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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

#101

Post by refurb »

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…

I get your point, but think of it this way - if you kept your money in a bank without deposit insurance, while also borrowing money from said bank, and then the bank went under, sure your money is gone, but is it fair for the bank to say "hey we lost your money, but we still expect you to pay us back the money you borrowed".

That doesn't seem fair to me.

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

#102

Post by crazygringo »

Ensorceled wrote: post #39
crazygringo wrote: post #37

Earlier quoted context omitted.

I agree with you, but in this analogy it was also the bank that set your house on fire in the first place. Which is what makes it less intuitive to separate the two.

Well, except the depositors chose to put their money in uninsured accounts.

Yes... I was agreeing with you. That's already the part of your analogy where you said "if you didn’t have house insurance".

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

#103

Post by motohagiography »

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…

This view of asset custody is uninformed, and it's designed to reinforce an ignorant worldview that would qualify as hate speech against any other group.

The reason these jurisdictions exist is because when you have pension funds that need to pay their members over a long horizon, you need to hold the assets in a place with a legal framework that has the incentives and protections to be able to make those payment guarantees. Sovereign wealth funds also need management, and you can't leave the money where some regime is going to loot the treasury to keep themselves in power instead of supporting the conditions that return growth.

If your understanding of money is something that you just debase yourself and accumulate resentments for, and then compensate for it by indulging in small acts of malice and deprivation, consider what you are putting out into the world before you complain about what you (or "the people") are getting back.

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

#105

Post by theRealMe »

refurb wrote: post #99
theRealMe wrote: post #96

Earlier quoted context omitted.

You might not like it, but the Caymans are absolutely known as a tax haven. You can’t really be arguing that people stash money in the Caymans “because of the transparency”… “The Cayman Islands are considered a tax haven because the Caymans do not impose a corporate tax, making it an ideal place for multinational corporations to base subsidiary entities to shield some or all of their incomes from taxation. The Cayman…

I think you two are using different definitions of "tax haven". You're using it (and your source) as "low or minimal taxes" are levied against corporations and people in the Cayman islands. The grandfather's definition is "a great place to hide your money so you don't have to pay the taxes you're supposed to pay". I would normally define "tax haven" as the second.

Entities DO hide their money in tax havens to avoid paying taxes. They avoid paying taxes BECAUSE tax havens have low or no taxes. Those two definitions are defining two ends to the same thing. The caymans have low or minimal taxes. The caymans are also used by entities to hide their money so they don’t have to pay taxes. Entities are not incorporating in the Caymans for any reason other than avoiding taxes. And the actual definition of a tax haven specifically is “a country or independent area where taxes are levied at a low rate.”

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

#106

Post by s1artibartfast »

imustbeevil wrote: post #100
s1artibartfast wrote: post #95

Earlier quoted context omitted.

yes, And I am saying that it is not unreasonable that the bank should have to pay back individuals with assets for sale before covering those without assets. It all comes down to priority in asset recovery. There is no moral, philosophical, or biblical truth that FDIC insured depositors must be paid out first. It is just as conceivable to have a system where customers with both bank assets and debts have higher prior…

Anyone using the bank signed a contract that defined how a failure affects them. There is absolutely a moral, philosophical, and biblical truth behind honoring that contract. Galatians 3:15: "To give a human example, brothers: even with a man-made covenant, no one annuls it or adds to it once it has been ratified." Proverbs 17:18: "One who has no sense shakes hands in pledge and puts up security for a neighbor." Outs…

I understand that there are legal regulations which generally specify these matters. However, to think that these are immutable is just wrong. Banking regulations change over time and jurisdiction.

To be clear, I'm not advocating abolition of the FDIC. Normal people wouldn't lose everything. The rich still would pay for FDIC payments, just like they now.

You would just see some individuals have less damage, specifically when bank assets in their name are commensurate with bank debt in their name. FDIC payouts would be slightly larger, but again, these are recouped by banking fees, largely paid by the rich

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

#107

Post by [deleted] »

refurb wrote: post #101
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…

I get your point, but think of it this way - if you kept your money in a bank without deposit insurance, while also borrowing money from said bank, and then the bank went under, sure your money is gone, but is it fair for the bank to say "hey we lost your money, but we still expect you to pay us back the money you borrowed". That doesn't seem fair to me.

[deleted]

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

#108

Post by toast0 »

imustbeevil wrote: post #85
s1artibartfast wrote: post #81

Earlier quoted context omitted.

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/

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

"In the case of a non-delinquent loan, the depositor might elect to “set off” the loan against his/her deposits in order to receive full value for any uninsured funds (i.e., funds in excess of the $250,000 insurance limit). In either case, no “offset” is possible unless the obligations are “mutual” – meaning that the borrower and the depositor must be the same person or legal entity acting in the same legal capacity."

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

#109

Post by refurb »

theRealMe wrote: post #105
refurb wrote: post #99

Earlier quoted context omitted.

I think you two are using different definitions of "tax haven". You're using it (and your source) as "low or minimal taxes" are levied against corporations and people in the Cayman islands. The grandfather's definition is "a great place to hide your money so you don't have to pay the taxes you're supposed to pay". I would normally define "tax haven" as the second.

Entities DO hide their money in tax havens to avoid paying taxes. They avoid paying taxes BECAUSE tax havens have low or no taxes. Those two definitions are defining two ends to the same thing. The caymans have low or minimal taxes. The caymans are also used by entities to hide their money so they don’t have to pay taxes. Entities are not incorporating in the Caymans for any reason other than avoiding taxes. And the…

True, but if you're looking to hide your money you want two things: 1) low taxes within the country and 2) low transparency as to who owns what in the country.

That's why Switzerland used to be a great place to hide your money decades ago - low taxes and numbered accounts where it was illegal to reveal the true identify of the account holder.

Based on DelaneyM's comment - Caymans has the 1st but not the 2nd.

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

#110

Post by Ensorceled »

crazygringo wrote: post #102
Ensorceled wrote: post #39

Earlier quoted context omitted.

Well, except the depositors chose to put their money in uninsured accounts.

Yes... I was agreeing with you. That's already the part of your analogy where you said "if you didn’t have house insurance".

I was disagreeing with your quibble in your agreement :-)
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