trump, not Biden. So why not "3 years ago"? Is Sacks trying to avoid criticizing Trump? Weird. I wonder why.

4. Not one mention of deregulation. Weird.

zeroonetwothree6• 3 years ago

Inflation is caused by printing too much money. Taxation does not directly reduce inflation (I suppose you could argue some indirect effect since it means the government will need to print less but then there are other secondary effects we would need to include, etc)

AnimalMuppet• 3 years ago

Is taxation an effective way to tackle inflation?

Inflation is too much money chasing too little stuff. Taxation is less money that the people have, but more money that the government has. If the government just set the money on fire, that would help with inflation, but they won't. They'll spend it. At that point, we will have the exact same amount of money chasing the exact same amount of stuff; the only difference will be who has the money. So we'll have the same amount of inflation, but people (and businesses) will have less money to try to deal with the inflation. That doesn't sound like an answer at all.

nfRfqX5n• 3 years ago

funny how this presumed causation only goes back to 2021

TechBro86154• 3 years ago

Yeah, personally I'd trace it back to the 2020 covid money printing mania, or even the 2019 (nearly) negative interest rates. I do think he's right to blame the rate hikes, and in turn, the inflation that necessitated them. But he does skip over the fact that these rate hikes shouldn't have been a surprise. The bankers had poor risk management by not considering the effect the rate hikes would have on their long duration bonds. And frankly, Sacks misses an opportunity here to shift blame to the bankers, who IMO are the real cause of the crisis (as always).

DrBazza3• 3 years ago

The article is an attack on Peter Thiel, not SVB. Also seems thin on facts, and just "SVB is getting bailed out, and hence some rich guy stays rich". Given that both the Fed and the Bank of England have decades-old laws protecting the financial system long before (tech) billionaires, this article seems even more ridiculous.

Context: https://en.wikipedia.org/wiki/New_Statesman

Today, the magazine is a print–digital hybrid. According to its present self-description, it has a liberal and progressive political position.[3] Jason Cowley, the magazine's editor, has described the New Statesman as a publication "of the left, for the left"[4] but also as "a political and literary magazine" with "sceptical" politics.

badrabbit• 3 years ago

Oh please. You know exactly what the article is saying. You chose to attack the publication instead of their arguments which boils down to Thiel and friends are very much anti-regulation and if it wasn't their money they would resist government interference. Perhaps you could talk about the quoted comments from those billionaires and correct the article?

DrBazza3• 3 years ago

Perhaps you could talk about the quoted comments

All the quotes are barely one sentence, and with zero context, and no link back to when or where they were said. I know modern journalism is lazy and just quotes tweets, but the author could have put a bit more effort in.

when Zuckerberg came up with his mantra, “move fast and break things”, he didn’t just mean code.
Thiel himself is so committed to libertarianism that he has established an eponymous foundation to “defend and promote freedom”
Larry Page, the co-founder of Google, has previously suggested a “limit” on laws to “some set of pages”. “When you add a page, you have to take one away,” he said.
“This is an extinction level event,” warned Garry Tan, the CEO of Y Combinator.
“Where is [the chairman of the Federal Reserve, Jay] Powell? Where is [the Treasury secretary, Janet] Yellen? Stop this crisis NOW,” tweeted the venture capitalist David Sacks

soumyadeb2• 3 years ago

As far as I know, haven't seen any tweet/quote from Peter Theil asking for a bailout. Shouldn't the onus be on the article author to do more research on their primary target. Can't blame him for being friends with people who asked for it.

Dma54rhs• 3 years ago

Thiel got his money out, where is he asking for bailouts? These techbros are imaginary characters invented for clicks and outage.

JaimeThompson4• 3 years ago

Thiel and friends are very much anti-regulation

Anti-regulation on the business side, their political donations show they are very much into regulations when it comes to people and ideas that aren't "typical" and or "straight".

andrepd3• 3 years ago

I don't know what your last paragraph is supposed to imply. That there shouldn't be outlets for the Left? That there shouldn't be outlets with stated political positions at all? Or it's just a basic ad hominem?

Anyway, as for the substance: a bank had risky behaviour and lost out. Now everyone, including those who never did and never will benefit from that risk, are called to pick up the check. This is, objectively speaking, a transfer of wealth from the poor to the rich.

Now you may justify that with trickle-down economics, but I'm not arguing that point, and neither is the writer. He is merely pointing out how the "leave free enterprise alone" crowd is now suddenly in favour of handouts :)

PM_me_your_math3• 3 years ago

How does the "rich" steal what the poor do not have?

fidgewidge2• 3 years ago

I don't know what your last paragraph is supposed to imply.

It's pointing out that the left hates libertarianism and Peter Thiel, leftism is literally the opposite of libertarianism, and so you would expect a left wing news outlet to try and trash Thiel and libertarians whether or not the argument makes any sense or whether it's actually their fault. It's a bias warning.

tekknik8• 3 years ago

That there shouldn't be outlets with stated political positions at all?

What a wonderful concept, a news organization that just spits dry facts and doesn’t spin at all. Kinda like Axios. We really should use AI to write unbiased news articles and fire all the journalists who can’t get rid of their biases. The world would overnight be a better place.

enumjorge• 3 years ago

The article is an attack on Peter Thiel, not SVB.

I don’t understand this comment. The article doesn’t pretend to not be an attack on people like Thiel. It’s in the title. So what’s your point—is Thiel above criticism?

