Yellen says government will help SVB depositors but rules out bailout • Hacker News Board

Re: Yellen says government will help SVB depositors but rules out bailout

#71

Post by [deleted] » Sun, Mar 12, 2023, 2:10 PM UTC

SirensOfTitan wrote: post #28

NotACop182 wrote: post #13

Earlier quoted context omitted.

Did they help depositors that lost money in the last 500+ bank collapses? Why do they get special treatment? The government has laws and rules the depositors are insured up to 250k. Either they liquidate and everyone takes a hair cut. Or they wait till the bonds mature and can pay them out. But the government should not relieve anyone past what is legally available.

I’m inclined to agree, this kind of special treatment is fairly ridiculous, depositors in other bank failures with funds over FDIC limits have to wait for fire sales to recover, which can take years in some cases. I’m not sure exactly what Yellen is proposing (I only subscribe to print FT so no access), but it seems like special treatment for the well connected on Sandhill Road.

[deleted]

Re: Yellen says government will help SVB depositors but rules out bailout

#72

Post by dap » Sun, Mar 12, 2023, 2:10 PM UTC

NotACop182 wrote: post #13

sithlord wrote: post #7

This actually makes a ton of sense, lets not forget that a bailout in this term is really pointing towards saving the bank itself, and its shareholders. There is inherent risk in equity investments, and it likely should have to suffer for its poor decisions. But when it comes to depositors, I think it makes a lot of sense to make them whole, especially in the case of SVB where the bank likely has pretty close to enou…

Did they help depositors that lost money in the last 500+ bank collapses? Why do they get special treatment? The government has laws and rules the depositors are insured up to 250k. Either they liquidate and everyone takes a hair cut. Or they wait till the bonds mature and can pay them out. But the government should not relieve anyone past what is legally available.

Not special treatment? The FDIC has been doing this for recent bank failures:

https://www.americanbanker.com/opinion/will-fdic-keep-protec...

Re: Yellen says government will help SVB depositors but rules out bailout

#73

Post by rtpg » Sun, Mar 12, 2023, 2:10 PM UTC

IG_Semmelweiss wrote: post #50

sithlord wrote: post #19

Earlier quoted context omitted.

My guess ( I havn't looked at is the last ones ) is that the majority of deposits were well under 250k, and that hundreds of thousands of jobs weren't on the line. Also, you are talking about a major banking collapse if people start thinking that their deposits aren't safe. (a lot of people will start pulling money, even if under 250k). There are so many irrational people out there... edit: I guess somewhere in what…

Thats not true. It was said elsewhere in HN thread and also in several articles online. The majority of avg deposits were NOT Only 3-7% of SVB accounts under FDIC limits. Edit: corrected to have specific languange

I think this is referring to other banks, not SVB’s special case.

Re: Yellen says government will help SVB depositors but rules out bailout

#74

Post by bradleyjg » Sun, Mar 12, 2023, 2:10 PM UTC

marvin wrote: post #20

This is exactly the statement that's required, given the confusion and irresponsible politicization of deposit insurance. Shareholders lose 100%, depositors get 100% of their deposits back. It's a simple situation, and the former point (as opposed to the solution during the GFC) counteracts moral hazard.

What politicization of deposit insurance? The amount of deposits that are insured have been capped since the program was put in place 90 years ago.

Making all depositors completely whole is not insurance. That was not a risk that premiums were paid for. It’s a government bailout.

Re: Yellen says government will help SVB depositors but rules out bailout

#75

Post by Overtonwindow » Sun, Mar 12, 2023, 2:10 PM UTC

Silicon Valley is so connected politically, and many in the government are so dependent upon silicon valley campaign money, that I will be surprised if SOME kind of bailout does not happen. The people can rant about it all they want, but at the end of the day a politicians first job is survival, and bailing out the money folks is about survival. The rest of the country be damned.

Re: Yellen says government will help SVB depositors but rules out bailout

#76

Post by somewhereoutth » Sun, Mar 12, 2023, 2:10 PM UTC

oceanplexian wrote: post #15

gonzo41 wrote: post #10

Earlier quoted context omitted.

