Update from Silicon Valley Bridge Bank CEO • Hacker News Board

Re: Update from Silicon Valley Bridge Bank CEO

#41

Post by Alupis » Wed, Mar 15, 2023, 1:33 AM UTC

dragonwriter wrote: post #38

Alupis wrote: post #19

Earlier quoted context omitted.

No, only SVB and Signature enjoy infinity insurance. Everyone else that played by the rules gets a measly $250k max...

> No, only SVB and Signature enjoy infinity insurance. No, only the balances of SVB and Signature at the time of the failure of the former banks have that. There’s no prospective guarantee inheritable by an acquirer. (Admittedly, any bank that could reasonably bid for them, especially for SVB, would probably independently qualify for the systemic risk exception itself if it suddenly failed, but also any bank that cou…

SVB may be called something different today, and probably something different in the near future, but we all know what we're talking about here.

Like I said downstream - if my bank fails next year (or 10 years from now) and I do not get infinite deposit insurance - then where are we? Just the well connected get special treatment? Seems so...

Re: Update from Silicon Valley Bridge Bank CEO

#42

Post by dragonwriter » Wed, Mar 15, 2023, 1:34 AM UTC

easton wrote: post #27

Alupis wrote: post #19

Earlier quoted context omitted.

No, only SVB and Signature enjoy infinity insurance. Everyone else that played by the rules gets a measly $250k max...

In writing yes, but the FDIC always makes depositors whole somehow. Otherwise the banking system would collapse. If some bizarre scenario were to happen (a failure of two of the big four) which the FDIC couldn’t recover, in the words of Dwight Schrute, “you’ve all been dead for weeks”.

> but the FDIC always makes depositors whole somehow.

This lie keeps getting repeated, but while it usually manages to do that (by facilitating a buyout, often before or over a business day – sometimes longer in calendar time because of a weekend – when the bank is closed), it doesn’t always, even when it facilitates a buyout rather than being forced to create a takeover bank.

When it does takeover without facilitating a buyout, it never protects uninsured deposits without invoking the systemic risk exemption.

> Otherwise the banking system would collapse.

Well it does where the banking system would collapse, that’s literally the point of the systemic risk exception.

Re: Update from Silicon Valley Bridge Bank CEO

#43

Post by tenpies » Wed, Mar 15, 2023, 1:36 AM UTC

sroussey wrote: post #16

Alupis wrote: post #14

Earlier quoted context omitted.

The result is the same. SVB has infinity insurance on all deposits, provided courtesy of the tax payer. This is a naked attempt to pump the value of SVB assets, and seek a less-than-fire-sale to another institution.

Don’t all banks have that right now?

On paper, only SVB.

In practice, we just saw that the US government will gladly retroactively change the rules to insure any amount of money. For all practical purposes, trillions of dollars in deposits became insured by US tax payers this week.

And that's on top of the totally-not-QE BTFP facility they conjured up. That is available to all insured banks who have any underwater asset that they wish to move to the Fed's balance sheet at par for a mere ~5% per year.

Re: Update from Silicon Valley Bridge Bank CEO

#44

Post by dragonwriter » Wed, Mar 15, 2023, 1:46 AM UTC

Alupis wrote: post #41

dragonwriter wrote: post #38

Earlier quoted context omitted.

> No, only SVB and Signature enjoy infinity insurance. No, only the balances of SVB and Signature at the time of the failure of the former banks have that. There’s no prospective guarantee inheritable by an acquirer. (Admittedly, any bank that could reasonably bid for them, especially for SVB, would probably independently qualify for the systemic risk exception itself if it suddenly failed, but also any bank that cou…

SVB may be called something different today, and probably something different in the near future, but we all know what we're talking about here. Like I said downstream - if my bank fails next year (or 10 years from now) and I do not get infinite deposit insurance - then where are we? Just the well connected get special treatment? Seems so...

> Like I said downstream - if my bank fails next year (or 10 years from now) and I do not get infinite deposit insurance - then where are we?

In the exact same place we’ve been for the last 15 years (much longer, really, because the last crisis wasn’t the start of this, either), between the time the systemic risk exception was announced for three large banks, and all the bank failures in between where it was not invoked.

A place where the FDIC guarantees $250K per depositor per ownership category per bank but tries to facilitate takeovers that protect uninsured balances and where, with the Treasury and President, might protect something more, if the conditions for the systemic risk exception are determined to apply.

The systemic risk exception has existed since at least 1950, was invoked as far back as 1980, and was easier to invoke (the FDIC could do it on its own) prior to 1991. It was also less necessary prior to 1991, since the FDIC could facilitate a sale even when doing so was more expensive than a payout of only the insured accounts until the least cost rule was put into the law in 1991, and in fact, since the 1960s, the general policy was to, where possible, facilitate a buyout by another bank to protect all depositors even when the cost to the Deposit Insurance Fund was greater than a payout of insured balances.

The arguments about the use of full-protection via the systemic risk exception for SVB fundamentally changing things is just, completely, historically ignorant.

Re: Update from Silicon Valley Bridge Bank CEO

#45

Post by TMWNN » Wed, Mar 15, 2023, 1:47 AM UTC

ekianjo wrote: post #33

> bring back to money to our bank This guy really thinks people are THAT stupid?

Tim Mayopoulos https://www.linkedin.com/in/timothy-j-mayopoulos-56972a45/> is

* a complete outsider to SVB

* formerly with FDIC

* ran a consumer banking-tech startup until joining SVB

* ran Fannie Mae for six years after the 2008 financial crisis

* high-level experience at BofA and Deutsche Bank

He sounds like about as ideal a person to run the new SVB as imaginable.

