Joint statement by the Department of the Treasury, Federal Reserve, and FDIC • Hacker News Board

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

#151

Post by radicaldreamer » Sun, Mar 12, 2023, 10:53 PM UTC

dehrmann wrote: post #123

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…

This probably sealed the deal: > 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. Two closures in three days is a sign that you have to take this very seriously.

This is going to put every regional bank on the map for short sellers as equity holders are being wiped out in these cases without depositors being affected. Why would anyone invest in any regional bank with the risk of a equity wipeout day to day?

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

#152

Post by ghettoimp » Sun, Mar 12, 2023, 10:53 PM UTC

seo-speedwagon wrote: post #98

This is 100% a bailout and the wording that “no losses […] will be borne by the taxpayer” is a shameful misrepresentation. Just because a bunch of VCs and founders didn’t realize they were at risk of this happening if they kept all their money in one bank, they still bear the responsibility of their losses. Looking forward to this new future where uninsured deposits are actually 100% backed by the FDIC, so actually i…

How do we know this is a "shameful misrepresentation" until we see how it pans out?

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

#153

Post by mason55 » Sun, Mar 12, 2023, 10:53 PM UTC

avidphantasm wrote: post #96

What if the Federal Reserve offered retail banking. Would it stabilize the banking sector? They wouldn’t be forced to try to find loans to pay interest on deposits. Where do private banks add value over what the Fed could do. ELI5.

Yeah, if there’s too much cash sloshing around then this idea helps because the banks don’t need to find places to put all their deposits.

What happens normally though is that everyone banks at the Fed and the banks don’t have any deposits and so loans freeze up, which is bad.

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

#154

Post by reso » Sun, Mar 12, 2023, 10:53 PM UTC

seo-speedwagon wrote: post #98

This is 100% a bailout and the wording that “no losses […] will be borne by the taxpayer” is a shameful misrepresentation. Just because a bunch of VCs and founders didn’t realize they were at risk of this happening if they kept all their money in one bank, they still bear the responsibility of their losses. Looking forward to this new future where uninsured deposits are actually 100% backed by the FDIC, so actually i…

I am also confused about where the money is coming from to cover SVB’s losses, if not from the taxpayer.

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

#155

Post by gnicholas » Sun, Mar 12, 2023, 10:53 PM UTC

ecommerceguy wrote: post #62

I'm just curious, who was running the investment / risk team at SVB and why should they get a pass for doing such a terrible job?

Apparently they had no Chief Risk Officer for much of the last year: https://fortune.com/2023/03/10/silicon-valley-bank-chief-ris...

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

#156

Post by avidphantasm » Sun, Mar 12, 2023, 10:53 PM UTC

loeg wrote: post #130

avidphantasm wrote: post #96

What if the Federal Reserve offered retail banking. Would it stabilize the banking sector? They wouldn’t be forced to try to find loans to pay interest on deposits. Where do private banks add value over what the Fed could do. ELI5.

Banks use deposits to extend loans to other customers. A narrow bank wouldn't do that.

Couldn’t the Fed just offer retail loans at the Federal Reserver rate, with maybe some kind of premium if inflation is high, or discount if inflation is low? What am I missing? Why do we need all these banks, some of which catastrophically explode every decade or so?

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

#157

Post by coffeebeqn » Sun, Mar 12, 2023, 10:53 PM UTC

323 wrote: post #135

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.

Yeah as long as the banks hold actually valuable things- SVB had treasury bonds- no reason the federal government can’t treat those as cash. I mean it’s their own issued assets!

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

#158

Post by belter » Sun, Mar 12, 2023, 10:54 PM UTC

xenadu02 wrote: post #72

AH4oFVbPT4f8 wrote: post #34

It was announced as a footnote in this Treasury announcement , which also guarantees 100% deposits for both SVB and Signature Bank above 250k How?! Who is funding this and if they sell the bank assets who is covering the losses?

If you look at the FDIC data for bank closures a lot of times the ultimate resolution is over 90% payback - the FDIC calls these "dividends". In some cases the payback is 100% to depositors and general creditors get some money. It just takes time - a 2009 bank failure may not finish dividend paybacks until 2014. The odds are the FDIC will ultimately (in the next 5 years) wind down SVB's assets with enough excess to n…

> whenever there's a large payout event exceeding normal reserves the fund recoups the money by assessing member banks.

The point you are missing is that would be to pay the required excess to cover the 250K per depositor, but this is a bailout of all depositors money.

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

#159

Post by mortenjorck » Sun, Mar 12, 2023, 10:54 PM UTC

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.

I think there was an air of "hey, it's been ten years since 2008, the system is working; we can relax Dodd-Frank a little bit."

After March 2023, the message should be an unequivocal "no, not even a little bit."

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

#160

Post by bradleyjg » Sun, Mar 12, 2023, 10:54 PM UTC

So depositors at banks taking on big risks get elevated interest rates or other perks for years, and when the shit hits the fan depositors that put their money in prudent banks get to bail them out through higher fees.

And people wonder why turnout is low. There’s no way to vote for non captured politicians.