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Update from Silicon Valley Bridge Bank CEO

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Re: Update from Silicon Valley Bridge Bank CEO

#51

Post by dylan604 »

Alupis wrote: post #49
dylan604 wrote: post #47

Earlier quoted context omitted.

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…

To be clear, who are the people that "played extremely loose" in your ire? The bank management or the individual bank account holders that had more than $250k in the accounts?

What does the price of a house have to do with the cash-on-hand bank accounts of the average citizen?

Re: Update from Silicon Valley Bridge Bank CEO

#52

Post by dragonwriter »

Alupis wrote: post #50
dragonwriter wrote: post #44

Earlier quoted context omitted.

> 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 b…

> 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.

The whole FDIC system (with or without the systemic risk exception) is a system of bailouts of depositors paid for by assessments on banks (which, sure, are a kind of targeted tax, and thus constitute funding “by the taxpayers”.)

Other than the fact that your earlier points are indefensible, I’m not sure what the point of responding in thread with such a sudden radical shift of topic is, though.

> 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.

I dunno, more than $100 billion in uninsured deposits, largely he operational accounts of a large number of businesses (not isolated to the tech sector, but mostly either geographically in the region of the bank or in the tech sector or both), which given the nature of the asset situation of the bank could be expected to either be resolved quickly at a very low percentage of face value or extremely slowly at a better percentage, would have massive knock-on effects on the businesses involved, there employees and investors, their creditor (ultimately, in large share, other banks), etc. Is it a different character of systemic risk, in some regards, than other previous invocations? Sure. But while there are clusters of similar case, systemic risks tend to be different from each other in details.

> 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.

The “systemic” in “systemic risk” refers to the scope and nature of the effects of the risk materializing, not the nature of the cause of the risk. The systemic risk exception is not about blame, its about the effects of inaction.

> 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.

Maybe. Again, this is just a radical shift of topic.

> The entire thing is a political exercise.

Yes, acts of government are by definition political exercises. This is not, even slightly, in dispute. Are you just looking for random things unrelated to the earlier discussion to try to get into an argument about now?

Re: Update from Silicon Valley Bridge Bank CEO

#53

Post by asciii »

gjsman-1000 wrote: post #25
paxys wrote: post #24

It's quite an ingenious situation. - FDIC guarantees that every deposit at these banks up to an unlimited amount will be paid out by the US government. - Because of that guarantee, the bank run stops and people leave their money there (and in fact deposit more). - Because of the influx of cash the bank solves its liquidity issues and the government doesn't actually have to spend a single penny. In theory all of this…

If I were head of a smaller or regional bank, I’d be running for the lawyers, because I would find it very hard to believe that FDIC would extend their offer in a fair and reasonable manner to smaller banks. If they don’t, it’s arguably a form of extortion, using mandatory fees on small banks to only protect big ones. How would that be legal? To avoid legal hot water, the FDIC may find themselves to equally protect e…

> He also makes a point about how the management was "idiotic" because if they had just gone to JP Morgan, or Wells Fargo, or another big bank

I’ve read a similar sentiment elsewhere about their inability to raise the necessary amount without hitting full panic button.

Whether idiotic or not, the CEO sold before this. Maybe there’s a bigger play

Re: Update from Silicon Valley Bridge Bank CEO

#54

Post by mister_tee »

paxys wrote: post #24

It's quite an ingenious situation. - FDIC guarantees that every deposit at these banks up to an unlimited amount will be paid out by the US government. - Because of that guarantee, the bank run stops and people leave their money there (and in fact deposit more). - Because of the influx of cash the bank solves its liquidity issues and the government doesn't actually have to spend a single penny. In theory all of this…

Apologies if I'm missing something, is this discussing the new Bank Term Funding Program or some other guarantee?

(edit: I see the phrasing "fully protected by the FDIC" -- this might be the general idea that depositors won't lose anything, but not literally that FDIC is officially extending insurance, I think?)

Anyway, for the BTFP, I think it is generally available to all banks. Seems to allow borrowing against underwater assets at par value, at roughly 4.6% interest.

https://www.federalreserve.gov/newsevents/pressreleases/file...

While it came together over the weekend[1] there are some guardrails -- including that it only applies to collateral that was already owned at the time of announcement (so far...).

[1] based on zero evidence, I wouldn't be surprised if they have stuff like this war-gamed and sketched out in case

Re: Update from Silicon Valley Bridge Bank CEO

#55

Post by Scoundreller »

smcin wrote: post #7
zhoutong wrote: post #3

Effectively there are two banks (Silicon Valley Bridge Bank, N.A. and Signature Bridge Bank, N.A.) with de facto unlimited FDIC insurance, as there's explicit guarantee for all existing and new deposits.

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…

The only appropriate thing to do would be to levy a haircut on only the uninsured deposits elsewhere in the banking system. And that's already unfair because it should be retroactive to some degree.

The rest have already been paying for this insurance all along. Wouldn't make sense to levy a fee on fire insurance policyholders when someone without fire insurance has their house burn down.

Re: Update from Silicon Valley Bridge Bank CEO

#56

Post by Scoundreller »

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…

> The only “moral hazard” being created here is encouraging people to deposit money in smaller banks.

Or everyone, nationwide, starts moving every penny they have into whichever bank, anywhere, offers the highest interest rates, without regard to how they accomplish that. Let's call it "risk intensification".

Re: Update from Silicon Valley Bridge Bank CEO

#57

Post by jacooper »

tenpies wrote: post #43
sroussey wrote: post #16

Earlier quoted context omitted.

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…

> For all practical purposes, trillions of dollars in deposits became insured by US tax payers this week.

By the FDIC, not the tax payer.

Re: Update from Silicon Valley Bridge Bank CEO

#58

Post by TMWNN »

jacooper wrote: post #57
tenpies wrote: post #43

Earlier quoted context omitted.

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…

> For all practical purposes, trillions of dollars in deposits became insured by US tax payers this week. By the FDIC, not the tax payer.

Said insurance is paid for by bank customers. The union of bank customers and taxpayers is 1.

Re: Update from Silicon Valley Bridge Bank CEO

#59

Post by mister_tee »

mister_tee wrote: post #54
paxys wrote: post #24

It's quite an ingenious situation. - FDIC guarantees that every deposit at these banks up to an unlimited amount will be paid out by the US government. - Because of that guarantee, the bank run stops and people leave their money there (and in fact deposit more). - Because of the influx of cash the bank solves its liquidity issues and the government doesn't actually have to spend a single penny. In theory all of this…

Apologies if I'm missing something, is this discussing the new Bank Term Funding Program or some other guarantee? (edit: I see the phrasing "fully protected by the FDIC" -- this might be the general idea that depositors won't lose anything, but not literally that FDIC is officially extending insurance, I think?) Anyway, for the BTFP, I think it is generally available to all banks. Seems to allow borrowing against und…

late followup, it might indeed be that FDIC removed insurance limits for these two banks?

I had seen the first round of announcements around receivership certificates https://www.fdic.gov/news/press-releases/2023/pr23016.html

I'm not sure on the time of that but the Fed press release the evening of the same day has the exception and "all depositors will be made whole" phrasing:

https://www.federalreserve.gov/newsevents/pressreleases/mone...

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