And since you imply that a publication somehow automatically loses credibility on this topic by leaning left, here’s a Financial Times opinion piece with a similar premise: https://archive.is/6MBEL

yucky4• 3 years ago

Not to speak for OP, but I think the point is obvious. Silicon Valley culture is liberal to progressive, not libertarian. That means more government intervention is the norm in the industry, not less. Thiel is more of an exception in that regard.

The entire premise that Silicon Valley has a libertarian culture is flawed, which is they the article can't back it up.

Aunche• 3 years ago

Thiel is entitled to a lot of criticism, but this is dumbest possible criticism. If Thiel took his money out of SVB, then he didn't receive a bailout. That's 100% consistent with libertarianism. But then he's a hypocrite because he's a "tech bro" and some other "tech bros", who the article makes no effort to explain why they are libertarian, asked for bailouts.

DrBazza3• 3 years ago

The FT is also a left leaning newspaper as it has had to increasingly post 'commentary' articles to stay relevant in the 2020s. Long gone are the days of its dull hard factual reporting that was of actual utility to London traders since the rise of the internet.

I had no 'point' other than to state that the article headline was misleading, the content was weak at best with sound bite quotes and zero context.

I referenced the wikipedia article so that non-UK readers have some context regarding the publication.

fidgewidge2• 3 years ago

since you imply that a publication somehow automatically loses credibility on this topic by leaning left

Funny how so many of the replies are shocked by this idea when virtually every single story posted to HN from a right leaning outlet is flooded with comments of the form "you can't trust this story, it comes from a right leaning outlet" and the post itself will often be quickly flagged to death. What goes around comes around.

mellosouls• 3 years ago

It's ok to point out this is a left wing magazine, but the "investigation results" pasting is over the top and just indicates potential lack of balance in the rest of the comment...

sonotathrowaway3• 3 years ago

When you don’t have any facts on your side, you need to rely on innuendo and ad hominems.

wolverine8764• 3 years ago

Given that both the Fed and the Bank of England have decades-old laws protecting the financial system long before (tech) billionaires, this article seems even more ridiculous.

Those laws don't insure deposits over $250,000. The response to SVB is relatively novel in some ways.

DeathArrow3• 3 years ago

The article is kind of low quality. First they name Peter Thiel as the poster child for libertarianism. Second they accuse libertarians being against state intervention. Third they say libertarians are asking for state help, so they think they've found a kind of paradox.

But Peter Thiel withdraw his money from SVB in time and he didn't ask for the government's help. So the article authors are kind of contradicting themselves.

Also, blaming libertarians for being against massive state intervention in economy is akin to blaming a fish because he swims in water. It's all what that fish is about and knows to do.

jjgreen• 3 years ago

What happened to third?

zaroth4• 3 years ago

They told you, it’s a low quality article!

hospitalJail3• 3 years ago

What makes Peter Thiel a libertarian? I thought he went full Trumpism, which is basically the opposite of libertarian.

fancyfredbot8• 3 years ago

There's clearly a lot of pent up anger directed at VCs and big tech. The collapse of SVB may not actually be their fault, but it still seems to have brought all of this frustration out into the open. I'm not really sure why there is so much anger - yes they were hypocritical here but I'm not sure people would be so keen to point that out if they didn't already have an axe to grind!

FollowingTheDao4• 3 years ago

"I'm not really sure why there is so much anger"

Maybe because you are one of the beneficiaries?

fancyfredbot8• 3 years ago

To be clear I wasn't trying to say people shouldn't be angry with VCs. I'm expressing some doubt that the reason for the anger is SVB's collapse or their hypocrisy around it. Whether you like VC or not, they aren't responsible for the SVB's investment choices or its undercapitalization and so the outflow of anger following SVB collapse feels misplaced. (Edited for clarity)

anon2914• 3 years ago

Never ask a man to question the source of his paycheck

dang• 3 years ago

"Please respond to the strongest plausible interpretation of what someone says, not a weaker one that's easier to criticize. Assume good faith."

https://news.ycombinator.com/newsguidelines.html

Edit: you've been breaking the site guidelines a great deal and we've already warned you a bunch of times. If this keeps up, we're going to have to ban you.

A4ET8a8uTh03• 3 years ago

I will say this and I am being absolutely honest.

I am surprised there is so little anger.

I can offer an explanation, but I am not sure how accurate that is. As I tried to explain to my friends in different industry what has, apparently, happened, their eyes quickly glazed over. There seems to be a lot of confusion floating around and no clear 'bad guy' to blame ( I have a pet theory about this, but this may be a bad time to introduce it ).

<< if they didn't already have an axe to grind!

Absolutely correct. Based on what I heard so far, adherents of each political spectrum in US went to their respective corners with their specific talking points. Super annoying as it only adds to the confusion ( its not like we have a systemic risk on our hands ).

anon2914• 3 years ago

Probably because VCs and big tech are one of the largest democratic donation bases and thus, the issue is politicized, because, from the outside, it looks like a democratic administration taking unprecedented steps towards ensuring the financial health of their own donation base. One wonders if the action would be as swift if this were a farming bank in Ohio, for example.

javajosh• 3 years ago

As an aside, I wonder when making allegations without proof based on speculation and partisan hate will fall out of fashion? I speculate that it continues to happen because people don't have a killfile anymore, and so trolls always have a new audience to lie to.

xdennis5• 3 years ago

I'm not really sure why there is so much anger

Because it's unfair to have millionaires bailed out. When the poor make bad decisions they don't get bailed out.

cloverich2• 3 years ago

...if they are poor they would be under FDIC limits and would be the FIRST to be bailed out?

zeroonetwothree6• 3 years ago

Non-rich people get bailed out constantly. What else is unemployment, Medicaid, welfare, social security, etc? Plus things like eviction moratoriums, foreclosure protection, FMLA, etc. The social safety net often protects those that made bad life decisions… or were just unlucky, but are we sure SVB isn’t in the latter category?

