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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

#271

Post by huhneverthot »

version_five wrote: post #112

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…

Who would've thought post-hand-wringing-over-poor-300k-salary-tech-workers realizing their disposability that we would have another event reminding HN just how different the rules are for capital owners than the rest of us.

Why is that tech workers, many of whom easily have earned over a million dollars in salary over the past few years can't be told to "live within their means"?

Why is it that the same VCs that rallied against student debt relief think their poorly run bank should be bailed out?

I know why, this thread is chalk full of it. "We were smart, we were playing the game with the advantage we were told made us untouchable, we can't fathom gasp 'negative consequences' whatever those are".

I'm sick of it and thankful to see people seeing through this a bit more than usual. Downvoting isnt going to change a damn thing, click your hearts out and enjoy the dissonance. See ya in the next too-big-to-fail-as-a-result-of-unchecked-corporate-greed thread. lmao

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

#272

Post by mgraczyk »

nateburke wrote: post #243
mgraczyk wrote: post #61

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.

They should claw back SVB CEO pay and televise the moment the funds move. Show the CEOs number going down and some other public number going up. Bonus points if his face is televised at that moment at well That's all that's really necessary in terms of handling moral hazard and public perception that this is yet another bailout. Let ppl see the CEO suffer and they will be fine with having taxes foot the bailout bill.…

Do you think software engineers who write bugs should also be publicly humiliated? Should your bonus be clawed back if you tech lead a project that ends up failing because of bugs?

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

#273

Post by anonymous_sorry »

LatteLazy wrote: post #263
bradleyjg wrote: post #160

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.

Which banks were offering elevated interest rates in the last decade?! I must have missed that memo...

SVB

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

#274

Post by tialaramex »

saurik wrote: post #111
mixdup wrote: post #79

Earlier quoted context omitted.

Well, paying for it by a special assessment on banks means the banks aren't going to get a free ride. They, as a group, have to get their shit together otherwise they will pay dearly

I think (but am honestly not 100% sure here) that the argument is if other banks are going to have to pay for SVB being greedy, it is in some sense punishing banks for not being greedy enough; as while, sure, the SVB investors are getting hit: 1) a lot of them already made a lot of money years ago (and potentially exited), 2) many of the executives apparently literally sold out last month, and 3) they were hoarding a…

You probably can't hope for better under the US system. Maybe other banks will push hard to not allow more SVBs in the future after seeing this.

Suppose I'm a Utah bank that is mostly lending money to diverse local businesses and home owners, and mostly taking deposits from other businesses, some local and some not, and would-be future home owners. Last week I probably didn't care that SVB wasn't required to be as risk-averse as I was, if they failed what do I care?

Today, seeing this news, I care a great deal, and I don't want to see other banks allowed to take risks I wouldn't have been permitted unless they're paying a lot more than I am for the privilege, because when they fail - and they will fail - I don't want to pay for that.

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

#275

Post by swatcoder »

hammock wrote: post #249
swatcoder wrote: post #108

Earlier quoted context omitted.

My read is that they see the shortage at SVB as relatively small and that they may be closing some marginal banks like Signature ahead of true insolvency/illiquidity to both protect depositors and minimize reactionary withdrawals across the broader market. And it sounds like they have the authority to just do this on a Sunday, so it doesn’t sound like any rules being changed. If I was a banker with a marginal portfol…

>they may be closing some marginal banks like Signature ahead of true insolvency/illiquidity That seems unjust and probably illegal. What makes you think Signature isn’t actually insolvent?

Maybe they are. I would assume that the government has some discretion over when to intervene, since financial status is dynamic, but I don’t know.

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

#276

Post by AYBABTME »

hn_throwaway_99 wrote: post #181
mgraczyk wrote: post #61

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.

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…

Why isn't it. Pragmatically it's pretty silly to insure the first 250k and then expect people to go through the trouble of spreading their cash over a multitude of accounts. Punishing people for not having accounted for black swan events in their risk assessment is also not scalable. Do we want people to do useful stuff, or to spend their time digging the rule book to ensure they've accounted for every eventuality?

Also it's not like once you have 250k in the bank, you're suddenly a finance wizz, omniscient of all the tricks and tips with regard to treasury management. Even as you get into the low millions of net worth, it's not like you suddenly became a HBS graduate. A lot of regular hard working people end up hitting those limits and wouldn't reasonably be expected to learn about treasury-foo. A lot of young or small businesses are in the same lot. Being somewhat wealthy doesn't turn you into a fine financier. And even if you think those folks should hire advisors, it's not like they can afford to hire the right ones with this relatively small amount of wealth.

I think resentment of having gone through the pain of spreading your cash, in vein, isn't a good reason to screw up hundreds of thousands of salaried employees, and a bunch of regional banks.

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

#277

Post by ummonk »

ZachPruckowski wrote: post #17

> "Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law." Very curious to see who ends up paying this special assessment. Are we all going to pay in lower deposit/investment interest from banks? Are bank shareholders/profits gonna eat it?

Bank market caps had fallen something like 100 billion last week. Compared to that the cost of any special assessment will be miniscule.

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

#278

Post by [deleted] »

patientplatypus wrote: post #193
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 was reading this and came across "No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer." What does this "special assessment on banks" mean in practice? Do they just go to all the bulge bracket banks and demand that they buy the outdated Treasuries at a loss? How does this work?

[deleted]

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

#279

Post by anigbrowl »

duxup wrote: post #231
version_five wrote: post #112

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…

>how prominent VCs behaved How did they behave? Try to pull their money out of a failing bank? I would too ...

Running to the Fed for help as soon as shit got real; made a lot of the bootstrapping libertarian ethos stereotypically espoused by a certain of VC seem very hollow.

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

#280

Post by [deleted] »

mortenjorck wrote: post #159
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."

[deleted]
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