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SVB customers who lost their deposits remain on the hook for loans

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Re: SVB customers who lost their deposits remain on the hook for loans

#81

Post by s1artibartfast »

imustbeevil wrote: post #79
s1artibartfast wrote: post #75

Earlier quoted context omitted.

Did your bank also go bankrupt and zero out your account? Because that's what's going on here. It is a question of which debts a bank pays before its assets can be sold off to another bank. In this case, I think it is reasonable that a bank use the assets it has to pay back depositors, before those assets can be sold to someone else.

If your bank sells your mortgage to another bank, the second bank now owns that debt. If the first bank goes out of business, you very obviously (separately from the previous transaction) lose any money that isn't insured. I'm not sure what else you would expect to happen.

yes, and I am saying the first bank should have to use the assets it has tied to you to pay off the debt it has to you, before it can sell them in bankruptcy to bank #2.

Re: SVB customers who lost their deposits remain on the hook for loans

#82

Post by [deleted] »

PragmaticPulp wrote: post #58
DelaneyM wrote: post #51

Earlier quoted context omitted.

As a Caymanian I’m doing to take exception to your non-sequitur about Cayman being a “well-known tax haven”. Cayman is one of the most financially transparent, if not _the_ most financially transparent, location in the world. We fully comply with FATCA, CRS, and AEOI, to the extent that it takes even a native Caymanian multiple weeks to open a local bank account. The reason most foreign investors use Caymanian interm…

> The reason most foreign investors use Caymanian intermediaries is actually just that transparency, particularly when they’re being scrutinized by foreign regulatory bodies and don’t want their money to disappear into a Delaware numbered company. > It is, however, a particularly easy place to keep global funds in a law abiding and transparent way. I don’t doubt that Cayman is strict for individuals like yourself ope…

[deleted]

Re: SVB customers who lost their deposits remain on the hook for loans

#83

Post by TheAlchemist »

DelaneyM wrote: post #51
mdasen wrote: post #14

This article feels like rich people who were trying to get around US law/regulations/taxes now wanting the protections afforded by it. They deposited money in SVB's Cayman Islands subsidiary (a country that's a well-known tax haven). SVB goes under and the Cayman Islands have no deposit insurance so their deposits are wiped out. Now they want their money back or their debt forgiven. The SVB Cayman deposits didn't pay…

As a Caymanian I’m doing to take exception to your non-sequitur about Cayman being a “well-known tax haven”. Cayman is one of the most financially transparent, if not _the_ most financially transparent, location in the world. We fully comply with FATCA, CRS, and AEOI, to the extent that it takes even a native Caymanian multiple weeks to open a local bank account. The reason most foreign investors use Caymanian interm…

I thought it's a joke, but apparently not.

It can be both - transparent, and a tax heaven. And it's one of the most well-known. Sorry, but in at least 2 countries where I lived, if you hear Cayman, you immediately think "tax evasion".

I get that you're offended though - when you see the Swiss - that somehow managed to turn their most shady banking system into a national pride thing - and admired but others too !

Re: SVB customers who lost their deposits remain on the hook for loans

#84

Post by notyograndma »

mdasen wrote: post #14

This article feels like rich people who were trying to get around US law/regulations/taxes now wanting the protections afforded by it. They deposited money in SVB's Cayman Islands subsidiary (a country that's a well-known tax haven). SVB goes under and the Cayman Islands have no deposit insurance so their deposits are wiped out. Now they want their money back or their debt forgiven. The SVB Cayman deposits didn't pay…

Cayman isn't really a tax dodge. I've structured a few hedge funds in the Cayman Islands, and FATCA/CRS regime to which it strictly adheres prevents it from being one. Companies set up foreign financial entities in Cayman Islands because it's a tightly regulated financial center with well known laws, and because foreign investors want it because it's perceived (particularly by Chinese investors) as a safe haven. If those investors invested directly through US entities, they still would not be taxed. What's also likelier here is that they were trying to avoid the US banking system so that funds could not be seized (so much for that).

I can't see the article since it's paywalled, but the bank would have required that a certain amount of funds remain on deposit for the borrower to get the terms. I've seen and facilitated an SVB loan agreement for a startup, and I can tell you that's exactly what it says. So the bank required you to park your money there, and then it lost the funds. In any normal business context, the money lost would come off of the balance owed. It sounds like the loan was received from one entity, but the deposits were placed with another, and none of the parties contemplated a bank collapse that would require the bank to forfeit a portion of the owed amount.

Re: SVB customers who lost their deposits remain on the hook for loans

#85

Post by imustbeevil »

s1artibartfast wrote: post #81
imustbeevil wrote: post #79

Earlier quoted context omitted.

If your bank sells your mortgage to another bank, the second bank now owns that debt. If the first bank goes out of business, you very obviously (separately from the previous transaction) lose any money that isn't insured. I'm not sure what else you would expect to happen.

yes, and I am saying the first bank should have to use the assets it has tied to you to pay off the debt it has to you, before it can sell them in bankruptcy to bank #2.

And we're saying that's not how that works. When the FDIC takes over the bank, they pay out all of the insured deposits, sell all of the assets, and distribute the remaining funds, which in cases like this one are not enough to cover uninsured deposits.

https://www.fdic.gov/consumers/banking/facts/priority.html

https://www.fdic.gov/resources/deposit-insurance/faq/

Re: SVB customers who lost their deposits remain on the hook for loans

#86

Post by Retric »

sp332 wrote: post #32
epgui wrote: post #19

Earlier quoted context omitted.