Re: Update from Silicon Valley Bridge Bank CEO

#46

Post by TMWNN » Wed, Mar 15, 2023, 1:49 AM UTC

rhaway84773 wrote: post #31

smcin wrote: post #7

Earlier quoted context omitted.

Somewhere between "$250k" and "infinite" would have been less moral hazard. Feels like we've set a dangerous precedent, but only for depositors who are politically connected and can instill panic. When does the de facto unlimited FDIC insurance expire/ When does Silicon Valley Bridge Bank go back to normal? Second: IIUC, any shortfall in making SVB depositors whole will come from a levy on the rest of the banking sys…

When was the last time non politically connected depositors lost money from their checking accounts? The only “moral hazard” being created here is encouraging people to deposit money in smaller banks. If the govt hadn’t created the “moral hazard” then people and businesses would simply have chosen to do all their banking with the much safer big banks like Chase and Citibank. The reality is that Americans don’t want a…

> When was the last time non politically connected depositors lost money from their checking accounts?

Many times. The typical uninsured depositor in bank failures from 2008 to today got about 75 cents on the dollar.

Depositors in IndyMac in 2008 got 50 cents on the dollar.

Re: Update from Silicon Valley Bridge Bank CEO

#47

Post by dylan604 » Wed, Mar 15, 2023, 1:50 AM UTC

Alupis wrote: post #37

dylan604 wrote: post #32

Earlier quoted context omitted.

Is that a fair assessment or just a knee jerk reaction to first reading? How long will the FDIC make this unlimited protection available to SVB++? Is it just long enough to calm everyone down, and then in a few weeks/months release a very quite announcement that the guarantee is going back to the original $250k? If it is new gov't policy that all accounts every where are guaranteed for ever, then that's a huge bankin…

If my bank fails next year, and I don't get infinite deposit insurance - where are we then? The fact that the FDIC website still says $250k cap is amazingly laughable. It's either unlimited for everyone every time, or it's $250k for everyone every time. The reality is - it's infinite deposit insurance if you are well connected. Let that sink in folks.

obviously this is a rhetorical question, but are you really going to be hurt by the $250k cap? really?

If so, maybe it's time for a better banking plan than "all eggs in one basket"

Re: Update from Silicon Valley Bridge Bank CEO

#48

Post by dragonwriter » Wed, Mar 15, 2023, 1:54 AM UTC

sroussey wrote: post #16

Alupis wrote: post #14

Earlier quoted context omitted.

The result is the same. SVB has infinity insurance on all deposits, provided courtesy of the tax payer. This is a naked attempt to pump the value of SVB assets, and seek a less-than-fire-sale to another institution.

Don’t all banks have that right now?

No, though all banks now have protection against the HTM assets fire-sale conditions which caused SVB to fail, which, from the perspective of stockholders, executives, and non-depositor creditors is a lot better than infinite deposit insurance, because its a lot stronger protection against failure (which wipes out those three groups), even if its not a stronger protection for depositors if failure happens anyway.

Re: Update from Silicon Valley Bridge Bank CEO

#49

Post by Alupis » Wed, Mar 15, 2023, 1:59 AM UTC

dylan604 wrote: post #47

Alupis wrote: post #37

Earlier quoted context omitted.

If my bank fails next year, and I don't get infinite deposit insurance - where are we then? The fact that the FDIC website still says $250k cap is amazingly laughable. It's either unlimited for everyone every time, or it's $250k for everyone every time. The reality is - it's infinite deposit insurance if you are well connected. Let that sink in folks.

obviously this is a rhetorical question, but are you really going to be hurt by the $250k cap? really? If so, maybe it's time for a better banking plan than "all eggs in one basket"

The point is not whether or not I personally would be hurt by this, or rather the metaphoric I, for the matter.

The point is the rules where changed mid-game to protect a bunch of very well connected people that played extremely loose with the "rules" and will suffer zero consequences as a result - because my personal dollars are being used to protect them.

Regarding the $250k cap in general - in my opinion, it's far too low. It's lower than the average price of a house in a large amount of the country.

Re: Update from Silicon Valley Bridge Bank CEO

#50

Post by Alupis » Wed, Mar 15, 2023, 2:08 AM UTC

dragonwriter wrote: post #44

Alupis wrote: post #41

Earlier quoted context omitted.

SVB may be called something different today, and probably something different in the near future, but we all know what we're talking about here. Like I said downstream - if my bank fails next year (or 10 years from now) and I do not get infinite deposit insurance - then where are we? Just the well connected get special treatment? Seems so...

> Like I said downstream - if my bank fails next year (or 10 years from now) and I do not get infinite deposit insurance - then where are we? In the exact same place we’ve been for the last 15 years (much longer, really, because the last crisis wasn’t the start of this, either), between the time the systemic risk exception was announced for three large banks, and all the bank failures in between where it was not invo…

It is disingenuous to say something required a SRE, will be guaranteed 100% by the government (ie. tax payers) - and then also claim it is not a bailout.

I am not putting words in your mouth - that is the logic the government is feeding everyone today.

It is also disingenuous to claim a techy bank that catered to the tech sector posed an imminent risk to the entire banking system, ie the systemic part of the SRE. A bunch of tech elites and big tech companies would have been burned - and some failover would have happened certainly, but this was not a system issue, it was bad choices made explicitly by banking executives at some specific banks.

It is also disingenuous to claim no tax payer money is involved when it is in fact tax payers that are providing all the guarantees here, bear future risks, and ultimately will pay for it with bank fees and more.

The entire thing is a political exercise. Don't look behind the curtain... because it might all topple over.