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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

#271

Post by spamizbad »

martythemaniak wrote: post #166
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…

This whole saga has exposed the shocking financial illiteracy in this industry. There are laws and procedures about how to handle the situation. Banks fail all the time and the FDIC disposes of them all the time. Depositors will get their insured money on monday. The FDIC will then dispose of all the banks assets and return the proceeds to its creditors, that is depositors. Calling for the government to guarantee all…

I think there’s a shocking lack of political literacy at work here because any action that could be perceived as a bailout by a layperson will be an albatross around the neck of any politician that supports such measures. Several of the VCs who spent Q4 of last year gloating about layoffs are now saying the sky is falling - so they aren’t exactly a sympathetic group. You can belly-ache about populism or whatever but that’s why you’re seeing tepid responses from Washington.

For the record I hope SVB gets taken over and depositors are made whole quickly but I think as an industry we are overestimating our political capital.

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

#273

Post by senttoschool »

NotACop182 wrote: post #238
senttoschool wrote: post #208

Earlier quoted context omitted.

I think the depositors should get a bit of a haircut if selling the assets don’t cover all deposits. For example, 5%. If it’s more than 5%, then the government steps in and pay for the rest. 5% seems like the right balance between the two extremes. Companies and people should pay a small penalty. At the same time, we shouldn’t rock the financial system further. We need to have confidence in the system. After this, th…

Government steps in and pays the rest? No, change the laws if this is the case. Why special treatment to help out but in any other scenario where tragic financial mishaps of regular folks you are given a pat on the shoulder and “good luck”. Pretty sure they have a write off tax wise for any additional loses.

A bailout is within the law if that’s what they want to do.

It’s just a matter of whether you think the ROI is worth it.

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

#274

Post by bradleyjg »

avianlyric wrote: post #188
Edmond wrote: post #152

Earlier quoted context omitted.

>The government will use the bank assets to make customers, not owners, whole. The reason SVB is in receivership is because they don't actually have the ability to make all their depositors whole. Any scenario where uninsured depositors end up with all their money back is likely to be a bailout.

> The reason SVB is in receivership is because they don't actually have the ability to make all their depositors whole. No, SVB is in receivership because they can make their depositors whole right now . They have most of the assets, it’s just that liquidating them immediately would result in losses far greater than SVB can afford, but that’s what a bank run demands. The feds can take over, make depositors whole now…

This is not a typical liquidity squeeze. The scenario you are talking about is where liquidating some assets all at once would crash the market and so to capture the value a sale needs to be made over time.

The treasury and agency mbs markets are plenty deep enough to handle this liquidation. The issue is that the value of the holdings have dropped. That’s a solvency issue.

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

#275

Post by hirako2000 »

fullshark wrote: post #164
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…

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.

Well put, can pull the "capitalism" at the expense of few to many yet "socialist" when conductive for mostly a few, but not many times.

I still think they will get away with bailing out several banks that will otherwise fall hence the system. Via means that adhere to whatever rules were put in place.

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

#276

Post by ericd »

locallost wrote: post #254
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…

I don't get this comment at all. The post you're replying to literally says the bank has more assets than 250k per client. I read somewhere the insured amount is around $8B whereas the bank's assets are at least 20x that. Where should that money go if every client gets capped at 250k?

>then distribute the rest pro rata based upon closing balance from when the fed's took over.

The second part of that sentence addresses your question.

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

#277

Post by 206lol »

bradleyjg wrote: post #136
chewbacha wrote: post #129

Earlier quoted context omitted.

It’s an insurance payout, not a bailout. If someone totals my car the insurance doesn’t say “well, that’s the risk of owning a car” and pay nothing. Insurance exists for these scenarios.

The insurance had an explicit policy limit. That’s what the premiums were based on. Up to $250k per depositor isn’t a bailout. A penny above that is.

It's likely SVB has assets in excess of $250k per account. So if they are sold, I'd expect depositors to get at least $250k and possibly more, depending on how those assets are sold.

It only becomes a bailout if the government pays beyond the sale of svb's assets.

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

#278

Post by bentlegen »

gerad wrote: post #199
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…

I just don’t understand why folks on the internet are so passionate about the depositors being hit by this. In terms of avoiding moral hazard they are about as far down the list as possible, and bankruptcy law supports that. First stock holders get wiped out (common then preferred), then debt holders (folks who have lent money to SVB won’t get their money back), only then would it hit depositors - and in the case of…

The C-suite paid themselves millions of dollars via bonuses and stock sales right before insolvency. Executives got paid. What’s to stop future bankers from running the same playbook? (We can debate that this the stock sale was premeditated/signaled months in advance, but the stock had already declined 80% from its 2021 peak and they surely knew about the tough liquidity position months ago — external observers drew attention to this back in January).

Note, one of the SVB executives was the former Lehman Brothers CFO in 2007, just one year prior to that institution’s collapse in 2008. What did he learn, exactly, besides how to get out in time?

https://www.foxbusiness.com/economy/silicon-valley-bank-exec...

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

#279

Post by alpineidyll3 »

bradleyjg wrote: post #256
sneak wrote: post #183

Earlier quoted context omitted.

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.

Do you think the $250,000 limit was an accident? Someone tripped on a keyboard and that’s how the provision capping the insured amount came to be in the law?

Since it was the result of single moment in time 100 years ago and never adjusted, yes it was basically an accident of history.

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

#280

Post by mark_l_watson »

ajross wrote: post #162
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…

> Generic screeching against the tech world There's some of this, for sure. But there's an equivalent screeching from the tech finance world[1] demanding a full government guarantee. That ain't happening, and I think it's appropriate for the fed to make that clear. FWIW: the dirty secret here is likely that there's a bunch of internal dealing going on as regards SVB. They were The Startup Bank for some reason, it's n…

I agree with you. I listened to the usually fantastic All In Podcast yesterday. Usually, I find the content very interesting but yesterday I felt like all four of them were all about protecting their little world.

To me, it sounds like SVB cut a lot of corners and SV customers enjoyed advantages of some of these cut corners.

I am deeply sympathetic to people who may not get paid for a while, or have their startups go under. That said, there are precise laws covering what the FDIC can and can not do. I think the general public is tired of very connected people and companies getting special treatment.

There is certainly a danger of contagion, of regional banks taking a hit, by being compared to SVB, but that does not change my opinion, and I certainly will not stop doing business with two relatively small Credit Unions in my state.

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