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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

#291

Post by a13n »

lotsofpulp wrote: post #214
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.

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.

I’m with you that we shouldn’t make a habit of spending taxpayer dollars to make depositors whole. We should have better regulation so this couldn’t have happened in the first place. Banks should be required to manage their risk better.

But in this particular instance taxpayers should want to invest in trust in US banks and dollars until regulation is corrected.

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

#292

Post by metalspot »

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.

no. absolutely not. these are smart greedy people playing the game for their own benefit. they knew the rules. if they lose they eat the losses just like anyone else.

it is all the bailouts and insider dealing that kill confidence in the dollar and the banking system. enforcing the rules increases confidence.

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

#293

Post by rib3ye »

lotsofpulp wrote: post #191
rib3ye wrote: post #160

Earlier quoted context omitted.

I guess that’s true if you are a Roku or a Roblox, but how can you say that about sub-50 person company still trying to find its footing?

The same thing people tell 22 year olds trying to find their footing who invested in the wrong degree.

Depositing money in a bank is not supposed to be an investment with associated risk.

Yes there may be an interest yield and services rendered, but these customers were not greedily looking for a sizable return.

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

#294

Post by dragontamer »

bratbag wrote: post #217
Cyph0n wrote: post #172

Earlier quoted context omitted.

Exactly. Rules for thee but not for me.

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

We literally have Dodd-Frank rules built up over the last 15 years to prevent these things from becoming a systemic failure.

I get that people are still squeamish about 2008. But our banking system is quite different today compared to back then. We built up these rules so that we wouldn't have to bailout banks in these situations anymore. That's what the entire damn point was.

If it doesn't work, then it doesn't work. But I for one am more than willing to test out these rules... at least for the next few weeks... to see if they actually work. If they don't work, then we strengthen our regulations over the next 10 years. If they do work, then... success.

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We absolutely shouldn't just hit the bailout button before understanding this problem. 2008 + Dodd Frank was supposed to prevent this from being a systemic cataclysm.

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What probably needs to happen is for Thursday's bank run to be undone. Issue a clawback so that the $46 Billion that escaped on Thursday and punish those who bankrun / collapsed the bank in a panicky stampede.

That's far, far more fair than a bailout. Redistribute the money in a more fair way, but accept the risk that SIVB made for itself and its community.

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

#295

Post by tempsy »

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.

i can open a bank account in 2 minutes on my phone

it certainly isn’t alone an excuse if you are wealthy enough to even worry about the limit.

most wealthy people probably have dozens of accounts for this reason alone. I read an article just yesterday about how Giannis (NBA star) opened 50 bank accounts to put $250k each years ago.

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

#296

Post by belter »

synu wrote: post #147
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?

Yes in the world of Finance, but the word has a different meaning, in the mind of said Depositors...The word is used by Government and Banks, as a misdirection into a false sense of security.

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

#297

Post by nerdponx »

bentlegen wrote: post #278
gerad wrote: post #199

Earlier quoted context omitted.

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…

I don't know if there is any regulatory authority to do this, but I think those executives should have their bonuses clawed back to pay depositors.

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

#298

Post by Vespasian »

baq wrote: post #224
avianlyric wrote: post #188

Earlier quoted context omitted.

> 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…

By now all the liquid assets are already sold. The question is what about the loan book. The most interesting development would be FDIC making offers to the top 5 banks which they can’t refuse, which is what I’m personally hoping for.

Can't the federal government simply take the long term t-bills directly and "close" them now at theoretical face value + interest.

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

#299

Post by hyperpape »

komali2 wrote: post #180
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.

This seems to be a core argument for those in opposition to shareholders getting liquidated bank assets vs depositors, but I don't really understand it because it seems to be kind of arbitrary. So there's fdic insurance, that's nice, but why does that mean anything regarding whether depositors or investors should be made whole first? The more important and real question is which option has what outcomes in terms of f…

FDIC insurance covers protecting depositors if a bank fails. I don’t see how you could interpret that as allowing anyone to give money to investors.

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

#300

Post by thesimon »

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…

> If depositors aren’t protected, then it’s going to have a lot of downstream impacts

But doesn't that hold true for basically every situation where private companies lose money?

If my employer goes bust, then there is also downstream impact. FAANG laying off workers also has a lot of downstream impact.

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