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Fed and FDIC discussing backstop to make SVB depositors whole, stem contagion

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Re: Fed and FDIC discussing backstop to make SVB depositors whole, stem contagion

#51

Post by swatcoder »

bedhead wrote: post #47
jimt222 wrote: post #7

A.k.a. “moral hazard”. When people take financial risks (such as holding more than $250K in FDIC insured bank account), why should taxpayers cover their losses?

In what bizarro world should holding cash in a perfectly legitimate bank to earn a negligible interest rate be considered "taking a financial risk" on par with like buying crypto or something???

That bizzaro world of deposits bearing risk is the one we’ve all been knowingly living in for the entire history of banking.

The FDIC is a modern intervention that protects most personal and small business accounts from needing to consider that risk.

Clearly, some people who grew up in the shadow of that insurance protection failed to learn about this “bizarro” world that they lived in and made uninformed choices when they suddenly came into money.

But the world never changed, just the naiveté of the people making deposits.

Re: Fed and FDIC discussing backstop to make SVB depositors whole, stem contagion

#52

Post by ok_dad »

Vecr wrote: post #40
labrador wrote: post #26

As a Independent non-aligned American voter, I have to ask myself did Peter Thiel deliberately cause a run on SVB? Did Elon Musk buy Twitter to destroy it as an effective platform for Democratic organizing? Is Musk coordinating with Tucker Carlson to push propaganda that Jan 6 was merely constitutionally protected protest? And are House Republicans coordinating with Thiel, Musk and Tucker Carlson over the debt ceilin…

Only the Jan 6 protest outside the in-use government buildings was constitutionally protected. As far as I know the congress does not have to allow random people to disturb them while in session and can enforce that. In general, it's safe for the police to do so, I think they should arrest all rioters on basic misdemeanor charges, do a bit of investigation, and then let those go who did not do anything. Obviously in…

Well, the one person who tried to “peacefully” climb over several barriers, bust a window, and enter any sort of chambers (while screaming and threatening violence) was shot due to the threat of the other several hundred “peaceful protestors” that day. I guess you and I have read different accounts of what went down.

Re: Fed and FDIC discussing backstop to make SVB depositors whole, stem contagion

#53

Post by AmVess »

hello_moto wrote: post #49
sidewndr46 wrote: post #28

Earlier quoted context omitted.

As it ought to be. Idiots gave some idiots money who banked said money with idiots. The answer is not for the government to step in and rescue the idiots. The idiocy will only proliferate when that happens.

love the simplistic world of view of an HN reader against a financial institution that has been in business for 40 years....

You mean the business that is now out of business and needs many billions in bailout cash. THAT business?

Re: Fed and FDIC discussing backstop to make SVB depositors whole, stem contagion

#54

Post by anonuser123456 »

louloulou wrote: post #21
anonuser123456 wrote: post #11

Earlier quoted context omitted.

There is a legitimate issue beyond “but Capitalism” here. Banks that may be otherwise solvent may become insolvent because of a domino risk of bank runs. Probably the right thing to do is forced equity dilution of a bank experiencing a run. That is, the Fed buys senior equity in the bank and the injection pays for short term losses. The equity injection guarantee alone would likely be enough to stop the contagion and…

> Banks that may be otherwise solvent may become insolvent because of a domino risk of bank runs. That to me implies the bank was never solvent in the first place. You could have easily created a bank that is always solvent, see the case of The Narrow Bank , but the Fed wouldn't allow it.

I don’t disagree with narrow banking. But the situation we are in is all based on the banking system we have today. And that banking system does have real systemic risk today.

Re: Fed and FDIC discussing backstop to make SVB depositors whole, stem contagion

#55

Post by christophilus »

labrador wrote: post #43
Vecr wrote: post #40

Earlier quoted context omitted.

Only the Jan 6 protest outside the in-use government buildings was constitutionally protected. As far as I know the congress does not have to allow random people to disturb them while in session and can enforce that. In general, it's safe for the police to do so, I think they should arrest all rioters on basic misdemeanor charges, do a bit of investigation, and then let those go who did not do anything. Obviously in…

There's a big effort on the right, including by Musk, to rewrite history and portray them as political prisoners ahead of the 2024 election.

There’s been a big effort on both sides to rewrite history. A bunch of dumb, rowdy protestors made some dumb moves. One side heralds them as patriotic heroes. The other as dangerous, violent insurrectionists the like of which we’ve never seen.

Nah. They were just a big, dumb crowd doing big dumb things.

Re: Fed and FDIC discussing backstop to make SVB depositors whole, stem contagion

#56

Post by grogers »

machina_ex_deus wrote: post #38

If this happens, banks have officially lost all their legitimacy and all banks should have their priviledges revoked. There is absolutely no reason banks should be given the priviledge of being the only way to deposit money, while playing with those customers money and simultaneously having zero risk on that money. These banks are getting 10 to 1 leverage, from me, captive customer. Break their monopoly. I want an ac…

You want a quasi-government agency to have unlimited tracking and control over your transactions? Banks may suck but a CBDC is straight up scary. It's bad enough we have to put up with the capriciousness of the Fed's monetary policy, the less power they have the better.

Re: Fed and FDIC discussing backstop to make SVB depositors whole, stem contagion

#57

Post by christophilus »

sidewndr46 wrote: post #19

Why does the government & media get away with using words like "contagion"? If a single bank failure were to precipitate the collapse of the US banking system as a whole, this isn't a contagion. It is the reality of the insanely fragile nature of US banking.

The media does it because sensationalism is the only thing they know. The non-sensationalist outlets went out of business a long time ago. Turns out, facts don’t sell newspapers.

The government is the same, except they are looking for votes, not sales. They have to convince you that they’re doing big, important things, and that their opponents are commie/nazis who want to kill God/send us back to the stone ages.

Also, there’s a little risk of contagion, so… it isn’t totally wrong to talk about that.

My cynical 2 cents. It explains almost all of the silly behavior I hear about from my more political friends.

Re: Fed and FDIC discussing backstop to make SVB depositors whole, stem contagion

#58

Post by hello_moto »

AmVess wrote: post #53
hello_moto wrote: post #49

Earlier quoted context omitted.

love the simplistic world of view of an HN reader against a financial institution that has been in business for 40 years....

You mean the business that is now out of business and needs many billions in bailout cash. THAT business?

You ran a bank before?

You better hope people don't lose confidence on their Bank by Monday.

Re: Fed and FDIC discussing backstop to make SVB depositors whole, stem contagion

#59

Post by fach »

machina_ex_deus wrote: post #50
fach wrote: post #46

Earlier quoted context omitted.

If the Fed provides a backstop for uninsured deposits, all banks have lost their legitimacy? They are not bailing out shareholders.

They are officially announcing to all listening banks that customers deposits are theirs to gamble with as they please. Why do banks get to play with those deposits, as if they were just free leverage from unwilling captive participants? How can small banks compete against big banks that can allow themselves to act this way? They can't. If you're big you get to risk it all. If you're small nobody will come to you as…

> If I gambled away all your money you'd never give me more again

Apart from the arguing about the definition of gambling here applied to the SVB situation, no one is going to be able to give SVB another dime after this. They no longer exist. This is the exact opposite of risk free.

Re: Fed and FDIC discussing backstop to make SVB depositors whole, stem contagion

#60

Post by pgwhalen »

jimt222 wrote: post #7

A.k.a. “moral hazard”. When people take financial risks (such as holding more than $250K in FDIC insured bank account), why should taxpayers cover their losses?

Because there is incredible social utility in having the most basic form of money (bank deposits) actually retain its value without depositors having to think too hard about it.
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