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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

#421

Post by Rury »

jnwatson wrote: post #303
pdq wrote: 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.

>The whole point of the FDIC is to avoid contagion, and they nipped this in the bud, again.

Maybe. Part of the problem here is related to Glass-Stegall. Depositors are essentially the ones backing the investors at a bank these days. So, they just shifted who's footing things here, from the depositors and investors at SIVB, to depositors and investors at other banks. This approach has essentially dispersed the risk into the broader economy. As so, don't be surprised if this ultimately exacerbates contagion in the end.

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

#422

Post by birdymcbird »

Fede_V wrote: post #378
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…

Joe Weisenthal (who is always worth listening too in matters of finance) put it well here: https://twitter.com/thestalwart/status/1634985524007157760?s... Some VCs were definitely better than others: the very worse was probably the All In Crew who were trying to spread a bank run to tie the government's hand. Truly despicable.

saw their all in episode. definitely did not get signal you described.

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

#423

Post by chernevik »

Jabbles wrote: post #232
seo-speedwagon wrote: post #98

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…

One of the key components of a bailout is that the company still exists. In this case, the company does not exist any more, and all shareholders have lost their stock. So whilst there may be some superficial appearance of a bailout (and we don't yet know how much that is, as we don't actually know the value of the assets that are recoverable), it is inaccurate to say that this is "100% a bailout".

It's been fun watching the special pleaders redefine "bailout", as if the term could only apply to equity or bonds.

It can apply to any interested party. As in "The depositors were bailed out".

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

#424

Post by dougmwne »

modeless wrote: post #393
chernevik wrote: post #377

It'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.

What about the VCs? Why were they made whole? They are the ones that owned all these businesses.

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

#425

Post by avalys »

moose_is_loose wrote: post #266
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.

Yeah, shit is gonna hit the fan over this in terms of domestic turmoil. All those people who took PPP loans and Silicon Valley VCs getting bailed out who railed against student debt relief, it's just mind boggling. Just wait until student borrowers start getting squeezed and the Supreme Court nixes the debt relief. This is not good for long term political stability.

PPP loans were designed to be forgiven from the start. They were loans only in the technical sense. It was a mechanism for the government to allow companies to continue to pay employees during the pandemic lockdown, instead of firing them. Complaining about PPP loan forgiveness is disingenuous.

As for student debt relief, there's a huge difference between someone depositing money in a regulated major bank and expecting that Federal regulators were doing their job and that their money would be safe, vs. someone taking out a $100,000 loan for their own benefit and expecting the government to essentially pay it off for them.

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

#426

Post by tome »

somewhereoutth wrote: post #319

> Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer. Not convinced both those statements can be true.

Yes, there's a lot of sleight of hand going on here. This is also highly suspcious:

> Finally, the Federal Reserve Board on Sunday announced it will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors.

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

#427

Post by snotrockets »

LewisVerstappen wrote: post #235
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…

> 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…

> A ton of the prominent VCs were writing out checks from their personal bank accounts so that founders could meet payroll.

Because they have duty to do so, as (part) owners of those companies. They could face personal liability for being negligent enough. You'd think any company with non-trivial payroll should've known better than not to hedge on all the things, including their banking partner.

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

#429

Post by 0xDEF »

midnightdiesel wrote: post #406

Meanwhile Peter Thiel is off plotting his next gambit to fleece and destroy this country.

Don't forget his buddy David Sacks and to a lesser degree Elon Musk. The "PayPal mafia" turned out to be just as damaging to society as a real mafia.

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

#430

Post by chank »

metalspot wrote: post #354
chank wrote: post #211

Earlier quoted context omitted.

> changing the rules in the middle of the game. That's literally how legal systems work.

not credible ones. google "ex post facto law" if you are confused about this.

No, all credible ones work by updating "rules" on the fly. That's literally how most laws are made in general. Something bad happens and appointed agencies and legislators rule and/or pass laws to cover that bad thing from happening again. Ex post facto only deals with retroactive aspects. Which isn't happening here. Just because the government acted one way in the past and not the same way in this instance does not equate to the retroactive definition of ex facto law.
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