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Yellen says government will help SVB depositors but rules out bailout

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

#81

Post by [deleted] »

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…

[deleted]

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

#82

Post by belter »

gonzo41 wrote: post #66
greatpostman wrote: post #32

It’s still not clear to me, are they making the depositors whole?

Yes, it's share holders who will realize the loss. Anyone owed money by the bank, ie depositors is now in a line to be paid as the FDIC sells everything and pays out the obligations.

Paid out to the limit set up by FDIC rules you mean?

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

#83

Post by waboremo »

sithlord wrote: post #19
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.

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…

BusinessInsider[1] has a different view:

>About 37,000 customers accounted for nearly $157 billion or 74% of the bank's assets with an average account size of over $4 million

So it seems the opposite is almost true, because the accounts are valued so high with generally more flexible account holders, they're able to move swiftly

[1]: https://www.businessinsider.com/how-silicon-valley-bank-impl...

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

#84

Post by Ekaros »

wheelerof4te wrote: post #63
nabla9 wrote: post #35

Earlier quoted context omitted.

Because there was a systemic risks. You let one bank collapse, OK. If the collapse causes other banks to collapse then it's bad. When WalMart, Costco can't transfer money to fill shelves, people go hungry. When people can't get their wages, they go hungry.

Then, at least be fair and nationalize the big banks. There's no point pretending that the large banks are "private" if they are subjected to some special rules. People put their money there willingly, no one forced them to. Let them all feel the joys of "free market capitalism".

Or we could just go with CBDC give everyone government paid 0-interest account at central bank. With zero risk to lose the money. As it could truly be cash equivalent while being there.

Then if people want more they could get account somewhere else, but fully carry the risks from that.

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

#85

Post by bradleyjg »

greatpostman wrote: post #32

It’s still not clear to me, are they making the depositors whole?

Yellen is suggesting they will, but there’s no details yet.

I don’t believe the FDIC has the legal authority to do so, but it’s highly possible that the treasury and/or Federal Reserve can cobble together some ad hoc legal justification.

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

#86

Post by vishnugupta »

“Let me be clear that during the financial crisis, there were investors and owners of systemic large banks that were bailed out . . . and the reforms that have been put in place means we are not going to do that again,” Yellen said.

“But we are concerned about depositors, and we’re focused on trying to meet their needs.”

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

#87

Post by koolba »

rtpg wrote: post #67
koolba wrote: post #59

Earlier quoted context omitted.

> 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 think we should really not forget that SVB hit duration risk on their assets that is almost definitionally not an issue for the FDIC. This isn’t “bank fell apart due to bad loans” this is “bank fell apart because money is locked away for 10 years but is basically guaranteed”. Basically no risk to taxpayers!

> This isn’t “bank fell apart due to bad loans” this is “bank fell apart because money is locked away for 10 years but is basically guaranteed”.

They fell apart due to greed. Not being satisfied with low short term rates that matched their short term liabilities.

They gambled on longer durations and got burned. It’s not the tax payers responsibility to cover their gambling losses.

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

#88

Post by anamexis »

MomoXenosaga wrote: post #44
roseway4 wrote: post #34

Earlier quoted context omitted.

Yes, in the case of large retail banks, the government did help. In 2008, the federal government purchased stock in several banks in order to recapitalize them. One could argue this was a starker example of moral hazard than letting the bank fail, but making depositors whole.

Which is why you should always bank at a "too big to fail" institution. Why America has 4000 banks is beyond me. In my country they all consolidated in the 60s and 70s into a half a dozen giants.

That's all well and good until a "too big to fail" institution fails.

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

#89

Post by gitfan86 »

remote_phone wrote: post #54

The truth is VCs are terrified their investments in their startups are going to go to 0. That’s why the biggest most vocal people are VCs talking about this. So they are framing the “we need to make depositors whole” as if they care about small business when really they are just talking their own book. The real solution is that VCs should give a loan to all their startups so that they can make payroll. Isn’t that the…

Exactly, none of them are pointing out what percentage of the money that is currently tied up was going to be sent out as payroll for people making under 100k/year over the next 30 days.

If the Fed came out and said "We have reviewed all the depositors and their situations and we are funding 100% of payroll and basic operating costs needs for the next 90 days" The VCs would immediately come up with another reason why ALL depositors need to be made whole immediately.

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

#90

Post by giaour »

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

Where did the 3-7% of accounts number come from?

According to [0], regulatory filings disclosed that 85% of deposits (not accounts) were uninsured.

[0]: https://time.com/6262009/silicon-valley-bank-deposit-insuran...

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