141–150 of 1001 posts
Incredible that this can just be done over a weekend. Is there a good writeup of (what I assume is a mountain-load of work) of how this works, and what happens during this process? Also, will the FDIC just eventually feed SVB's MBSs back into its insurance fund once they mature?
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…
Haven’t depositors always been first on the list to get paid, even their uninsured deposits? I don’t know if charging a special assessment to member banks is standard operating procedure, but that doesn’t sound like government intervention. It just sounds like reasonable operation of the FDIC.
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…
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
Yet another new precedent by the Fed and FDIC. All depositors are now guaranteed their funds if a bank fails. This is the definition of Moral Hazard [1]. [1] https://en.wikipedia.org/wiki/Moral_hazard
If payment is done by other banks, doesn't that serve as mitigation? Sure, when the government pays, it's super risky. However if other banks pay, for sure they'll either self regulate or push for better legislation.
Interesting that they're announcing this for SVB and Signature. I infer from this that they will backstop the depositors at these two banks, and they assume that by doing so no other banks will be 'run' by depositors.
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…
How do you square this statement of yours: > Yellen has just broadcast that FDIC insurance is essentially unlimited, as long as you can threaten wider disruption to the economy. with this quote from the Treasury Dept statement? > "No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer."
Earlier quoted context omitted.
In cases where you can't predict the future appropriately, sometimes it's better to make prudent decisions that help everyone instead of attempting to punish the sinful. Keep in mind that bank shareholders and senior management are going to get wiped out and fired.
"Punishing the sinful" isn't about morals, it's about incentives, and ensuring a level playing field where sinning doesn't improve your long-term competitiveness. Will senior management have to return their 2021 performance bonuses? If not, successful sinning is just a matter of ensuring you cash out early.
All bank deposits should be guaranteed by the state. Just like tap water is guaranteed to be drinkable, ... Bank accounts are the basis of many things.