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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

#171

Post by luckylion »

pmorici wrote: post #107
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.

At the same time, they've essentially raised the insurance limit to infinity. Depositors will be made whole, and if they aren't the next time something happens, they'll need some very good arguments for why the 9th largest bank is now also too big too fail but e.g. the 11th largest isn't.

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

#172

Post by tedivm »

radicaldreamer wrote: post #151
dehrmann wrote: post #123

Earlier quoted context omitted.

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?

They're also taking action to prevent this kind of thing from happening again-

> The Fed facility will offer loans of up to one year to banks, saving associations, credit unions and other institutions. Those taking advantage of the facility will be asked to pledge high-quality collateral such as Treasurys, agency debt and mortgage-backed securities.

> “This action will bolster the capacity of the banking system to safeguard deposits and ensure the ongoing provision of money and credit to the economy,” the Fed said in a statement. “The Federal Reserve is prepared to address any liquidity pressures that may arise.”

https://www.cnbc.com/2023/03/12/regulators-unveil-plan-to-st...

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

#173

Post by ummonk »

kqr2 wrote: post #52
mkmk wrote: post #6

“After receiving a recommendation from the boards of the FDIC and the Federal Reserve, and consulting with the President, Secretary Yellen approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors. Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of S…

This special fee will most likely be passed onto bank account holders either through lower interest rates or higher fees, so most taxpayers with bank accounts will likely be affected indirectly.

They'll be less affected than they would have been if contagion had been allowed to spread unchecked. All banks have a vested interest in the stability of the financial system in general.

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

#174

Post by FormerBandmate »

radicaldreamer wrote: post #151
dehrmann wrote: post #123

Earlier quoted context omitted.

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?

At the same time, why would the bank runs continue? AFAIK, this was sparked by Silvergate’s slow motion collapse climaxing on Wednesday, and the infinite FDIC threshold makes more bank runs pointless and self defeating

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

#176

Post by DANmode »

peyton wrote: post #145
grey-area wrote: post #78

Earlier quoted context omitted.

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

You’re saying SVB should’ve been designated “too big to fail?”

Other way around.

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

#177

Post by notfromhere »

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…

The FDIC can waive limits if it feels the deposits are of a systemic nature. It has had this power for a long time

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

#178

Post by ajross »

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…

> I really wish we could plan for these entirely foreseeable events ahead of time

That's exactly what Dodd-Frank did. The audit and stress testing requirements got rolled back in the Trump administration. "Planning" is not the problem here.

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

#180

Post by piperswe »

askl56 wrote: post #97
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?

From the UK branch which also is in severe trouble[0] Jay Ersapah, the boss of Financial Risk Management at SVB’s UK branch, launched initiatives such as the company’s first month-long Pride campaign and a new blog emphasizing mental health awareness for LGBTQ+ youth. “The phrase ‘you can’t be what you can’t see’ resonates with me,’” Ersapah was quoted as saying on the company website. “As a queer person of color and…

I'm not sure how relevant this is to the topic at hand.
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