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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

#211

Post by macintux »

luckylion wrote: post #206
macintux wrote: post #144

Earlier quoted context omitted.

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…

Why are you pretending that Roku would get $250k and not a cent more? They won't. The bank has plenty of assets, they'll take a 5% loss for their strategy of taking on counter party risk, not a 99% loss. Everyone is going to be able to pay their employees, unless they're looking for a reason not to.

I was replying primarily to this sentence.

> For depositors it's made whole, not bailed out, when of course it's no less a bail out.

It's not a bail out for depositors.

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

#212

Post by [deleted] »

rafael09ed wrote: post #186
a13n wrote: post #176

Earlier quoted context omitted.

This is short sighted. If the government doesn’t make depositors whole then people and companies all over the world lose trust in US banks and eventually US dollars. This is a federal problem. It makes sense to make depositors whole, they’re innocent here. It doesn’t make sense to make SVB whole for managing their risk poorly.

Maybe we should have a public banking option if the government's going to give everyone their money anyway

[deleted]

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

#213

Post by koolba »

nonethewiser wrote: post #193
koolba wrote: post #153

Earlier quoted context omitted.

> Then what do we do with the billions in remaining assets? Appropriate them, and leave small and mid businesses hanged to dry? Easy, pay out $250K per account, then distribute the rest pro rata based upon closing balance from when the fed's took over. If they have to wait because assets need to be liquidated then sucks to be them. I'm sure they can get their money faster if they agree to a haircut. > “This is a bail…

> Money to depositors for amounts greater than $250K is a bail out. They have no right to that money from the Feds. I’m surprised to hear this perspective. I think most people understand a bailout as cash injection. Not that you get more than what the government insures. If it were the latter then bailouts happen all the time without bank failures or FDIC takeovers (all transfer > 250k).

The $250K is the FDIC covered limit. Amounts greater than that are not insured by the Feds. If the bank fails, the Feds ensure that depositors get at least $250K per account.

If SVB is insolvent than customer deposits are not worth their full value. The phrase “making all depositors whole” would be the Feds covering the difference. Anything beyond the $250K per account would be money that they are not entitled to per US banking regulation.

> If it were the latter then bailouts happen all the time without bank failures or FDIC takeovers (all transfer > 250k).

This has nothing to with bank transfers. It’s about deposit insurance.

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

#214

Post by lotsofpulp »

a13n wrote: post #176
koolba wrote: post #153

Earlier quoted context omitted.

> Then what do we do with the billions in remaining assets? Appropriate them, and leave small and mid businesses hanged to dry? Easy, pay out $250K per account, then distribute the rest pro rata based upon closing balance from when the fed's took over. If they have to wait because assets need to be liquidated then sucks to be them. I'm sure they can get their money faster if they agree to a haircut. > “This is a bail…

This is short sighted. If the government doesn’t make depositors whole then people and companies all over the world lose trust in US banks and eventually US dollars. This is a federal problem. It makes sense to make depositors whole, they’re innocent here. It doesn’t make sense to make SVB whole for managing their risk poorly.

It does not make sense to let bank shareholders profit from having an implicit guarantee of federal taxpayer funded bailouts.

The bank’s owners have to pay $x for buying FDIC insurance of up to $250k per account per person. If it actually costs $y > $x to insure for more than $250k, then that is quite a windfall for the bank owners at the expense of federal taxpayers.

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

#216

Post by rib3ye »

koolba wrote: post #143
rib3ye wrote: post #111

Earlier quoted context omitted.

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…

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

Not on your home, no.

But if it were your factory and you were responsible for a respectable percentage of the workforce being able to put food on their tables, I would hope a gov entity step in and try to reduce friction for getting the factory back on its feet.

And again, that reduced friction doesn’t need to be a check to you, it could simply be forced asset sale.

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

#217

Post by bratbag »

Cyph0n wrote: post #172
fullshark wrote: post #164

Earlier quoted context omitted.

The reason is because there are countless scenarios in the US economic system, where people/businesses fail cause of no fault of their own, but they are told tough luck that's the free market at work cause these people are simply unconnected or their failure is deemed unimportant. It's why the finanical bailouts left a bitter taste for anyone paying attention, and why gov't action here is immediately scoffed at.

Exactly. Rules for thee but not for me.

Different rules for something that could risk systemic failure, more like.

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

#218

Post by martythemaniak »

version_five wrote: post #200

As others have said, if depositors are bailed out, it's a bailout. Pretending that changing the definition makes a difference is childish. Whatever the government decides to do, this makes the VC and startup industry look really weak and entitled, and knocks them down from risk takers building the future to the same status as a bunch of bankers looking for a handout. There was an opportunity here for VCs with lots of…

Indeed. The bank was trying to raise money and recapitalize itself several days before this and instead of investing, VCs panicked, told their portcos to withdraw immediately, and started a bank run.

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

#219

Post by criddell »

sneak wrote: post #183
tempsy wrote: post #170

Earlier quoted context omitted.

can’t people buy private insurance for their deposits above the $250k threshold? if you buy an expensive house or car you generally pay a lot more to insure that asset. not sure why people don’t think of buying insurance on their bank deposits in the same way if you find yourself in a situation where you need to hold much more than $250k in one account for whatever reason. But even if you’re an individual holding mil…

I am fairly sure that the FDIC does not want people to need private insurance for bank deposits. This is a big sign your banking system sucks and is expected to fail badly at least some of the time, the avoidance of which is why the FDIC exists. And, yes, opening ten checking accounts is difficult and inconvenient.

Then maybe banks should be required to have private insurance for accounts with balances above $250k? More conservative banks would pay very little for insurance while banks that take on more risk would pay more for insurance.

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

#220

Post by harles »

> “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.

The headline is misleading and much of the discussion I’m seeing is based on that. Looking at the quote, there’s no mention of whether or not depositors will be bailed out.

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