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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

#491

Post by JumpinJack_Cash »

gizmondo wrote: post #317
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.

Actually a lot of depositors would be happy with a narrow bank that takes no risk, just holds the money at the Fed. But the Fed decided it's too safe so narrow banking is essentially banned. Seems fair if they ensure safety of deposits in return.

How is that banned? The Fed Fund Rate is effectively the same as the 1yr Treasury Note, except even if everything collapses like the Black Monday, 2008 or March 2020 (trifecta of bonds,stocks and commodities collapsing) you (as a commercial bank) can always and in any event access those funds.

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

#492

Post by xupybd »

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…

They really need regulation that requires banks to hold more funds. They have to be able to withstand small runs.

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

#493

Post by Dem_Boys »

With this news, I'm opening a bank. Here is my business plan:

1. Make risky investments and offer better terms than other banks

2. Watch business flock to me

3. Get filthy rich on yearly bonuses

4. 10 years later my risky investments blow up (Make sure to sell stock before)

5. Get taken over by the FDIC

6. Don't return those years of bonuses

7. Let other banks pay for my wrongdoing with a "special assessment"

8. Walk away as a filthy rich failed bank executive

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

#494

Post by IAmGraydon »

Octokiddie wrote: post #270

Translation: the Fed is done raising interest rates. Period. Forget all of the tough talk by the team over the last few months. We raise until we break something. Now that we broke it, that's that. As for that inflation problem... It will require another solution...

Wrong. The Fed is well aware that things will break as they raise rate. That's the nature of what they're doing.

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

#495

Post by corbulo »

cragfar wrote: post #164

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.

There are risk profiles between crypto/sv banks and JPM & co. lol

What is this sentiment called? SVCentrism?

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

#496

Post by college_physics »

If I interpret the action correctly the Fed just granted all banks a giant put option to place any government securities at par for cash whenever interest rates move against them

The only decent thing would be to remove the bank's freedom to (mis)manage interest risk altogether, have sovereign money deposits with the central bank and force private banks actually work for their profits by properly managing risks

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

#497

Post by dpkirchner »

Dem_Boys wrote: post #493

With this news, I'm opening a bank. Here is my business plan: 1. Make risky investments and offer better terms than other banks 2. Watch business flock to me 3. Get filthy rich on yearly bonuses 4. 10 years later my risky investments blow up (Make sure to sell stock before) 5. Get taken over by the FDIC 6. Don't return those years of bonuses 7. Let other banks pay for my wrongdoing with a "special assessment" 8. Walk…

9. Get hired by another bank as CFO (See Lehman Brothers/SVB for a tutorial)

10. Repeat

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

#498

Post by bagels »

college_physics wrote: post #496

If I interpret the action correctly the Fed just granted all banks a giant put option to place any government securities at par for cash whenever interest rates move against them The only decent thing would be to remove the bank's freedom to (mis)manage interest risk altogether, have sovereign money deposits with the central bank and force private banks actually work for their profits by properly managing risks

It's the only sensible choice with unlimited backstop. It should have already been happening, really because the only difference from last week is that the guarantee was made explicit and we don't have to wonder.

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

#499

Post by tick_tock_tick »

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…

> At the same time, this is yet another example of changing the rules in the middle of the game

Every time the FDIC has stepped in like this they have made all depositors whole. This is not new behavior.

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