To be clear, I think it’s a good thing. Just let’s not pretend the government is only ever helping the rich.

fancyfredbot8• 3 years ago

I don't like the idea of millionaires who make bad decisons being bailed out either, but it's not clear that is what is happening here.

Firstly not clear that this is really a bail-out in the usual sense. No tax-payer money is going to these millionaires, and any costs (if there are any, which isn't entirely clear) are going to go to other banks and their shareholders.

Secondly not clear that depositing money in SVB was a "bad decision" - doing this wasn't a risky thing VCs did to try and get rich.

Rapzid3• 3 years ago

Being angry is easy. Understanding is hard. Manipulating angry people is easy.

fullshark• 3 years ago

These people pretend to be the stewards of innovation, bringing society forward by building great new technologies but in reality they are just rich gamblers who have no interest in building anything, and the last few years have devoted their efforts to pumping and dumping garbage companies on the public in the form of IPOs/SPACs.

And now their bank, which behaved recklessly, failed and they suffer no consequences, the costs of 100% deposit insurance offloaded onto every other sector of the economy.

angryasian3• 3 years ago

How is it not their fault ? The Bank run was caused by VC's telling their portfolio companies to pull their funds based on a weak signal. Raising money shouldn't have been enough to cause this kind of panic.

fancyfredbot8• 3 years ago

Sure if they'd all left their money there then nothing would have happened, but on the other hand, if a company has a large uninsured deposit at an under-capitalised bank, leaving the money there is arguably irresponsible. I don't really blame them for moving their cash elsewhere.

CatWChainsaw• 3 years ago

For all the articles posted on HN in the past 24hrs, none of them are the Business Insider piece. It explains the axe that's being ground rather eloquently, so avail yourself of that.

alphanullmeric3• 3 years ago

It doesn’t, libertarians will still tell you the same thing. Don’t take from me iff you don’t give to me. On the contrary, it seems like the authors of this article would like people forced to pay for insurance to not be compensated by them.

dsfyu404ed2• 3 years ago

Asking for deregulation when it suits you and government intervention when it suits you is like the right leaning version of the over-policed upper middle class suburb that's dotted with "defund the police" yard signs.

The people trying to play both sides as it suits them are just selfish and unprincipled and in both cases the movement they profess to support would be better off without them.

At some point a line has to be drawn. If you advocate for X or Y you cannot in good faith claim to be a member of political movement Z.

scarface74• 3 years ago

Or the “Back the Blue, we are a nation of laws”. But “defund the FBI and the IRS”

alphanullmeric3• 3 years ago

You’ve already forced me to pay for insurance. Is it me that’s the hypocrite for wanting to be compensated?

BlueTemplar2• 3 years ago

Wait, when did "tech bro" went from an oxymoron joke about smart morons, and turned into a turn of phrase people accept without blinking ? (When scammers overran cryptocurrencies I guess ??)

TechBro86154• 3 years ago

Thank you for remembering the etymology... the earliest instance I recall is some YouTube video circa 2010 making fun of mediocre programmers ("brogrammers") at Facebook who got the job based on fraternity connections instead of skill. There were sunglasses involved in the skit. It was at most something you would call yourself ironically (in fact, at least according to my recollection, even "bro" itself was originally a perjorative used to refer to a caricature of fraternity brothers interacting with each other - "ok, bro" etc. - but which they themselves later embraced and adopted).

BlueTemplar2• 3 years ago

IIRC that itself came from gang members trying to have stronger ties (since not actual brothers) ?

blahblah12345676• 3 years ago

What is "tech bro"?

Is that like... denigrating a person based on their gender... ?

meghan_rain4• 3 years ago

Yes, ridiculous that this is allowed here, and I say this as a girl. @dang?

blahblah12345676• 3 years ago

The irony is that the same author, Emma Haslett, recently wrote an article about women facing increasing child-care costs.

https://www.newstatesman.com/business/2023/03/childcare-cost...

In her lefthand (main thread article): Denigrates men interested in technology jobs which pay well and are intellectually arduous to even learn let alone practice.

In her righthand (article I link to above): Complains that women need more money for childcare.

Gee, it's almost as though left-leaning journalists are trying to drive men and women apart.

"Men, as a woman, I tell you: You're terrible! Now go fund women's lifestyles, we need your money!"

GlacierFox2• 3 years ago

Ridiculous that the phrase 'tech bro' is allowed here? Why wouldn't it be allowed here? It's ridiculous the things people try and censor...

foldr• 3 years ago

It's in the title of the article. HN guidelines for comments presumably don't apply to articles. (It wouldn't be good for me to call another HNer a 'tech bro', but we can discuss an article that uses the phrase, no?)

lewisflude• 3 years ago

https://en.wikipedia.org/wiki/Brogrammer#:~:text=%22Brogramm....

blahblah12345676• 3 years ago

""Brogrammer" or "tech bro" are slang terms often used to label a stereotypically masculine programmer. "

I've only ever known one masculine programmer, out of dozens I've met.

Programming is a sedentary & solitary activity.

It doesn't seem to attract masculine, sex-god type males. If anything, it's the opposite scenario.

hospitalJail3• 3 years ago

I've been calling my gym crew gymbros, despite half of them being female.

I suppose I've not really thought about the gendered nature of it being short for brother.

To me its like calling a group of people 'guys'.

DeusExMachina• 3 years ago

The argument in the article is weak.

