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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

#111

Post by rib3ye »

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…

Don’t you think there is a huge difference between the bank shareholders getting bailed out and depositors getting bailed out?

Let’s think about the risk of “morale hazard” in these case: Bail out the shareholders: we can throw more money into the stock and never lose money! Risk free returns, I better pump this bubble up! Bail out depositors: I feel safe having my money in a reputable bank! I can operate my business and pay vendors/employees, I can keep doing my job without interruption.

Bailing out one group makes them greedy, bailing out the other makes them productive.

This is not old testament judgement, this is a financial war and our gov has to use every appropriate tool to fight it.

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

#112

Post by sithlord »

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 am stating for prior fails, the number from SVB was that only ~3% were insured. Which was my point, that in the past, there wern't as many e(a)ffected (and they (uninsured) could have received special treatment for all I know).

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

#113

Post by zamfi »

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…

No one here actually reading the thread, all assuming you’re talking about SVB and not (as the parent says) previous bank failures.

To address your actual point: we don’t know whether WaMu depositors had a lot in uninsured accounts, probably not as much as SVB, but we do know that all depositors were made whole when JP Morgan Chase bought the bank — from assets WaMu already had, not the FDIC’s pool. Even senior creditors received some amount back!

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

#114

Post by remote_phone »

bradleyjg wrote: post #61

Bailing out the depositors is still a bailout.

The only depositors at risk at startups. All regular people are made whole. And they are getting ~50% of their holdings in the next week. Why are VCs clambering for a bailout? The system works as designed. No need to do anything else above and beyond.

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

#115

Post by mytailorisrich »

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…

It may make sense to prevent many companies from going under but for the long term good of Silicon Valley it should sting.

If all depositors are made whole at no cost to them then there is no incentive to avoid a repeat.

Remember that those depositors are not random members in the public, their are insiders of the SV microcosm.

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

#116

Post by UncleEntity »

morelisp wrote: post #40
bastian wrote: post #9

Earlier quoted context omitted.

I am not sure why you are so bitter but it’s important do understand that all you do is create more hate with comments like this. The only thing anyone is asking for is to protect the deposits of the people who bank(ed) with SVB. That is it.

Founders drained the whole Bay Area of anything culturally interesting, tech companies all just did massive layoffs, years of shouting "learn to code" at every other profession, the world's art output fed into an AI meat grinder with "whoops sorry but also it's legally okay" to enrich a few VCs, but you can't imagine why someone might be bitter about demands to compensate their business mistakes from the public purse…

> Founders drained the whole Bay Area of anything culturally interesting…

I grew up in the Bay Area in the 70s and 80s and it wasn’t all that culturally interesting back then either.

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

#117

Post by fma »

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.

If depositors get 100% back (I assume the government pays the difference between selling SBV assets & the deposits)...then what's the purpose of saying "FDIC Insured up to $250k"? It's a moot then isn't it? I don't need to go through the hassle of distributing my money anymore?

Edit: I read the article. Yellen says "“But we are concerned about depositors, and we’re focused on trying to meet their needs.”

She says NOTHING about depositors getting 100% back. It could be that they get the share of deposits back faster.

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

#118

Post by ericmay »

waboremo wrote: post #83
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…

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...

Average or median?

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

#119

Post by CPLX »

bradleyjg wrote: post #85
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.

There’s a lot of ways they can just do whatever they want.

It could be as simple as the fed purchasing a large long dated convertible note with very favorable terms from the new entity created for receivership and then turning around and selling that entity to another bank, now that the balance sheet is fine. Or the conceptual equivalent.

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

#120

Post by rib3ye »

skwirl wrote: post #79
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 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.

Additionally, it sounds like a total depositor “bailout” is just float until the receivership can unload the banks assets
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