I actually personally profit from this as a software engineer working at a startup, but I don't agree with it because I recognize it's unfair.
Let's say my house gets burglarized. Everyone agrees this is a bad thing and unfair to me. However, my insurance only covers $2k, and I lost $20k of stuff. Can I expect the government to "backstop" me?
It's bad that the bank got shut down and depositors might have lost some of their money, but it's not fair to expect the government (and the average person indirectly) to reimburse for this, particularly when that's not how the FDIC policy is written.
Garry Tan and all the people I listed have a lot of their value in YC and startups which have direct losses and direct benefit from getting reimbursed for losses. If it weren't for reimbursement, the effective valuation of the startups would go down, and they'd have to invest more money to keep them afloat. So he has much stronger incentives than ordinary Americans.
The stable economy might be good for everyone, but I certainly will not celebrate rich people that push for their own wealth.
The US economy depends on you trusting that your bank account is less likely to disappear than a pile of cash under your bed is.
That's why the US government steps in for one case and not the other.
There is also precident for the government to pay damages above insurance limits after natural disasters, which from the depositor's point of view this basically is.
From what I understand: SVB offered below-market rates on loans and even personal financing for the founders of companies if you, in return, use them exclusively as your bank and put all your raised capital into an account with them.
You buy favorable rates on loans with the increased risk of putting more than the insured amount into the account.
When your house gets damaged in a flood and you've selected to insure it for $250k because that's cheaper, and you've knowingly built it in a floodplain, is the government still going to cover 100% of the cost of building it?
Let's say my house gets burglarized. Everyone agrees this is a bad thing and unfair to me. However, my insurance only covers $2k, and I lost $20k of stuff. Can I expect the government to "backstop" me?
It's bad that the bank got shut down and depositors might have lost some of their money, but it's not fair to expect the government (and the average person indirectly) to reimburse for this, particularly when that's not how the FDIC policy is written.
Garry Tan and all the people I listed have a lot of their value in YC and startups which have direct losses and direct benefit from getting reimbursed for losses. If it weren't for reimbursement, the effective valuation of the startups would go down, and they'd have to invest more money to keep them afloat. So he has much stronger incentives than ordinary Americans.
The stable economy might be good for everyone, but I certainly will not celebrate rich people that push for their own wealth.