First they build their case against libertarians going at length against Peter Thiel, Elon Musk, and Larry Page.

Then, they point at the hypocrisy citing Garry Tan, David Sacks, and Bill Ackman.

These are different people.

Where is the hypocrisy of Thiel, Musk, or Page? It makes me think there is none since they can't provide examples and they have to switch. But I guess building an article on the second set of people, which is far less known than the first, would have not attracted enough clicks.

michael_vo• 3 years ago

Principle: there should never be a single point of failure in a well designed system. This is really just a lesson that we will keep re-learning and exposing as ecosystems get massive and companies make decisions at scale.

_trackno53• 3 years ago

I don't know how we can remove that point of failure though. Although we don't think about it, banks fail and are designed to do so. We just try to reduce the chances of that happening.

frankreyes8• 3 years ago

Hypocrisy? They are the ones who saw it coming, ran away, and survived the debacle. But hey, let's just find a scapegoat.

Just like the 2008 crisis let's just blame it on Michael Burry and those who looked under the layers of bureaucracy

my_city2• 3 years ago

This is not tech bros. Capitalism itself is the problem. Capitalism always socializes loses and privatizes profits. Do you think that democrat bankers like Jamie Dimon don't run for government assistance at every chance they get?

This is not a problem of a few "libertarian tech bros". The capitalists run the show, they run the government.

mejutoco• 3 years ago

Capitalism can work, it just has never been implemented properly in reality.

Only half kidding.

frankreyes8• 3 years ago

Capitalism would get your bank and their depositors bankrupt, end of story.

It was the USSR that were using heavy machine industry to finance and subsidize unproductive companies, leading to monopolies and corruption.

my_city2• 3 years ago

"Capitalism would get your bank and their depositors bankrupt, end of story."

Except that's not capitalism. America is real, actually existing capitalism, and only poor people get bankrupt, not banks or bankers. Capitalism is not about fairness or justice or whatever ideal. Is about maximizing profits and exploiting wage labor. "Socializing" loses maximizes profits, so that happens. Poor people getting bankrupt maximizes profits, so that also happens.

"It was the USSR that were using heavy machine industry to finance and subsidize unproductive companies, leading to monopolies and corruption."

I'm not sure what the argument is here. Nationalizing industries is not socialist per se. But you said it yourself "subsidize unproductive companies". So the objective was not to maximize profits, but to protect national interests and the development of socialism. Also, the USSR has a long and complicated history, from Lenin's War communism to NEP, to rapid industrialization, to perestroika, to liberalization. So we can't make sweeping generalizations.

But is unfair to talk about "monopolies and corruption" if you look at "western democracies" today. Monopolies. You realize that today only 5 or 6 companies (Unilever, Nestlè, Pepsico, etc.) control the vast, vast majority of food in the world? And "corruption". Corruption is legalized in the USA and banks and tech companies freely decide what the government should or should not do, get tax cuts, grants, subsidies, low-interest loans and so on. That's corruption through and through.

hparadiz• 3 years ago

The premise of this article is dumb. All tech bros are libertarian? Oy vey.

I have no horse in this race. I work for a retail/porn company in LA.

roenxi• 3 years ago

I appreciate that this might be a little tone deaf, but what the article is accusing Thiel of isn't hypocrisy. It is a completely consistent libertarian position to observe that government intervention gives people an unfair advantage and then attempt to take advantage of that advantage if people make it clear they aren't going to change the situation.

I'm of a very libertarian bent and think the money printing is stupid, but I'm careful to position my assets to take advantage of the money printing. That is not necessarily honourable, but it is consistent.

neilwilson2• 3 years ago

Depositors are not investors in a bank. They just want a checking account and to make payments. Why should they have to waste time spreading $250K chunks around multiple banks? It's inefficient.

Equity and bond investors are the only ones who should lose their shirts when a bank fails.

If we're the have a distributed payment system, then full deposit insurance and a flexible lender of last resort is the only sensible approach.

The alternative is everybody has their payment accounts at the central bank, which will then mean, by accounting identity, that the central bank will end up as the only depositor in every bank.

Which given that the central bank is the regulator who should be checking asset quality is perhaps the way to go. That way when a bank fails, the entity responsible for ensuring they don't stands the loss.

We need heterogenous banks who will lend on different criteria. Otherwise we'll end up in the situation where only the propertied will get bank liquidity.

However heterogeneity means that some banks, like SVB, will inevitably fail when they get it wrong.

FiberBundle• 3 years ago

Why do you need to hold that much cash in deposits though? There are alternatives that provide essentially the same kind of liquidity such as money market funds, which are used by other businesses. The rules were pretty clear: deposits are insured only up to $250k, anything above that isn't risk-free. If you don't want to have the slight overhead of finding alternatives for anything that supersedes that amount, you should have had to accept the risk that you might lose anything above those $250k.

intev3• 3 years ago

Are you serious? How do you think companies that earn over 1M per month operate? Do you think they all receive the cash on the same day and make the payouts on that day itself?

you should have had to accept the risk that you might lose anything above those $250k.

This laughably impractical. If you run any medium/large SaaS company you have payments continuously rolling in and you have to build up a balance to pay the salaries. The bank account is in a constant state of flux and a lot of times its at multiples of the insurance limit because a certain payment hasn't gone through yet, and a large advance just came in. Are you expecting every company to risk manage these large amounts in real time? Is that where companies should be spending their resources on? What's the point of having financial institutions and regulations when you're expected to micro manage basic aspects of the financial rails the whole economy runs on.

madsbuch9• 3 years ago

You buy storage service from a company. Either you insure your storage, you make sure the storage company insure the entire storage or you risk the uninsured part.

