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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

#351

Post by bradleyjg »

206lol wrote: post #277
bradleyjg wrote: post #136

Earlier quoted context omitted.

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.

Yep, we are on the same page. No issue with an orderly, open market asset sale and pro rata distribution. That’s how the system is supposed to work.

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

#352

Post by lotsofpulp »

rib3ye wrote: post #293
lotsofpulp wrote: post #191

Earlier quoted context omitted.

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.

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

Says who? Why do all the signs in a bank specify $250k then?

What if the 22 year olds also thought that when they borrowed money to get their degree?

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

#353

Post by tqi »

jmull wrote: post #260
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…

If you're volunteering to give or invest a few billion into the SVB receivership deal, then go right ahead. Please leave me and my tax dollars out of it. I'm not just hard-hearted, BTW. Unlimited depositor insurance is an awful idea.

ooc why is unlimited deposit insurance a bad idea? A quick Google search didn't have many results, except some brief articles about section 343 of Dodd Frank (which itself seemed limited in scope).

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

#354

Post by LatteLazy »

Kephael wrote: post #313
LatteLazy wrote: post #234

I 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.

It will be interesting to see who else is struggling as I doubt svb are the only bank that went long duration to try and eek out some yield.

Here in the UK there was a pretty explicit choice to watch medium sized (still huge for a mere human like me) banks fail but to bail out large ones. I guess that's fine from a short term, pragmatic sense. Not sure what it does for long term competition but c'est la vie.

I believe bailouts are usually kept secret as telling anyone (a) makes banks less likely to ask for one and (b) then causes a run pushing up the cost of the bailout. The conspiracy theorist in me wonders who has been given a below-inflation "loan"...

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

#355

Post by daniel-thompson »

fma wrote: post #117
marvin wrote: post #20

This is exactly the statement that's required, given the confusion and irresponsible politicization of deposit insurance. Shareholders lose 100%, depositors get 100% of their deposits back. It's a simple situation, and the former point (as opposed to the solution during the GFC) counteracts moral hazard.

If depositors get 100% back (I assume the government pays the difference between selling SBV assets & the deposits)...then what's the purpose of saying "FDIC Insured up to $250k"? It's a moot then isn't it? I don't need to go through the hassle of distributing my money anymore? Edit: I read the article. Yellen says "“But we are concerned about depositors, and we’re focused on trying to meet their needs.” She says NOT…

> what's the purpose of saying "FDIC Insured up to $250k"

The FDIC guarantees up to $250k, but if additional assets are available beyond that, then those will be paid out to depositors as well. It's a floor, not a ceiling

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

#357

Post by jliptzin »

metalspot wrote: post #312
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…

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.

No one is going to touch a bank while people are literally lining up to withdraw all their money no matter what their asset book looks like

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

#358

Post by patientplatypus »

patientplatypus wrote: post #165

Does anyone have any hard numbers on the risk of potential contagion in the banking sector? This is a rather large institution to go bust, and there is some discussion that a large percentage of their portfolio is composed of members that are over the FDIC limit. I also don't know how the Treasury mismatch can be solved - do you just tell creditors to wait for the maturity of the 10 year bonds to withdraw their funds…

From the Face The Nation transcript -

MARGARET BRENNAN: For those depositors, about 85% of SVBs accounts were uninsured. And, as you were saying, a lot of different tech firms relied on them. Do you believe that depositors should be paid back in full? Will they?

SECRETARY YELLEN: Look, I'm not going to comment on the details of the situation at this point. I simply want to say that we're very aware of the problems that depositors will have, many of them are small businesses that employ people across the country. And of course, this is a significant concern, and working with regulators to try to address these concerns.

So that means (if the other numbers above are correct) that there should be approximately $150 billion in assets that are currently uninsured. The risk of contagion may be less than during the 2008 financial crisis if there is less counterparty risk (banks owing other banks assets and no one understanding who owns the underlying). There would be a problem to the extent that VC firms may go bust and this trickles up to hedge funds and larger institutions. That risk is hard to assess and asset holders have every incentive to claim that risk to be high.

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

#359

Post by niij »

belter wrote: post #82
gonzo41 wrote: post #66

Earlier quoted context omitted.

Yes, it's share holders who will realize the loss. Anyone owed money by the bank, ie depositors is now in a line to be paid as the FDIC sells everything and pays out the obligations.

Paid out to the limit set up by FDIC rules you mean?

The 250k FDIC limit is just what they guarantee. If the bank has enough assets left they will pay over the limit to make depositors as whole as possible. Plenty of information on this topic in threads over the last few days.

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

#360

Post by bentlegen »

grey-area wrote: post #321
bentlegen wrote: post #278

Earlier quoted context omitted.

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…

So to punish them, we need to punish depositors?!?

I didn’t say that? I asked, what’s to disincentivize executives if the Fed backstopped all depositors money, now and perhaps in perpetuity? (Forgive me if I misinterpreted your position here. I have also edited this post for clarity.)
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