Anonymous treasury official alluding that other banks might be in similar situations:
https://twitter.com/sonalibasak/status/1635059528546000897/p...
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
#392Yellen 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 never thought Mnuchin was the most competent of all people but regardless of how this particular SVB saga plays out, Yellen has to be one of, if not, the most incompetent treasury Secretary of the recent past. She came into power and the first thing she did was suggest a global minimum tax rate, as if that would have fixed the accounting tricks that companies use to reduce the actual tax they pay. Disconnecting the…
Agreed 100% Yellen sucks. She would be bad in "good" financial times, but in our current times, its even worse. Mismanaged inflation (or at least perception of it) and is offering the US as a personal bank to Ukraine (among 100x other things).
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#393It's a bailout. They're putting the cost, presently unknown and probably not huge, on the other banks. But the message to depositors everywhere, of every size, is "don't worry about your bank's solvency, we'll protect you". So market scrutiny is removed as a discipline on bank asset strategy. That leaves regulation as the only control. That politicizes and bureaucratizes bank lending. And the general presumption that…
Shareholders are wiped out, so there will still be quite a bit of market scrutiny on banks.
Edit: just to point out that I'm not claiming this is "not a bailout because shareholders were wiped out". It's a bailout of course.
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#394Can anyone help me understand why would any bank practice proper risk management after this?
SVB took on risk by catering to high risk clients (startups). Growth metrics were great as a result. And stock performed spectacularly (up nearly 6x from April 2020 lows at ath).
More conservative banks like JPM, however, saw modest growth.
If you're a banker and your salary is tied to stock performance, why not just adopt the SVB playbook, take on riskier clients, show strong growth, cash out your stock options, and when it all ends, just walk away without any guilt since the government will bail out your customers anyway?
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#395Earlier 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.
>> and senior management are going to get wiped out and fired. Yeah, let's punish the management like we did in 2008... "SVB executive was Lehman Brothers CFO prior to 2008 collapse" https://m.economictimes.com/news/international/business/svb-...
Look, it's a meme, you're not supposed to take them seriously. The guy is an executive at SVB Securities, a separate branch that is completely fine.
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#396Good to see the wealthy elites banding together to lookout for themselves!
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#397So 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…
Just think of this moment as a great interview question during the next upcycle
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#398I'm surprised the top comment wasn't focusing on this bit of the statement: "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."
Crypto focused bank and pretty small, even in consideration of historical bank runs
Re: 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
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