The article points out that the libertarians turn authoritarian after they loose the amounts they have not insured - they call for somebody to ad-hoc insure it.

(In the same vein as this comment: Why should I risk loosing my expensive paintings to fire of theft when I deposit it with a storage company?)

anon2914• 3 years ago

The article points out that the libertarians turn authoritarian after they loose the amounts they have not insured - they call for somebody to ad-hoc insure it.

Some did that. Other tech bros, such as myself (and my next job was on the line, since the company that extended me an offer banked there), called to let the bank fail.

dsm4ck• 3 years ago

I believe the $250k limit is intended to encourage large accounts to invest in assets directly, and to have a limit to the FDIC liability in case of bank failure.

madsbuch9• 3 years ago

Or encourage people to buy their own insurance for the uninsured part. We are all free to call up an insurance company to do that.

anon2914• 3 years ago

Depositors loan banks money. Of course they are investors. Debt investors.

The deal was you had a government guarantee (well FDIC, a government corporation) up until $250k, and anything past that was best effort. Typically, this effort involved finding a new private bank to guarantee the deposits. For amounts over the insured limit, typically there would be a delay. The whole "We're just going to loan the money and print it into existence and we're also going to do that for other banks and oh yeah we will charge every American account holder for it" is novel.

webmaven2• 3 years ago

Equity and bond investors are the only ones who should lose their shirts when a bank fails.

Responsible executives should too (and I don't just mean whatever remaining equity that they hadn't cashed out yet).

xdennis5• 3 years ago

Depositors are not investors in a bank.

You're saying that like only investors should be exposed to risk.

Everything you do has an implied risk. If I buy a house I am not an investor. Yet if it gets destroyed and I don't have insurance the government won't make me whole again.

Why should big bank depositors be protected when home owners, farmers, cancer patients, &c are not? They are not investors either.

LatteLazy3• 3 years ago

I don't understand why bailing out DEPOSITORS is a big deal:

* when I put money in a bank, I am just depositing it, I am not "investing". If I wanted to invest (take risk for a chance of profit) I would buy bonds or shares etc. I expect the money to be safe and accessible.

* the "product" being sold by SVB is a bank account. It's low interest (if any at all) and comes with a bunch of charges (so most people will not even break even). If they were offering a 10% interest current account, that might be different. But until then no one has been compensated for the risk of losing their "capital".

If I leave clothes with a dry cleaner or tools at a storage unit, those are mine. I am not "investing" my clothes in the dry cleaner. The same should apply for standard, low interest, current accounts for individuals and businesses.

Maybe in the 1950s, people only used accounts for saving, and they were expecting a return and it was the main way for people to invest. At the same time people/businesses did most of their business in cash (literal folding notes etc). But the opposite is true now. People and Businesses need a risk free account to make a receive payments. They're not looking to be "on risk".

yathaid2• 3 years ago

I am by no means an expert.

The bailing out was needed due to risky behavior.

The risky behavior was enabled by de-regulation starting from Clinton. (Most de-regulation related systemic flaws today can be traced back to his admin)

"Tech bros" support this de-regulation. Any regulation is govt. overreach. "We know how to handle our shit" attitude all over the place.

Yet when the downside of the risk comes, it is govt. money that bails them out.

Regarding your last line. How much of your stuff (something that is fungible, like money) needs to be actually be in the unit while the storage company can loan out the rest is the question. There can be more of the stuff in circulation than there are resources. As long as not everyone is asking for their stuff back, the storage company can keep juggling balls in the air.

gruez2• 3 years ago

The risky behavior was enabled by de-regulation starting from Clinton. (Most de-regulation related systemic flaws today can be traced back to his admin)
"Tech bros" support this de-regulation. Any regulation is govt. overreach. "We know how to handle our shit" attitude all over the place.

Surely this doesn't apply to all SVB depositors? Or do you think the entire SVB deposit base was card carrying "tech bro" members? Or suppose 80% are, what of the remaining 20%? Should they get ruined because they dared to associate with "tech bros" and/or didn't do financial risk modeling properly? Or maybe the government should make the bailout conditional on whether you were a "tech bro" or advocated for deregulation?

LatteLazy3• 3 years ago

It is something of an aside but, I find it very amusing that the risky behaviour people are up in arms about in this case is "buying long dated US treasuries".

I think no one really disagrees about whether people who knowingly take risks should be bailed out - they shouldn't.

To me, the deeper question is who actually knowingly took the risks and should people/businesses have an opportunity NOT to take such risks but to still access basic banking services?

I have zero objection to shareholders, bond holders and even senior management getting nothing in these cases. They absolutely should not. And the second government has to step in, that should be the case.

I am just not convinced that depositors count as having knowingly taken risk. It does not seem to me that the average depositor (including businesses or individuals with more than 250k in cash) ARE or SHOULD BE knowingly taking risks just by depositing their cash.

Perhaps I am wrong, maybe that should be the case and bank accounts should continue to be a "risky" product? But if so, then I think we should offer (either via private banks or direct from the FED etc) a risk free product that lets you do the things we rely on from bank accounts (store, send and receive cash).

It is an accident of history otherwise that the only way to access those services is to invest in a private firm. If I proposed that we should ban cash transfers and if people wanted to move money electrically, they should buy shares, send the shares, then have the recipient sell the shares, people would think I was crazy. But this is the same system really if depositors are really to be treated as "investors". I should not have to invest in a bank to transfer money anymore than I have to invest in a moving company to transfer a package.

