The government buying those bonds at face value would be ridiculous. They're worth 80% of face value or less on the open market. So buying them at face value would be a 25% subsidy... Billions of tax money flowing to VC funded startups. That's an absolute no-go.
The solution is to wipe out the SVB shareholders, that's the only way to make sure other banks don't have an incentive to do these things. Then pay the startups whatever part of the funds you can recover on the market (may be close to 90% if some comes from SVB shareholders).
The VCs may have to step in at a few companies for loosing 10%, but that's likely the ones that weren't doing great anyway.
Using tax payer money to save SVB shareholders and some VCs is ridiculous. These guys have enough money, they're all professionals, it's a risk they took and unfortunately they lost this round. Better luck next time.
If this were the Bank of Omaha and a bunch of cattle ranches and soy farms were at risk, would you still feel the same way?
It is in the governments best interest for people to have faith in banks, regardless of what industry they serve. The FDIC was created because a run on one bank, once it becomes public knowledge, always turns into a run on more banks. They don't want this turning into a line of dominoes.
A lot of the people who could suffer because of this are not the people who caused the problems.
The biggest risk is that this leads to runs on other banks. People are already looking pretty closely at a few others like First Republic. Deposit insurance exists to reassure people that they won't lose their money, to reduce the temptation to start a bank run.
The workers who might not get their next paychecks or could lose their jobs entirely are not to blame for the problem either.
VCs will be fine no matter what happens, because they are billionaires. Trying to hurt them will fail and will result in other people getting hurt too. Moral outrage shouldn't be used as an excuse to make a bad problem worse.
Sure, but this isn't about it being fair or not. This is about a group of professionals making an investment decision that turned out to be wrong. Laymen then saying "let the government eat their 25% loss" based on the (wrong) idea that it isn't a real loss doesn't make sense.
Because then even more people that did not cause this would be paying for it.
Why is it so ridiculous to buy it at face value? They aren't losing the 25% you're quoting, they are just holding the bonds till maturity. In the worst case they are losing the what they could have "made" on that money in the interim. But realistically this is kind of the governments job no? Put cash where it can help society the most - making the depositors (who are mostly startups) seems like a great use of capital - it ensures employees get paid payroll AND makes sure a bunch of startups don't die (who would have gone on to create a bunch of value/jobs/etc).
The solution is to wipe out the SVB shareholders, that's the only way to make sure other banks don't have an incentive to do these things. Then pay the startups whatever part of the funds you can recover on the market (may be close to 90% if some comes from SVB shareholders).
The VCs may have to step in at a few companies for loosing 10%, but that's likely the ones that weren't doing great anyway.
Using tax payer money to save SVB shareholders and some VCs is ridiculous. These guys have enough money, they're all professionals, it's a risk they took and unfortunately they lost this round. Better luck next time.