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Joint statement by the Department of the Treasury, Federal Reserve, and FDIC

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Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC

#101

Post by chejazi »

zamfi wrote: post #42

Wow, here’s the real news: > Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law. Note the uninsured depositors clause in there — FDIC &co seem to have acted unilaterally to extend deposit insurance beyond the 250k and to the full amounts of any deposit account. And they are charging the banks for it. If this doesn’t stop a ru…

And yet, socializing any potential losses across banks (as opposed to homeowners, back in 2008) feels like the appropriate move.

Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC

#103

Post by AviationAtom »

I'm surprised the top comment wasn't focusing on this bit of the statement:

"We are also announcing a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state chartering authority."

Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC

#104

Post by roflyear »

hn_throwaway_99 wrote: post #40

Yellen and the FDIC is in a tough spot. This is the important line, "Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law." Thus, on one hand, I'm glad they're doing this, as it should help prevent wider bank runs, and it ensures that banks are the ones that are actually paying for it. At the same time, this is yet another exam…

Perfect policy doesn't exist. I prefer this to hard line actions that cause massive harm because it's impossible to account for all situations.

Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC

#105

Post by ghettoimp »

morelisp wrote: post #43
noelsusman wrote: post #15

It's a bit embarrassing to have to invoke the systemic risk exception when regulations on these banks were relaxed in 2018 on the theory that they wouldn't pose a systemic risk if they got into trouble. This should spark some serious soul searching from everyone involved in that effort, but I'm not holding my breath. Anyway, I'm happy for all the depositors.

The depositors were largely those with means to manage risk but not doing so. Surely you mean you're happy for the workers, clients, contractors, etc., not the depositors? Right? The backstop was sold on the backs of those people, and if they're not the overwhelming beneficiary it means the depositors might not have been totally honest with us about their motives!

The depositors did nothing here but put their own money in a bank account?

What possible nefarious motive are you implying?

Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC

#106

Post by vishal0123 »

hn_throwaway_99 wrote: post #40

Yellen and the FDIC is in a tough spot. This is the important line, "Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law." Thus, on one hand, I'm glad they're doing this, as it should help prevent wider bank runs, and it ensures that banks are the ones that are actually paying for it. At the same time, this is yet another exam…

> Thus, on one hand, I'm glad they're doing this, as it should help prevent wider bank runs

Could you expand? My first thought was that the bank who is in verge of crisis could tip over with additional burden.

Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC

#107

Post by pmorici »

hn_throwaway_99 wrote: post #40

Yellen and the FDIC is in a tough spot. This is the important line, "Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law." Thus, on one hand, I'm glad they're doing this, as it should help prevent wider bank runs, and it ensures that banks are the ones that are actually paying for it. At the same time, this is yet another exam…

Because a major component of this is human nature causing bank runs they are betting that by doing this upfront it will be cheaper than not doing it and risking a high number of similar bank runs in the coming month as word spreads it isn't safe to keep money over the insurance limit in banks because of the unrealized loses on bonds.

Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC

#108

Post by swatcoder »

hn_throwaway_99 wrote: post #40

Yellen and the FDIC is in a tough spot. This is the important line, "Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law." Thus, on one hand, I'm glad they're doing this, as it should help prevent wider bank runs, and it ensures that banks are the ones that are actually paying for it. At the same time, this is yet another exam…

My read is that they see the shortage at SVB as relatively small and that they may be closing some marginal banks like Signature ahead of true insolvency/illiquidity to both protect depositors and minimize reactionary withdrawals across the broader market.

And it sounds like they have the authority to just do this on a Sunday, so it doesn’t sound like any rules being changed.

If I was a banker with a marginal portfolio, I wouldn’t be encouraged by this. Depositors are making it out, but banks are being aggressively shuttered to make that happen.

Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC

#109

Post by twelve40 »

notmindthegap wrote: post #67
hn_throwaway_99 wrote: post #40

Yellen and the FDIC is in a tough spot. This is the important line, "Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law." Thus, on one hand, I'm glad they're doing this, as it should help prevent wider bank runs, and it ensures that banks are the ones that are actually paying for it. At the same time, this is yet another exam…

Did you foresee this?

surely it's not on HN throwaway to do all the foreseeing here? there are people whose fulltime job is to monitor the banks.

Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC

#110

Post by Donald »

grey-area wrote: post #78
hn_throwaway_99 wrote: post #40

Yellen and the FDIC is in a tough spot. This is the important line, "Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law." Thus, on one hand, I'm glad they're doing this, as it should help prevent wider bank runs, and it ensures that banks are the ones that are actually paying for it. At the same time, this is yet another exam…

Well one way to do this would be to regulate banks more, like we used to: https://www.cnbc.com/2018/05/24/trump-signs-bank-bill-rollin... https://en.wikipedia.org/wiki/Glass–Steagall_legislation

This isn’t necessarily a Glass–Steagall issue as SVB was primarily in government bonds and mortgage-backed securities.
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