It's another aside but... The system in Scotland a few hundred years back was that each bank would issue it's own currency. Then the value of a "pound" from one bank would fluctuate compared to others depending on how stable that bank was considered to be. So even the bundle of bank notes under your bed could become worthless overnight. Personally I think that sounds crazy, and a sound, transferable deposit system sounds like the same sort of boring obvious infrastructure we should really have...

Thanks for reading! :)

zefalt2• 3 years ago

You have a big misunderstanding just like the David Sacks and the rest who feel depositors are wholly innocent.

Most everyone involved in finance knows that banks treat 'depositors' as creditors. Banks view deposits as a liability. Anything over $250k is uninsured. There are multiple ways to insure deposits over $250k. These are simple concepts.

To say that you shouldn't know how to manage your own money is like saying you shouldn't know the traffic rules when you're driving. Where you decide to keep your money is your own choice. Everyone participating in the economy takes risks. It doesn't matter where money are assets are kept...there is always risk.

In terms of depositors, they neglected counterparty risk. In terms of SVB, they poorly managed interest rate risk.

LatteLazy3• 3 years ago

Oh, no, you mis understand me: I know what the rule is. I just think it is arbitrary and stupid and was a hack when it came in decades ago before most people actually used banks.

Why does someone with 250,001USD in an account deserve what they get but someone with 249,999USD here and 100bn elsewhere get bailed out? Why is the only way to transfer cash to take counterparty risk? Why are the amounts for businesses and individuals the same (250k is huge for an individual but tiny for a business!?)? Especially since it is individuals that will miss their salaries when their employer finds they're bankrupt, and is that also their own fault for not assessing counterparty risk?

We could avoid all these contradictions by just having "basic function" accounts that let people/companies use banking services that pay no interest and have no risk (fully insured). Then separately offer "investment" accounts for people that want them (with no insurance). If I want to use a hospital or an insurance company, I just use it and pay accordingly. Why is are banking services the only thing where to access the service I have to become an investor in the provider!?

Bailout SVB, or don't. I don't know if people deserve it or not. I make no moral judgement. I just think this whole system makes no sense, is unfair/arbitrary and is not effective. It should be changed irrespective of what we do in this one case...

Edit: I should have been clearer in my original comment. I didn't mention the 250k limit because to me at least it doesn't matter. I can see being an investor (risk AND reward) or not (no reward but no risk) at any amount...

imgabe• 3 years ago

The crisis was created by the Federal Reserve in the first place printing trillions of dollars and then jacking up interest rate. That wouldn't happen in a libertarian system.[1]

It's not hypocritical to call on the people in charge to clean up the mess they created.

[1] Not to say that a purely libertarian system would be perfect and without other problems.

jmyeet4• 3 years ago

Libertarians are, and always have been, ridiculous. It's nothing more than Reagan-era deregulation. And just like trickle-down economics there is a mountain of evidence to show how ridiculous it is that gets ignored.

Watch this space. The narrative ofn this will shift to how the FDIC's actions were unnecessary once the capital-owning class realizes they got hosed here. The depositors got paid, banks (through the FDIC insurance fund) paid for any shortfall and SVB shareholders were left holding the bag.

We could tackle inflation with taxation. We certainly can't have that. So we're left with interest rates. Well, VCs like--even depend on--zero interest rates. So they don't like that either. But it's better than getting taxed. So Sacks, Calacanis, Elon and the like will chirp about this on the timeline and frame it as a government failure.

These libertarians are really just conservatives. That too is self-serving ultimately. Don't lose sight of that.

newmac• 3 years ago

David Sacks wants to run for President. He watched Trump's election closely. He wants to be the smart guy that uses the idiot's playbook. He is working hard to get placed on as much media as possible as a commentator. He is connected to many of the richest and most powerful people in the country.

He is, at the end of the day, a bored billionaire with some very pedestrian ideas. He does go to great effort to shout them louder. He does seem to have some serious ego issues, but I guess what politician doesn't?

I think the hilarity of Calacanis literally tweeting his own similar ideas is that it was a transparent attempt to be louder. ie: he just didn't feel heard about his ideas, so they needed amplification.

nova220332• 3 years ago

David Sacks was born in South Africa. I don't think he can run for president.

LargeWu3• 3 years ago

Depends on if his parents were US citizens when he was born.

whywhywhywhy• 3 years ago

This argument seems about on the same level as criticizing someone against capitalism for using an iPhone.

O__________O• 3 years ago

Reality is there are rarely to the death true libertarians or authoritarians, only those who lacked the opportunity in the monument to change their positions when significant threats or opportunities are presented. The optimal degree of control in a system is based on context, both for the individual and the system itself. To think otherwise is just illogical and discards the complexity of the world for a theoretical utopia.

Anyone that believes to the death libertarian bros exist doesn’t understand the people they’re referring to — which to me is a larger issue than people behaving rationally.

pelorat• 3 years ago

Libertarianism is just a fancy word for anarchy. Never trust anyone who calls themselves a "libertarian", they are insane.

baryphonic3• 3 years ago

(Disclaimer: I am not a libertarian, though I was once.)

These arguments have a fundamental flaw, arguing that a libertarian enjoying some government benefit is "hypocrisy." This is nonsense.

Libertarian tech bros pay into our system just like everyone else. Given the progressive income tax, those who are billionaires likely pay more in years where they make money than just about anyone else. So if the government is in the position to offer money, what good does it do for them to refuse? If they refuse, will the government be embarrassed and adopt libertarians' preferred policies? It's no more hypocritical than a socialist defending her private property.

