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

home.treasury.gov

301–310 of 1001 posts

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

#301

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…

> prominent VCs behaved during the brief period of uncertainty A ton of the prominent VCs were writing out checks from their personal bank accounts so that founders could meet payroll. > For some silly reason I had some respect for the startup industry before this, now I see it as a joke Wait seriously? You somehow lost more faith from this than you did from - crypto - Adam Neumann - $100m seed rounds and like 30 oth…

> Having your bank account randomly disappear isn't one of the risks that anyone should have to take.

Then you put your funds in less risky banks who did not lobby to get an exemption from the regulations that protect against precisely this kind of thing. Even, spread it around safer banks.

Putting all of one's money in a bank because they have better returns or other investment opportunities is business. Not something that someone can be safe at the public's expense.

The public, because the public will pay for this one way or the other - if this is paid from the insurance that insures all banks like how the statement says, then it will cause all the banks who pay into this insurance pool to reflect it on their customers with fees. So every single person with a bank account in the US will pay. Its still public money, but it doesnt come directly from the US govt.'s pocked, so its 'okay'.

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

#302

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.

But, crucially, the shareholders are wiped out. No CEO would be incentivized to repeat the SVB strategy if they stand to make no gains from it.

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

#303
post #68

Yet another new precedent by the Fed and FDIC. All depositors are now guaranteed their funds if a bank fails. This is the definition of Moral Hazard [1]. [1] https://en.wikipedia.org/wiki/Moral_hazard

No it isn't. In the history of the FDIC, no depositor has ever lost money, regardless of balance. The whole point of the FDIC is to avoid contagion, and they nipped this in the bud, again.

Moral hazard is if they made the investors whole. They did not. Depositors are not investors.

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

#304

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…

Why the scare quote on “founders”? It makes your comment come across as motivated.

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

#305

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.…

The CEO cashed out $3.6 million in stock two weeks ago.

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

#306

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…

>How can you expect startup companies to spread their deposits across multiple banks?

Buy one year CDs from many banks and T-bills.

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

#307

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."

Possibly, but Dodd-Frank wouldn't have prevented what happened at SVB.

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

#308

It's pretty embarrassing how many people thought depositors should be on the hook for this. A banking system where companies or people would actually lose money due to bank failures (especially one caused by a run on the bank) would just lead to people only using BOA, JPM, and some merged WF/Citi/whoever else.

I have a feeling a lot of these people are Bitcoin maximalist. They want depositors to suffer so that they feel vindicated for their faith in Bitcoin.

[flagged]

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

#309

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…

> It's great at a personal level that "founders" and startup employees didn't have to do without. But it's important to remember that they no longer automatically deserve any credit for taking risks and doing something new.

Mm hmm. Yes, after all is said and done, the main take away from this is that startup employees and founders no longer deserve credit for taking risks and doing something new. Glad our priorities are straight here on hackernews.

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

#310

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.

Think of it a different way.

Wells Fargo/BoA are "too big to fail" institutions in the United States.

They got significant back hand, handshake deals, from Washington institutions to not only stay afloat, but for hundreds of little issues.

In essence, the FDIC is a well crafted "redistribution," of all the under the table benefits Wells/BoA get from lobbying the Feds, to the smaller banks.

The US has a deep interest in keeping its smaller banks alive.

I can say, in Australia, the small business lending market is hugely overvalued due to monopolist price gouging by a handful of large institutions.

In Canada, I'm told the situation is similar. Costs to small business are immensely higher than the United States.

Banks similar to Silicon Valley Bank are essential because they undercut BoA, and prevent the "Canada" situation.

Unfortunately, SVB blew its top off. But the system itself is good.

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