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Fed and FDIC discussing backstop to make SVB depositors whole, stem contagion

cnbc.com

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Re: Fed and FDIC discussing backstop to make SVB depositors whole, stem contagion

#41

Post by comte7092 »

ivalm wrote: post #32
comte7092 wrote: post #10

Earlier quoted context omitted.

> why should taxpayers cover their losses It doesn’t follow that there will be any losses to cover. The government can take ownership of the assets of the bank and won’t be stuck having to sell them at a loss.

If you mark to market the assets are less than liabilities. It’s unlikely government will keep to maturity a bunch of 30 year mortgages. At the same time, we should just make FDIC limit infinite and make depositors whole.

The fed already has billions of dollars worth of mortgage backed securities on its balance sheet right now.

Re: Fed and FDIC discussing backstop to make SVB depositors whole, stem contagion

#42

Post by peyton »

machina_ex_deus wrote: post #38

If this happens, banks have officially lost all their legitimacy and all banks should have their priviledges revoked. There is absolutely no reason banks should be given the priviledge of being the only way to deposit money, while playing with those customers money and simultaneously having zero risk on that money. These banks are getting 10 to 1 leverage, from me, captive customer. Break their monopoly. I want an ac…

It’s ridiculous how much bank fuckery we’re forced to put up with. I’m not splitting deposits across 50 banks while middlemen make money.

Re: Fed and FDIC discussing backstop to make SVB depositors whole, stem contagion

#43

Post by labrador »

Vecr wrote: post #40
labrador wrote: post #26

As a Independent non-aligned American voter, I have to ask myself did Peter Thiel deliberately cause a run on SVB? Did Elon Musk buy Twitter to destroy it as an effective platform for Democratic organizing? Is Musk coordinating with Tucker Carlson to push propaganda that Jan 6 was merely constitutionally protected protest? And are House Republicans coordinating with Thiel, Musk and Tucker Carlson over the debt ceilin…

Only the Jan 6 protest outside the in-use government buildings was constitutionally protected. As far as I know the congress does not have to allow random people to disturb them while in session and can enforce that. In general, it's safe for the police to do so, I think they should arrest all rioters on basic misdemeanor charges, do a bit of investigation, and then let those go who did not do anything. Obviously in…

There's a big effort on the right, including by Musk, to rewrite history and portray them as political prisoners ahead of the 2024 election.

Re: Fed and FDIC discussing backstop to make SVB depositors whole, stem contagion

#44

Post by tome »

grogenaut wrote: post #24
tome wrote: post #9

Earlier quoted context omitted.

The problem is that continuing to bail out depositors means that they'll never do due diligence on their banks and therefore bank executives will keep trying risky strategies that increase their bonuses.

what kind of due diligence are you imagining that I, a depositor with under 250k should / am doing on a bank? What do you believe, I, as a single depositor of 250k CAN DO to audit a bank or otherwise make sure it's safe for my deposit?

Oh, when I say "bail out" I mean bail out of depositors with more than $250k of deposits, less than $250k already being well-understood to be covered. You, as a single depositor of $250k are fine. If you have $1m then you spread it out amongst 4 banks and are fine. If you have more then you'd better use your own nous or hire a financial advisor.

Re: Fed and FDIC discussing backstop to make SVB depositors whole, stem contagion

#45

Post by hanklazard »

frgtpsswrdlame wrote: post #8
hanklazard wrote: post #6

Earlier quoted context omitted.

This is referring specifically to deposits not equity or corporate bond holders, management, etc. The depositors are not making a sizable returns, they’re just wanting to keep their money in a bank account.

Why should it matter whether it's deposits or equity or bonds? The instrument is irrelevant to the logic - if I have to back it on the downside then I want a piece of the upside too.

Businesses aren't making upside by putting their working capital in a bank checking account. Mine was making like 0.1%, it's negligible. I would be happy to socialize that upside for higher limits on deposit protection.

Equity and bond holders are a totally different group of people, they are investors in that bank. They are explicitly taking risk on the bank as an investment, not as a basic piece of their financial plumbing.

