It's a little more complicated.

Nobody wants to socialize the loss for the bank's management or stockholders. They're gonna be wiped out regardless.

But we socialize losses for bank depositors all the time, it's a lot less objectionable generally. It's just harder to be sympathetic when the depositors are risky startups.

Risky startups run (or funded) by people like Bill Ackman who have been urging the Fed to tighten its monetary policy [1], which is precisely the policy that caused SVB to fail.

[1] https://twitter.com/BillAckman/status/1529133155801829380

> It's a little more complicated.

I'd beg to disagree. Bank makes bad bets. VCs put all their eggs in bad bank. VCs now hold a gun to our head.

"But the depositors?!" Who is a depositor of more than $250K cash in an account who can't take a 20-30% haircut, because they didn't understand FDIC insurance? And why shouldn't they? Because they're special?

This is an argument that only makes sense to people with mid 6 figure salaries, a gold plated benefits package, stock options/grants, Uber Eats for lunch. Everyone else says -- "Looks like those depositors made a mistake, huh?"

How is this socialized costs when FDIC insurance premiums are paid by the banks?

Because we're talking way above and beyond what FDIC insurance covers.

What? He is primarily asking for another private bank to acquire SVB not a bailout. Even if a bailout happens this may be smaller than the sum US spends randomly.

E.g., we sent ~$80 billion to Ukraine in a year. https://www.cfr.org/article/how-much-aid-has-us-sent-ukraine....

If you agree there is a good argument for sending money to Ukraine benefitting US then why not agree there is an argument protecting against bank runs and depositors? SVB's total deposits are in that range (ignoring other assets they have).

Did you really just compare a war, where somewhere in the order of 200,000 people have died, with a bank collapse?

Did you just do an emotional appeal devoid of logic (but taking advantage of deaths of 200,000 people)?

Well, if you believe that the only thing the lives at stake have to do with are emotions, then yes I did. But usually the reason for spending money is considered part of the rational decision making process.

Well, at least you care more than Zelensky.

https://www.ndtv.com/feature/oscars-reject-ukraine-president...

Exactly.

This would only be the case if the company didn't benefit society at large. These companies pay taxes, drive the economy and innovation, and help the USA be the superpower it is.

Mostly privatize the profit and slightly socialize the costs.

I’m not sure I believe your assertion that the companies in question “pay taxes.” If you operate at a loss you get to deduct that loss. And there are lots of loopholes every company used to avoid paying their fair share. Unless you mean the employer share of the payroll taxes, which are paid on behalf of each employee and in my opinion don’t count.

The fact is that it’s really important to do due diligence on any institution that you’re putting more than six figures into. I would expect any “sophisticated investor” to understand the risks to the degree that they would be able to make an informed decision.

Why do payroll taxes not count? Employees are able to provide the value because there is an employer that enables them to.

Trickle up economics 101

The US has been doing trickle around economics. Up is also a direction.