141–150 of 325 posts
Meanwhile, all the benevolent VC techbros had to do was collectively agree to just not withdraw all of their deposits from SVB en masse, and they couldn't even muster that. How deep is the rot in SV?
People seem to have a really hard time with the idea that, in the SVB debacle, the system worked effectively and pretty much the way it was planned to. It's not even clear what people are upset about. There's an article on the front page of The Atlantic today about how angry we should be about SVB, and if you read it, it's hard to figure out who those angry people should be. Equity is getting zeroed out. Management w…
Earlier quoted context omitted.
I guess my point is that they still got hit by the steamroller : they lost their jobs and future earnings, they lost any equity (which certainly was part of aforementioned bonus), etc. Earning a nice bonus last year is a reasonable consolation prize, but I'd wager most execs would rather have had a lower bonus and the ability to continue to manage an operational bank through 2023.
No, the investors got hit by the steamroller. Management, who knew exactly what they were doing, did not lose their earnings. Future earnings? Some of these were Lehman execs -- their ability to land a position in SVB is proof that they probably did not sacrifice future earnings. > Earning a nice bonus last year Why do you think this was limited to last year? I suspect they made risky moves again and again and again…
Edit: after reading this article posted by lordfrito below I stand corrected. SVB executives knew the risk and took it anyway. But not for personal gain but to maximize firm value as it allowed higher profit which increased the valuation (so yes they benefited personally, but to a greater extent than just a few million in bonuses).
https://www.bloomberg.com/news/articles/2023-03-13/svb-failu...
Until we categorically prevent banks from attempting to "satisfy shareholders" with returns, these occurances will continue in one form or another.
Banks dont need to be sexy or shake up the industry. We need boring people in banking making okay-ish money.
Earlier quoted context omitted.
I guess my point is that they still got hit by the steamroller : they lost their jobs and future earnings, they lost any equity (which certainly was part of aforementioned bonus), etc. Earning a nice bonus last year is a reasonable consolation prize, but I'd wager most execs would rather have had a lower bonus and the ability to continue to manage an operational bank through 2023.
They cashed in millions in stock just before they announced they needed to raise $2B in capital to offset losses on their bond sales, which led to a crash, on top of their bonuses. If that's getting hit with a steamroller, sign me up.
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I am one of those who has been harmed. I work at a different bank. The rates charged to banks for FDIC insurance have been based on the assumption that the FDIC would cover depositor losses up to the insured limit. By choosing to cover all losses even above the insured limit, we have chosen to put the burden for paying for those losses on all of the other banks (and indirectly on those banks depositors). I suspect th…
Have the FDIC rates actually changed or is this a hypothetical. It's relevant because the FDIC limit has not actually increased--it's still de jure $250K. The fact that the FDIC said they would cover 100% of deposits at SBV could be related to the fact they weren't actually insolvent and could have covered the run if given enough time to liquidate assets.
Of course the banks are only happy to have ANY justification to complain and not raise saving rates, and blame the Federal Government.
But there have been no indication yet that the FDIC will be drawing on the insurance fund to cover the depositors.
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I am one of those who has been harmed. I work at a different bank. The rates charged to banks for FDIC insurance have been based on the assumption that the FDIC would cover depositor losses up to the insured limit. By choosing to cover all losses even above the insured limit, we have chosen to put the burden for paying for those losses on all of the other banks (and indirectly on those banks depositors). I suspect th…
Have the FDIC rates actually changed or is this a hypothetical. It's relevant because the FDIC limit has not actually increased--it's still de jure $250K. The fact that the FDIC said they would cover 100% of deposits at SBV could be related to the fact they weren't actually insolvent and could have covered the run if given enough time to liquidate assets.
It's hypothetical. The FDIC is likely to recover a vast majority of the uninsured deposits through asset sales, people just want to be outraged.
At smaller banks, 60-75% of uninsured deposits are usually recovered by FDIC and those banks went out of business for bad balance sheets, not bank runs due to duration mismatch.
We've gotten so used to assuming every statement is spin on 'you're getting screwed' that people assume it's always the case.
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First Republic now has a sweep account that spreads up to $100m across 400 banks in increments of up to $FDIC_INSURANCE_LIMIT. What's the difference between the FDIC insuring all deposits at US banks directly and US banks doing it themselves by forming a complete graph? (Other than there being a clear upper limit in the latter case, which is currently greater than $1b per account.)
Insurance only pays out to $FDIC_INSURANCE_LIMIT if a bank fails. I can't say what the scenario looks like where 400 banks fail simultaneously, but I can image it would not be good. I'm not sure the current FDIC payout models account for that, either.
But financially I think it's the same. If 400 customers each use 1 bank each, then a single bank failure means the FDIC needs to make whole one customer.
But if every customer put 1/400th of their wealth into each of the 400 banks, then FDIC has to cover all customers for 1/400th each.
The cost to us as depositors/taxpayers is equal.
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> Depositors were made whole almost immediately This is what I'm mad about. FDIC insures to $250k in normal cases. It should not have been used to insure depositors for their full deposit amounts here.
Why does that make you mad? If my money is at risk, I expect to be compensated with an interest rate. If I'm not earning interest, my money should have zero risk. We should remove the FDIC $250k limit and if bank's business models don't work with that, we should nationalize the banks. It's in society's best interest to not have our money wiped out overnight for things beyond our control.
You should learn that you the moment you put a deposit in the bank, the funds become the property of the depository bank. As a depositor, you are a creditor of the bank.
People are mad because the rules were changed in the middle of the game to serve the interests of a select few (mainly VCs and the startup crowd).
Those supporting this bailout seem to have some of the least knowledge on how banks work.
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I dont know if I agree with your assessment. > Equity is getting zeroed out. Management was fired. Depositors were made whole almost immediately. SVB's assets are apparently not impaired; SVB would have held them to maturity had the bank run not happened, and now somebody else will instead. Part of the problem is that the system that enabled them to end up in this situation is the erosion of Dodd-Frank. The systemic…
This wouldn't have been solved by any thing in Dodd-Frank. SVB invested in highly liquid securities that are considered the safest asset class, interest rate risk wasn't expected to materialize as quickly as it did as the Fed would have been expected to raise rates more gradually over a longer time horizon or provide an asset exchange mechanism for member banks. SVB is not an example of a bank that had engaged in Inv…
Maybe we should admit Congress will never repay the national debt and simply have the Fed purchase new federal debt issuance. The current complicated charade just pays banker bonuses.