Personally, I think if libertarians are serious, they should seek out every government benefit they're qualified for, and encourage everyone else to do the same. If libertarians are right, then the shaky foundations of the Progressive system can be toppled over by overuse.

I think the real thing being unmasked is that libertarianism is often ideology without grounding in reality. They can't account for the world of second bests, and the Progressive system has twisted and destroyed so much of what was once free that getting to a libertarian world would be like a society-wide kernel panic.

Thiel deserves credit for being one of the (quasi-)libertarians who seems to recognize this and has attempted alternatives like that seasteading thing, though they typically haven't gotten off the ground.

sf_rob• 3 years ago

I think your broader point is generally true and often missed so have an upvote, but in this case the FDIC is going beyond it's stated policy. Demanding that the floor of the FDIC's guarantee be lifted/ignored seems distinctly anti-libertarian regardless of whether it was the right thing to do practically. Draining a substantial portion of the FDIC's insurance program's funds seems anti-libertarian. Refilling that portion through (likely) additional requirements on banks that didn't have these issues seems anti-libertarian.

I guess you could make the broader point that people comfortable with government intervention would have argued for full depositor guarantees, so in some since libertarians are playing the same game but that seems much more tenuous to me.

Per your general point, it was very well written! I like to say that you aren't a hypocrite for playing by the rules of checkers even if you wanted to be playing chess but were overruled.

baryphonic3• 3 years ago

I think these are all fair points, and if the author of that article were capable of making them, I'd be sympathetic. Instead we got a litany of non-libertarians (including Larry Page! lol) plus David Sacks. Peter Thiel is also guilty, you see, because he's buddies with Sacks and once upon a time worked with Elon.

The underlying problem here is the naturalistic fallacy. Libertarianism is a set of statements about how the world should be, not about how it is. I think this is a flaw with the ideology, because I don't see a path from the "is" world to the "ought" world, but that's beside the point. Your chess vs checkers analogy is right on.

David Sacks had a concise statement about what he thought the world should be based on what it is.[0] I'm not sure how it works in practice, but it is a coherent worldview. Given that we don't live in a world corresponding to his proposal, but in one where certain people making loud noises can get their way, I don't see any hypocrisy, even though it may be embarrassing.

Thanks for the upvote – I'm at -3 so far. :D

[0] https://mobile.twitter.com/DavidSacks/status/163436339349803...

xdennis5• 3 years ago

Given the progressive income tax, those who are billionaires likely pay more in years where they make money than just about anyone else.

Nonsense. Rich people assets (i.e. stocks) aren't taxed. That's why Amazon doesn't pay any taxes.

https://www.cbsnews.com/news/amazon-taxes-1-2-percent-13-bil...

baryphonic3• 3 years ago

Nonsense. Rich people assets (i.e. stocks) aren't taxed. That's why Amazon doesn't pay any taxes.

Amazon is a corporation, not an individual billionaire tech bro. Not sure what relevance Amazon's tax situation has to this discussion.

blahblah12345676• 3 years ago

"It was particularly unfortunate that this was happening to a sector that has historically rejected state interventions of any kind, railing against attempts at heavier regulation and insisting all its problems would be solved if only the government would just back off. "

What an utterly silly claim, demonstrating the author's ignorance. The IT industry, based in Silicon Valley, worked hand-in-hand with governments at all levels from municipal to federal-- taking subsidies and giving innovations in return.

Not only that, but technologists rejecting state intervention?! California is THE nanny state-- California & the Bay Area are hot beds for demands for government intervention-- particularly of the neomarxist variety.

She doesn't bother to state a premise, she just assumes the reader takes it at face value.

madsbuch9• 3 years ago

When I started a company in Denmark, we were made very aware that we were not insured by the national depositors insurance schema and that we had no protections.

We were offered to buy insurance for e-banking theft and other types of fraud _and_ insurance for our deposits.

Is it really the case, that Americans assume to have all these sorts of insurances taken care of automatically?

packetlost• 3 years ago

For individuals (or rather, up to $250k UDS per account), it is. There's other opt-in systems for businesses that have different risk profiles.

ianai• 3 years ago

“On June 16, 1933, President Franklin Roosevelt signed the Banking Act of 1933, a part of which established the FDIC. At Roosevelt's immediate right and left were Sen. Carter Glass of Virginia and Rep. Henry Steagall of Alabama, the two most prominent figures in the bill's development”

https://www.fdic.gov/about/history/

devnullbrain2• 3 years ago

How reliable is the insurance? In other words, how bad would things have to get for it not to pay out?

madsbuch9• 3 years ago

That would be a part of the terms – we didn't get it, we knowingly took the risk.

gen220• 3 years ago

Is it really the case, that Americans assume to have all these sorts of insurances taken care of automatically?

For consumers, yes. For businesses, this falls under the "treasury management" responsibilities of the CFO position.

If they make this assumption (i.e. by foregoing insurance, T-bill ladders, etc.), they're a poor fiduciary. The VCs and relatively mature startups that stood to lose money in the last week have come out of this looking really bad to the adults in the industry.

exabrial• 3 years ago

I’m glad we’ve identified the boogy man. I was waiting for the political slant, it finally arrived

BurningFrog2• 3 years ago

It's always the people we already hated who caused the bad thing!

hospitalJail3• 3 years ago

The only sector more regulated than Banking is Medical.

