If depositors take a haircut, what incentives could smaller banks offer in order to remain competitive with GSIBs for business deposits? Higher rates seem like it would just increase risk.
Yellen says government will help SVB depositors but rules out bailout
311–320 of 1001 posts
Re: Yellen says government will help SVB depositors but rules out bailout
#312Earlier 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…
bull. shit. if their assets actually could be liquidated for full cover over time than any other bank with plenty of reserves would be happy to buy them. that didn't happen, so we know for sure their assets are not worth what they claim on any timeline.
Re: Yellen says government will help SVB depositors but rules out bailout
#313I have no horse in this race but... The US has spent the last 15 years printing money to bailout mortgage holders. So no one who has had a mortgage or sold a house since 2008 can complain about a bailout, since they have received one...
Funny thing is, part of why SVB blew themselves up was they bought a bunch of long term mortgage backed securities paying low rates so now those securities have lost a ton of value if they were to liquidate them (which the FDIC will be doing shortly).
But I don't think the Fed engaging in QE constitutes a bailout.
Re: Yellen says government will help SVB depositors but rules out bailout
#314I 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…
Perhaps I can address your point about “generic screeching” against the tech world, by noting that the criticism here is often specific and direct. Not generic. The usual suspects have been trying to frame it in terms of the regular old startup workers that will be affected. But what about these entrepreneurs, the taxi drivers who were completely fucked by the onslaught of Uber and Lyft using financial engineering to…
I agree with you, except for the comment about Libertarians. Let me assure you, as a member of the Libertarian Party, that we don’t in general like or support government bailout of special interests.
I 100% agree with you about the chutzpah level being really annoying! I also like your comments about the groups of workers adversely affected in the past.
Re: Yellen says government will help SVB depositors but rules out bailout
#315Earlier 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…
[deleted]
Re: Yellen says government will help SVB depositors but rules out bailout
#316There’s a theme of NEVER AGAIN comments in these SVB posts. Harkening back to 2008 financial crisis. Doing your best to make depositors whole (maybe not 100%, but as much as possible) is not a bailout ala 2008. It’s generally not very controversial financial policy that prevents a financial contagion like 1929. No 10 person company is going to split their 2.5 mil 10 ways to get insurance. And they’re not going to hav…
It’s generally not very controversial financial policy that prevents a financial contagion like 1929.
A law was put in place in 1933 with a limit. If it didn’t have a limit, we wouldn’t be having this discussion.
Where were all these billionaires and VCs any time prior to this calling for uncapped FDIC insurance? This is special pleading.
Re: Yellen says government will help SVB depositors but rules out bailout
#317I 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…
Depositors are protected exactly as any other depositors and there are solutions to the protection ceiling. Like insured cash sweep.
That VCs forced the small companies to operate in less safe way and gave them bad advice is 100% fault of these. I do not know why it was so, but this really seems like the case of "we want benefits of minimal regulation and getting better protection then everyone else gets from the goverment".
It does rubs people wrong when you are all about disruption and regulation bad, but first thing you do in case of failure is governmental bail out for large accounts.
Re: Yellen says government will help SVB depositors but rules out bailout
#318Earlier 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…
It is completely insane to allow innocent depositors to lose their money especially when the government clearly would have no problem coming up with the funds to backstop depositors since this is an isolated incident. This bank being located in a tech hotspot is incidental and I am sure some non-techies are swept up in this as well. Imagine a 70 year old woman who just lost her husband and sold her house to downsize…
It's 250,000 per institution. Just don't hold more than that much in a non-system critical bank, spread it out. If you do that you're 100% safe.
Re: Yellen says government will help SVB depositors but rules out bailout
#319Earlier 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?
The salty commenters think it should go to them or the govt but won’t say it out loud lol.
Re: Yellen says government will help SVB depositors but rules out bailout
#320I 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.
Because if a normal business goes bust leaving customers out of pocket, it’s usually only a small percent of the customers “wealth” (and often insurance will cover it).
If someone’s bank goes bust they can loose a much larger proportion of their wealth. Often causing them to go bust, causing more bankruptcies and job losses.
Governments act as insurer of last resort for most bank defaults, because the confidence of the banking system and money is integral to the countries existence.