SVB probably has enough assets to make most depositors largely whole, but it'll take time. Shareholders are going to wear a total loss. Which sucks for them but this is part of share market game. I suspect cooler heads will not prevail. And there will be much silliness Monday morning.

This keeps getting repeated, but no, they don’t have enough assets to make depositors whole. A bond that matures in 10 years does not make anyone whole. That’s like saying “I know I owe you money today, but don’t sweat it, I’ll get you the money in 10 years”. These arguments completely ignore the time value of money.

Exactly. Somebody has to eat the loss, maybe depositors, maybe the taxpayer.

And somewhere, someone (some many), was on the other end of those trades - or not on the other end of trades that should have been made, and has made a gain.

Re: Yellen says government will help SVB depositors but rules out bailout

#77

Post by kshacker » Sun, Mar 12, 2023, 2:11 PM UTC

NotACop182 wrote: post #13

sithlord wrote: post #7

This actually makes a ton of sense, lets not forget that a bailout in this term is really pointing towards saving the bank itself, and its shareholders. There is inherent risk in equity investments, and it likely should have to suffer for its poor decisions. But when it comes to depositors, I think it makes a lot of sense to make them whole, especially in the case of SVB where the bank likely has pretty close to enou…

Did they help depositors that lost money in the last 500+ bank collapses? Why do they get special treatment? The government has laws and rules the depositors are insured up to 250k. Either they liquidate and everyone takes a hair cut. Or they wait till the bonds mature and can pay them out. But the government should not relieve anyone past what is legally available.

We do not know what specifically they are going to do. Helping depositors may just mean expediting the recovery process even if there is a 10% haircut. It could mean something else. The government forced the sale of countrywide and other companies so this would be no different.

Also the term "too big to fail" comes to mind. Isolated risk vs systemic risk. Which one is it now? We can have opinions but Yellen may have more informed data about the gravity of the situation. It does make sense for governments to intervene in systemic risks such as this and covid.

Re: Yellen says government will help SVB depositors but rules out bailout

#78

Post by alecco » Sun, Mar 12, 2023, 2:11 PM UTC

Yellen was the 11th President of the Federal Reserve Bank of San Francisco [1]

Current president is her protégé [2]

Greg Becker (SVB CEO & president) was in SF Fed board of directors [3]

"It's a big club, and you ain't in it."

[1] https://en.wikipedia.org/wiki/Janet_Yellen

[1] https://en.wikipedia.org/wiki/Mary_C._Daly

[2] https://www.reuters.com/markets/us/ceo-failed-silicon-valley...

Re: Yellen says government will help SVB depositors but rules out bailout

#79

Post by skwirl » Sun, Mar 12, 2023, 2:11 PM UTC

koolba wrote: post #59

sithlord wrote: post #7

This actually makes a ton of sense, lets not forget that a bailout in this term is really pointing towards saving the bank itself, and its shareholders. There is inherent risk in equity investments, and it likely should have to suffer for its poor decisions. But when it comes to depositors, I think it makes a lot of sense to make them whole, especially in the case of SVB where the bank likely has pretty close to enou…

> But when it comes to depositors, I think it makes a lot of sense to make them whole, especially in the case of SVB where the bank likely has pretty close to enough assets to cover the liabilities (deposits), but its tied up in such long term investments that it could take a long time to get it out. If anybody gets an extra penny more than $250K from the Feds than that is by definition a bailout. > But moreso, when…

> FDIC insurance is not infinite. Not understanding that is no fault of the rest of society.

I hope you realize FDIC insurance isn’t even guaranteed to be $250k. The FDIC is funded by member fees and can only cover a very small amount of “insured” losses. If it goes beyond that, depositors would need a bailout.

Re: Yellen says government will help SVB depositors but rules out bailout

#80

Post by npalli » Sun, Mar 12, 2023, 2:11 PM UTC

marvin wrote: post #20

This is exactly the statement that's required, given the confusion and irresponsible politicization of deposit insurance. Shareholders lose 100%, depositors get 100% of their deposits back. It's a simple situation, and the former point (as opposed to the solution during the GFC) counteracts moral hazard.

I don't think she is saying (as of the article) that depositors will get 100% back. They will get help but could be with a haircut.