So they made their decision, everyone can move on. I just hope nobody forgets how prominent VCs behaved during the brief period of uncertainty. The idea of some noble class of investors championing disruption is dead. They're just a bunch of rent seekers like everybody else. For some silly reason I had some respect for the startup industry before this, now I see it as a joke. It's great at a personal level that "foun…
I don't understand this comment. 1) SVB was not managed by VC's. 2) SVB went under because they bought US Treasuries, not because they took risky bets on startups.
I believe they're referring to the bailout YC (and others) were asking for- going so far as to arrange a petition last night.
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.
1. FDIC reserve fund (from the premiums they collect)
2. "a special assessment" aka a tax on member banks directly
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?
They don't, they got fired already.
Pretty mild consequences considering the magnitude of their screw up. Doubt they're going to be missing any meals or have trouble paying the electric bill.
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.
> Banks use deposits to extend loans to other customers
"Money creation in the modern economy" from the Bank of England is worth a read - it explains why this isn't the case.
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.
> No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer. i'm out of touch with how much of this works, can someone explain how this is paid without burden to the taxpayer?
It's coming out of the insurance fund, which is paid into by banks. So the cost is still ultimately borne across a wider sphere, but not the government per se. (This is what's meant by "Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law.") The costs aren't borne by "the taxpayer", but an awful lot of taxpayers who had nothing…
yupppp
at least they have to pay lipservice now and not just printing billions and handing them straight to the rich
So, is this a bailout, that we are definitely absolutely not calling a bailout?
No it's not because it only covering deposits.
If you want to call it a bailout it would be an bailout of investment/company money parked in SVB but _not of SVB itself_.
Furthermore SVB might still have enough assets to cover that (or most likely a very huge part of it), they just don't have enough cash/liquidity to continue on as a company.
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…
> At the same time, this is yet another example of changing the rules in the middle of the game.
No, its not.
The “rules” of the “game” authorize systemic risk exceptions, so applying them is not a change to the rules of the game. Moreover, civilization is one continuous game, changing the rules in the middle is the only way to ever change the rules.
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.
I mostly agree with this, but I feel like the past 25 years or so, ever since "the Greenspan put", has just gone more and more in the direction of telling people that they don't need to worry about doing adequate risk assessments, because if you have powerful people that yell loud enough, and you can cause enough damage, that Washington will come to the rescue. Eventually, I just don't see this ending well. As someon…
The decisions about "is this bank adequately capitalized to serve its depositors" should be made by the regulators, not by the market. We know what it takes to run a bank safely, and its really easy to both quantify and test. This is how the "too big to fail" banks are run today. No one talks about the moral hazard of elevators (make sure you inspect it before you get on) or airplanes (make sure you do your own pre flight check) we trust that the regulators have set up processes that make this infrastructure safe for the public to use. Even with a deposit guarantee, a poorly run bank can still be closed by regulators, a bank run doesn't need to happen for a bank to be shut down, just like an elevator accident doesn't need to happen to decertify an elevator in a building.