Is it thought? The shareholders of SVB are going to lose out big. The message this is sending to bank owners and investors is “the government may bail out your customers but you will lose everything.”

Lose everything ? The responsibility of the shareholders is limited to what they brought to the cap table, but the potential for upside is significant.

If it fails, you can restart and recreate a bank, but you, your partners and your friends keep all the profit and privileges that you collected before the failure.

All that at the expenses of the government.

Your main task is to not fail too early, so you can recoup your initial investment (and if it can last forever if you are lucky / well-managing the risk, then better for you!)

So how would letting depositors get wiped out stop these executives and shareholders from repeating SVB?

Better to just ban such executives from the banking industry and set up better monitoring of banks to catch those that are trying to pull a SVB.

> So how would letting depositors get wiped out stop these executives and shareholders from repeating SVB?

That would not be what I would argue for, but at 10% haircut for all depositors would create a nice incentive for reverse KYC.

You know, I suspect part of the problem is the lack of diversity in SVB's depositor base. When the tech sector took a hit, a significant chunk of SVB's depositors started to redraw money, combined that with their reduced liquidity due to higher interest rates killing the market value of the long term bonds they held*, it lead to a run.

* I don't really know if we should blame them for that. Who could have expected interest rates to rise so sharply, much less anticipate all the consequences from it doing so?

Shareholders lost all the money they spent on capital. That’s a lot. Exec employees extracted a lot, and in a just world that would be clawed back.

Imagine this scenario:

You invest $1.

Other people deposit $50.

You take $51 to a Las Vegas roulette table and bet it all on black.

50-50 chance there's $102 afterwards and shareholders and employees get to share most of the $51 gain; 50-50 chance there's $0.

Taking outsized risks with other peoples' money is a great gig for both stockholders and executives. We normally prohibit financial services firm from engaging in this kind of behavior, because the economic incentives favor outsized risk.

But wait, I see that SVB was paying 4.50% of interest per year to depositors (cf. https://www.svb.com/account/y-combinator )

Even if depositors lose 5%. 5% that they shouldn't have earned because of the ultra high-risk position taken, maybe it's from them it should be taken...

A "money market" account means the money is invested in extremely short term government or corporate bonds. SVB probably wasn't paying that 4.5%, they were just passing through what the market is paying for money market funds right now.