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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

#511

Post by ProjectArcturis »

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…

Unlimited FDIC insurance has been the unofficial rule for some time now. No depositor has lost money since 1933, not even when Lehman went bankrupt.

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

#512

Post by bagels »

noelsusman wrote: post #15

It's a bit embarrassing to have to invoke the systemic risk exception when regulations on these banks were relaxed in 2018 on the theory that they wouldn't pose a systemic risk if they got into trouble. This should spark some serious soul searching from everyone involved in that effort, but I'm not holding my breath. Anyway, I'm happy for all the depositors.

Of course the people lobbying for that knew it was a lie to make more money.

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

#513

Post by JumpinJack_Cash »

dev_tty01 wrote: post #287
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. Yellen has just broadcast that FDIC insurance is essentially unlimited, as long as you can threaten wider disruption to the economy. No, there are systemic risk exceptions within the rules. If a bank is large enough, then the systemic risk to the economy as a whole is large enough to warrant this step. "Too big to fail" is…

> > Governments are supposed to act in the best interest of the governed

Many of the governed see what policymakers and politicians call 'systemic risk' and 'instability' as a not so unwelcome wildcard considering that the wealthy of today are mostly descendants of wealthy land owners from the times of the Crusades.

> > They did their job and did it quickly and effectively

Where are the Fed , D.C. , the FDIC etc. when a gas station goes belly up? Or a small family owned boat builder in Maine? Nowhere to be found. Their fault? Not being systemically important enough. Whatever the fuck that means.

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

#514

Post by sinzone »

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…

The was a way to get AHEAD of time. The bank regulatory [Liquidity Coverage Ratio] should have never been pushed to $250B in Deposits threshold.

It was at $50B for a reason since 2008. But Trump administration lifted to $250B in 2018.

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

#515

Post by Zetice »

hizanberg wrote: post #294
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.

We banked at SVB and got 0% interest, it was just the bank recommended for Startup’s to use. It seems the risk was not choosing a top 3 bank since no one can survive a Bank Run and the largest banks are too big to fail. Which is terrible for competition if everyone’s essentially forced to use a top 3 bank just to have confidence for your money in a US Bank to be safe.

It's not true that "no one can survive a bank run", though, and that's why SVB is at fault here, and not just a victim of circumstance.

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

#516

Post by tobias3 »

Looking at the bigger picture, I do not know if this was the correct decision. The depositors were bailed out (it wasn’t just a liquidity issue) and the FDIC is paying for it.

This means all FDIC members will need to pay less interest on deposits to make up for increased FDIC insurance cost.

This will increase the speed with which people take out deposits and put it into e.g., short term treasuries because they get more interest. Enabled by easy-to-use fintec made in Silicon Valley.

This will decrease bank profitability.

And this is on the “Liability” side of the balance sheet. If the FED is successful in causing a recession surely there will be a lot of insolvencies (people swimming naked etc.) and there will be problems on the “Asset” side as well.

How can this end well? We just failed at most easy hurdle here.

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

#518

Post by Forgeties79 »

urthor wrote: post #310
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.

Think of it a different way. Wells Fargo/BoA are "too big to fail" institutions in the United States. They got significant back hand, handshake deals, from Washington institutions to not only stay afloat, but for hundreds of little issues. In essence, the FDIC is a well crafted "redistribution," of all the under the table benefits Wells/BoA get from lobbying the Feds, to the smaller banks. The US has a deep interest…

> Banks similar to Silicon Valley Bank are essential because they undercut BoA, and prevent the "Canada" situation.

There are plenty of small banks that didn’t ignore when Powell/the Fed were repeatedly saying “inflation ain’t over, interest rate hikes are coming.” We talked about this in another thread. What SVB did wasn’t essential, smart, innovative, etc. There is a reason they are crumbling so catastrophically. And I’ll give you a hint: it wasn’t due to a bold vision or new ideas or being disruptive or whatever.

Simply put: SVB was reckless and went against known information.

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

#519

Post by greenyoda »

dehrmann wrote: post #123
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…

This probably sealed the deal: > We are also announcing a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state chartering authority. Two closures in three days is a sign that you have to take this very seriously.

> > We are also announcing a similar systemic risk exception for Signature Bank, New York, New York

Signature was another bank whose business was primarily in a volatile and risky market:

"Signature is one of the main banks to the cryptocurrency industry, the biggest one next to Silvergate, which announced its impending liquidation last week. It had a market value of $4.4 billion as of Friday after a 40% sell-off this year..."

https://www.cnbc.com/2023/03/12/regulators-close-new-yorks-s...

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

#520

Post by woeirua »

JamisonM wrote: post #194
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 ARE NOT IN A TOUGH SPOT!!!! They know (and it is obvious) that all deposits are going to be fine without any extra funds, wacko VC's and nutjob politicians are stoking the sort of flames that might cause a contagion so they are forced to make statements like this. The fact that the statement is so milquetoast is certainly on them, but being uber-conservative in your promises is generally a failing/asset for bank…

… which is why Signature Bank was also placed in receivership this weekend. The contagion was spreading, if they did nothing there would be runs on a number of banks tomorrow. There still may be runs tomorrow.
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