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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

#141

Post by 300bps »

paganel wrote: post #104
walnutclosefarm wrote: post #98

I think Yellen is signalling the right approach, frankly. First, the balance between the bank's assets (its loans and the investments it made with depositors money, plus the bank's capital) and its liabilities, is such that SVB has enough holdings to cover nearly all of its deposits. The banks capital (that is its equity, and subordinated debt) should all go toward making depositors whole. That's what bank capital is…

> For the Feds to put up that money as part of a deal to sell SVBs portfolio intact to another bank, makes good sense to me Honest question: why? I.e. why can't the capitalists invested in this business absorb the reasonable haircut? (I assume it's "reasonable" based on the information we have been provided with until now). Depositors (especially those holding more than 250k) were also investors, they were getting ba…

The “capitalists” invested in this business will get $0.

Look at their stock chart. Heck, look at what their bonds are paying.

There will very likely be nothing left for the “capitalists” after depositors are paid.

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

#142

Post by UncleEntity »

marckhoury wrote: post #109
jmclnx wrote: post #24

Says nothing real. For instance, will the rule for uninsured deposits be followed ? Or will there be a bailout for people with over $250,000 in deposits ? Seems all it says is "there will be no bailout but there will be a bailout". If people with over 250,000 in deposits are covered, the once again the the rich is allowed to avoid all risks for bad decisions.

> If people with over 250,000 in deposits are covered, the once again the the rich is allowed to avoid all risks for bad decisions. I feel like putting your money in a bank should not be considered an obviously bad decision. The risk profile your bank takes on with your deposits is largely opaque to you, and it’s not feasible to expect every depositor to do due diligence on it. Even if you understood their portfolio…

If you want the taxpayers to assume the risks maybe don’t allow the CEO to lobby to be excepted from the regulations which prevent this risk?

This whole situation is dodgy and I’m the last person to be calling for government intervention.

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

#143

Post by koolba »

rib3ye wrote: post #111
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…

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…

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

Of course they're different. But they're both bail outs.

If my house burns down and I have $250K of home owners insurance, do I get the rest covered by the Feds?

> 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.

SVB, and banks in general, offer incentives for people to deposit money. It can be anything from account bonuses to non-monetary perks like access to other sources of capital. To say that depositors had nothing to do with the losses is extremely naive.

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

They're both greedy. Or stupid. Or both. Either way, no hand outs.

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

The government does work solely for the depositors or investors of SVB. It works for all of us and we've established rules for when it is authorized to step in and provide both liquidity and direct bail outs.

Romanticizing a specific customer base does not earn them special treatment.

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

#144

Post by macintux »

hanoz wrote: post #124
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…

Bailing out the owners is obviously completely out of the question, but why bail out the depositors beyond the guarantees they knew they were getting at the time? Funny how language is being used to frame all this. For depositors it's made whole , not bailed out , when of course it's no less a bail out.

Because businesses need to be able to pay their employees, because the banking system as a whole relies on trust to function.

And because we're not really bailing out depositors. The FDIC is just doing its best to make sure depositors take precedence over bank shareholders, which is as it should be.

Sure, you could let Roku lose a half billion dollars, but it's not their fault SVB couldn't meet its obligations. They didn't invest in the bank. Placing your money in a bank should not be a gamble.

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

#146

Post by lotsofpulp »

manuelabeledo wrote: post #132

I see a lot of unexpected saltiness and clear misconceptions in any thread about SVB. “Depositors shouldn’t get anything beyond the insured $250,000”. Then what do we do with the billions in remaining assets? Appropriate them, and leave small and mid businesses hanged to dry? “This is a bailout”. It would be if shareholders were to get their money back, which doesn’t seem likely. The government will use the bank asse…

> “Depositors shouldn’t get anything beyond the insured $250,000”. Then what do we do with the billions in remaining assets? Appropriate them, and leave small and mid businesses hanged to dry?

I think the common sentiment is depositors should not get any more than whatever the remaining assets are worth.

And I think the prominent people asking the government to bailout depositors are worried about only getting 75% of their deposits back, because the remaining assets might not cover all of the deposits, or it might take a while to recover the deposits.

And that is what people are against.

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

#147

Post by synu »

belter wrote: post #60

The first step would be to stop calling them Depositors. They are not and were never Depositors. That is what you have deposit boxes for...You do not have money at the Bank. You loaned money to the Bank. That is why they pay you interest on it...

Isn't that literally the definition of a bank depositor?

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

#148

Post by fwlr »

Eh, the depositors aren’t totally blameless here. On Thursday they conspired to perform a huge bank run on SVB, on Friday they succeeded, and on Saturday they were demanding the government and taxpayers make them whole by Monday. They deserve to get their money back and they eventually will once SVB’s assets are liquidated. But that’s not good enough, they want it now, and they won’t hesitate to make you pay for the expedience. I don’t like that.

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

#149

Post by booleandilemma »

Waterluvian wrote: post #21
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.

The law is clear on the priority of claims. You can get a quick overview at the bottom of this page: https://www.fdic.gov/resources/resolutions/bank-failures/fai... It makes sense that they’ll make depositors whole before even thinking about the rest. From the top of that page: “ All depositors will have full access to their insured deposits no later than Monday morning, March 13, 2023. The FDIC will pay uninsured de…

More than 85% of Silicon Valley's Bank's Deposits Were Not Insured.

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

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