This is merely an answer. Stock of SVB may ( may because at this point I am not discounting anything ) go to zero, however based on available information, vast majority of depositors ( 90% range ) were above FDIC insurance cap, which makes it a bailout of depositors AND, effectively and likely more importantly, all the smart ( and well-connected money ) that are invested in those startups.
It is a bailout. Its true beneficiaries are not as straightforward as in 2008 though.
<< bail outs keep the stock afloat. Here the stock goes to $0.
In such a case you are wrong about this statement then. This bailout is 100% intended to keep stock afloat; just not SVB's.
Interesting. So a bailout is when the rules are changed so that some people get to keep money that they otherwise would have lost (or would not have gotten). I'm onboard with that.
But then the PPP and pandemic payments were bailouts, too - a bailout isn't necessarily a "bad" thing, right?
Like, we judge the bailout by who benefits, right?
We should just bail out families, small businesses with payroll needs, etc., and VC firms should take a haircut? Or rich people shouldn't be bailed out - cap FDIC guaranteed deposits at 1m?
Or should Signature have gotten the full deposit bailout (not tained with VC funny-money), while SVB should not?
Serious question: what is the rule / policy / threshold that solves the problem better than "everyone affected by the problem gets the same full deposit insurance"? It's a decision full of tradeoffs, being made in a limited time and information situation. I don't think the Fed+FDIC+Yellen are making calls based on trying to "save" nor "punish" certain groups - they can't possibly have the time or resources to figure out an optimal solution.
<< So a bailout is when the rules are changed so that some people get to keep money that they otherwise would have lost (or would not have gotten). I'm onboard with that.
I would say that bailout is a bailout is a bailout. No need for conditionals here. Most people instinctively know the bank would not survive without government intervention.
<< But then the PPP and pandemic payments were bailouts, too - a bailout isn't necessarily a "bad" thing, right?
You may be assuming something about me that I did not say. I am not sure what PPPs were exactly, but at its core, they were bailouts too ( or at least that was their intended purpose ).
<< what is the rule / policy / threshold that solves the problem better than "everyone affected by the problem gets the same full deposit insurance"?
The rule is really simple: follow the policy you claim to follow. Otherwise some may think you are lying all the time.
> But then the PPP and pandemic payments were bailouts, too
Yes, PPP loans were 100% bailouts. I do think, however, that there’s a significant difference, which is that we didn’t have widely available insurance for pandemics. Even if businesses wanted to protect themselves against the risk of pandemic, they probably could not have done so before COVID.
Businesses that fail to hedge risks when the option is readily available to them should fail.
A bailout is a bailout is a bailout. I am not sure why people get so offended by this. Here it is a bailout with extra steps to allow for claims that it is not a bailout. I have no real horse here. My market exposure is maybe 10k usd now.
The point made is rather simple: whatever the rules are, enforce them. Otherwise they are not rules and no one will take you seriously.