Re: Fed and FDIC discussing backstop to make SVB depositors whole, stem contagion

#46

Post by fach »

machina_ex_deus wrote: post #38

If this happens, banks have officially lost all their legitimacy and all banks should have their priviledges revoked. There is absolutely no reason banks should be given the priviledge of being the only way to deposit money, while playing with those customers money and simultaneously having zero risk on that money. These banks are getting 10 to 1 leverage, from me, captive customer. Break their monopoly. I want an ac…

If the Fed provides a backstop for uninsured deposits, all banks have lost their legitimacy? They are not bailing out shareholders.

Re: Fed and FDIC discussing backstop to make SVB depositors whole, stem contagion

#47

Post by bedhead »

jimt222 wrote: post #7

A.k.a. “moral hazard”. When people take financial risks (such as holding more than $250K in FDIC insured bank account), why should taxpayers cover their losses?

In what bizarro world should holding cash in a perfectly legitimate bank to earn a negligible interest rate be considered "taking a financial risk" on par with like buying crypto or something???

Re: Fed and FDIC discussing backstop to make SVB depositors whole, stem contagion

#48

Post by blockwriter »

grogenaut wrote: post #24
tome wrote: post #9

Earlier quoted context omitted.

The problem is that continuing to bail out depositors means that they'll never do due diligence on their banks and therefore bank executives will keep trying risky strategies that increase their bonuses.

what kind of due diligence are you imagining that I, a depositor with under 250k should / am doing on a bank? What do you believe, I, as a single depositor of 250k CAN DO to audit a bank or otherwise make sure it's safe for my deposit?

Others have mentioned here, although I am not sure if or to what extent this is true, that depositors may have had an exclusivity relationship with SVB in order to secure loans or other financial services, which might account for depositors maintaining more the $250k in their accounts. If this is the case, then the risks of their banking relationship was manifest, and I feel there is an argument for taking no special action to reimburse depositors in the full amount. If not, then I agree with you. There is a level of due diligence that is simply unrealistic for individual depositors to perform.

Re: Fed and FDIC discussing backstop to make SVB depositors whole, stem contagion

#49

Post by hello_moto »

sidewndr46 wrote: post #28
AmVess wrote: post #22

Earlier quoted context omitted.

They are calling it such because contagions spread. Tomorrow is going to be a bloodbath.

As it ought to be. Idiots gave some idiots money who banked said money with idiots. The answer is not for the government to step in and rescue the idiots. The idiocy will only proliferate when that happens.

love the simplistic world of view of an HN reader against a financial institution that has been in business for 40 years....

Re: Fed and FDIC discussing backstop to make SVB depositors whole, stem contagion

#50

Post by machina_ex_deus »

fach wrote: post #46
machina_ex_deus wrote: post #38

If this happens, banks have officially lost all their legitimacy and all banks should have their priviledges revoked. There is absolutely no reason banks should be given the priviledge of being the only way to deposit money, while playing with those customers money and simultaneously having zero risk on that money. These banks are getting 10 to 1 leverage, from me, captive customer. Break their monopoly. I want an ac…

If the Fed provides a backstop for uninsured deposits, all banks have lost their legitimacy? They are not bailing out shareholders.

They are officially announcing to all listening banks that customers deposits are theirs to gamble with as they please. Why do banks get to play with those deposits, as if they were just free leverage from unwilling captive participants?

How can small banks compete against big banks that can allow themselves to act this way? They can't. If you're big you get to risk it all. If you're small nobody will come to you as they know they won't be insured by a spooked Fed stopping "contagion".

There's no legitimate reason to keep banks priviledge as a government supported oligopoly of investment institutions allowed to play with other people's money. If you admit the government is actually backstopping those deposits, there is absolutely zero reasons why banks get to gamble it in the first place. They are getting to eat the cake and have it too. This has to stop.

If I gambled away all your money you'd never give me more again. If the bank gambled away all your money and the government came and made you whole, you'd look to become a banker too so you get to gamble away money that isn't yours.

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