I don’t know if it’s just me that’s heartless, but I think if you’re financially sophisticated enough to bank in other countries or to have more than the insurable limit held in cash (!!! why???) then you ought to have known better or to have known the risks. I never have more than a small amount held in cash, and even if I had a crazy windfall and made some billions, I wouldn’t keep more than a small amount in cash.…

Any company with more than a couple dozen employees is going to have more than $250k in the bank for payday. SVB had some payroll processing companies as clients, so they each had multiple companies' payroll in the accounts that Friday. And the article mentions that the Cayman Islands branch had investment and private equity firms as clients, so they wouldn't get too far with only $250k in their accounts.

You can use multiple banking accounts at multiple banks and still maintain FDIC protection. There’s many business models set up to facilitate such things, so while you can’t hold billions in this way in practice it’s not a problem for payroll. Ex: https://en.wikipedia.org/wiki/IntraFi_Network

Alternatively, you can also buy your own insurance from a 3rd party to minimize risks.

However, you can also get incentivized to ignore the risks and keep large sums at individual institutions. Which has the obvious downsides SVB customers are discovering.

Re: SVB customers who lost their deposits remain on the hook for loans

#87

Post by light_hue_1 »

DelaneyM wrote: post #51
mdasen wrote: post #14

This article feels like rich people who were trying to get around US law/regulations/taxes now wanting the protections afforded by it. They deposited money in SVB's Cayman Islands subsidiary (a country that's a well-known tax haven). SVB goes under and the Cayman Islands have no deposit insurance so their deposits are wiped out. Now they want their money back or their debt forgiven. The SVB Cayman deposits didn't pay…

As a Caymanian I’m doing to take exception to your non-sequitur about Cayman being a “well-known tax haven”. Cayman is one of the most financially transparent, if not _the_ most financially transparent, location in the world. We fully comply with FATCA, CRS, and AEOI, to the extent that it takes even a native Caymanian multiple weeks to open a local bank account. The reason most foreign investors use Caymanian interm…

> As a Caymanian I’m doing to take exception to your non-sequitur about Cayman being a “well-known tax haven”.

The Cayman islands are a well-known tax haven. Sorry to say.

Economists, in journals, routinely refer to the Cayman islands as a tax haven. Just a few examples out of many thousands:

https://www.nber.org/system/files/chapters/c14730/c14730.pdf

https://eprints.lse.ac.uk/56125/1/__lse.ac.uk_storage_LIBRAR...

If you want to know more this is a thorough review of the Cayman islands and their role as a tax haven: https://www.tandfonline.com/doi/pdf/10.1080/09692290.2016.12...

The main reason for having a subsidiary in the Cayman islands is to avoid paying taxes. In some cases this is legal tax avoidance, in others it is illegal. The ratio of the two is unclear because of secrecy laws.

One common way businesses legally avoid taxes (note that legal is not moral, many people think should be illegal) is through IP. They make money in country X, then their subsidiary in the Cayman islands has to be paid because it owns the patents involved, but that subsidiary is owned by the main company and sends that money back with zero taxes. In country X the profits look very small now because so much had to be paid in licensing fees.

Another way is through round-tripping money. Investing in the Cayman islands and then taking that money and investing it back into their country as a foreign investment.

There are countless other ways. The Cayman islands along with a few other tax havens play a nasty and selfish role in today's financial system that gives rich companies and rich people a massive advantage while hurting everyone else, while of course generously skimming something off the top for themselves.

Re: SVB customers who lost their deposits remain on the hook for loans

#88

Post by Seanambers »

mdasen wrote: post #14

This article feels like rich people who were trying to get around US law/regulations/taxes now wanting the protections afforded by it. They deposited money in SVB's Cayman Islands subsidiary (a country that's a well-known tax haven). SVB goes under and the Cayman Islands have no deposit insurance so their deposits are wiped out. Now they want their money back or their debt forgiven. The SVB Cayman deposits didn't pay…

Yeah, it was the same when FTX went belly up. Crypto bros trying to use the U.S legal system(which they want to replace) in order to get their money back.

It's all fun and games until someone has to pay.

Re: SVB customers who lost their deposits remain on the hook for loans

#89

Post by [deleted] »

hyevbnff wrote: post #45
epgui wrote: post #19

Earlier quoted context omitted.

I don’t know if it’s just me that’s heartless, but I think if you’re financially sophisticated enough to bank in other countries or to have more than the insurable limit held in cash (!!! why???) then you ought to have known better or to have known the risks. I never have more than a small amount held in cash, and even if I had a crazy windfall and made some billions, I wouldn’t keep more than a small amount in cash.…

High yield savings accounts give up to 5% atm.

[deleted]

Re: SVB customers who lost their deposits remain on the hook for loans

#90

Post by MallocVoidstar »

djbusby wrote: post #42
MallocVoidstar wrote: post #15

Earlier quoted context omitted.

archive.is is poisoning results to users of Cloudflare DNS again. You can look up its IP (via e.g. 8.8.8.8) and hardcode it locally for their domains to fix it.

How do they know which DNS a client is using?

They run their own DNS and if a request comes from Cloudflare's servers return garbage.
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