But yes, one former libertarian = Libertarian tech broooo

jtr1• 3 years ago

It’s either the techbros or the wokes, choose your own adventure

gargs• 3 years ago

The irony is that regional smaller banks would now be supporting larger banks with insurance contributions if unlimited deposit insurance becomes a real perpetual thing.

anonymouse008• 3 years ago

Um, no. The true libertarians would rather burn down the Federal Reserve and enjoy the whipsaw's of market dynamics that actually allow for economic mobility. No one can buy jacksh*t in terms of assets with this 'controlled demolition' aspect. Every single market participant with means is always prepared for a buying opportunity. The ones 'pulling themselves up by their bootstraps' cannot.

So, heck yes, you scream and yell at the fools that started all of this. We gave away too much money, made money artificially cheap, then tried to pull the e-brake when it was too late.

Truthfully the only critique is the hypocrisy of enjoying high valuations due to the idiocy of monetary and fiscal policy.

goodgoblin• 3 years ago

it just bears remembering that whenever anyone in SV says "government bad!" - the government saved their asses

pjkundert• 3 years ago

Everyone’s a libertarian with respect to their own liberties.

It’s only the liberties of others that are up for debate.

So when I see “libertarian tech bros”, I laugh, because it’s clear that it is only envy speaking.

Enlisting the arm of the state to protect your liberties is always “just” - when someone else’s liberties are protected, it is “unjust”.

Bearing the consequences of one’s own actions is now widely considered as fundamentally unacceptable - the consequences must be borne by society: ideally, by your political adversaries, to be most “just”.

This is unlikely to end well.

qudat• 3 years ago

I really don't understand the argument against Thiel. He might have help cause the bank run ... but he used his own influence in the market to withdraw all of his money. He took matters into his own hands without leveraging government intervention, right? That sounds as libertarian as it gets. What am I missing?

monero-xmr• 3 years ago

A standard straw man for the political left is, "These people are libertarian, look how un-libertarian they are!" ignoring all of the evidence and facts.

https://reason.com/2023/03/13/everyone-is-learning-the-wrong...

rdevsrex• 3 years ago

Well because it's true. It's beyond clear that the rich get bailed out. It's libertarianism on the way up, socialism on the way down, but only for the rich.

Would that we respond as fast to the needs of ordinary people as to SVB depositors.

elicash• 3 years ago

Yeah, the article opens with Thiel but doesn't actually claim he did anything wrong. It then shifts to comments by David Sacks "who is a friend of Thiel" for hypocrisy in comments. Which, I think, might be fair to say of Sacks but not really fair to attribute to Thiel at all, or to the valley in general.

In defense of the article, it never directly states that Thiel is a hypocrite. He's at first included just because it lists actions he took. But there's an obvious implication being made later, and not just because of the title. That said, I think Thiel's anti-democracy views ("I no longer believe that freedom and democracy are compatible") are terrible and worthy of criticism for different reasons altogether.

mtlmtlmtlmtl2• 3 years ago

Yikes. I mean I would agree with him if he said that libertarianism and democracy are incompatible, but most libertarians I've met are much more self-deluded about the fact that this is what their view boils down to.

The fact that he states the fundamental logical issue with his ideology so clearly and at the same time in defence of it, is fascinating.

jaytxng• 3 years ago

Yeah I don't understand it either.

This is a classic prisoner's dilemma. Thiel just happened to be one of the first VCs to tell portfolio companies to get their money out. If [another VC name] had done so, it'll be their name on these articles. The point being, whoever went first avoided massive pain, so someone would've started it.

smrtinsert• 3 years ago

He's a well established libertarian. He wasn't calling for the govt to not intervene.

SamPatt• 3 years ago

Silicon Valley isn't libertarian.

All my feeds right now are full of libertarians who are upset about this.

The bailout itself isn't the main issue, it's mainly the Fed's irresponsible policies over decades.

They kept interest rates too low for too long, contributing to high inflation, then quickly jack rates to fix the problem they caused, then when banks begin to fail because of this rapid interest rate swing they fix that problem by rendering the FDIC $250k deposit insurance meaningless, furthering moral hazard, and to fix that problem they will...

hersko• 3 years ago

This article fails to make a valid point. It starts by talking about Thiel as the epitome of the libertarian venture bro, and how they are all asking for the government to step in now that the banks are failing, but then goes on to say that he got all his money out on time, no government intervention needed.

DonnyV• 3 years ago

Privatize the profits and socialize the losses.

Capitalism is failing and its on its way out. It doesn't work and only enrichs a hand full of people. No matter how many rules you put in place to regulate it.

Wyoming23• 3 years ago

Dang, how does this title not qualify as flame bait?

hk1337• 3 years ago

The title, and this is the article's title, screams angst. "Ha, gotcha!"

aww_dang• 3 years ago

Peter Thiel supports libertarian causes. Larry Page suggested there should be an upper bound on laws. Presumably that would be somewhere below restricting everyone from doing anything. Yet, the article doesn't quantify what a libertarian is in any meaningful context and how it applies to the topic.

Libertarian has become an amorphous category partisan writers can hurl at their opponents. Meanwhile, canonical libertarian content is highly restricted on this site. When it is posted it is often dismissed out of hand based upon the source.

Perhaps it is worth looking at what prominent libertarians are actually saying here?

https://news.ycombinator.com/from?site=mises.org

Intellectual curiosity indeed.

smsm422• 3 years ago

So the logic here is "it's the right thing to do, but it should have been delayed to annoy our political opponents and maybe cause them harm". I feel it is extremely hard to view such approach with any sympathy.

jrcplus• 3 years ago

A comedic take at the same topic: "A Disrupter's POV on the Silicon Valley Bank Collapse" <https://www.youtube.com/watch?v=A13erYPcDVI> by Michael Kosta (The Daily Show).

Silicon Valley Bank unmasks the hypocrisy of libertarian tech bros

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