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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

#591

Post by twblalock »

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…

> Yellen has just broadcast that FDIC insurance is essentially unlimited, as long as you can threaten wider disruption to the economy.

I think everyone knew that already. Since 2008 at least.

It's very possible that if this is not done, the only banks left at the end of the week will be the "too big to fail" ones. A domino effect is very hard to prevent when it's based entirely on consumer confidence and those consumers can very easily create a bank run on literally anything if they freak out.

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

#592

Post by jacquesm »

Nifty3929 wrote: post #586

If they had wanted to avoid a contagion, they could have just given a 6-month 100% deposit backstop to all the other banks, and let SVB play out naturally. But then the VCs might have lost a little money.

Not just the VCs though and therein lies the rub. You'd have to start differentiating between various kinds of account holders and that doesn't really work beyond the 'private individual/business' classification.

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

#593

Post by jacquesm »

roflyear wrote: post #505
bcantrill wrote: post #490

I have never seen such cognitive dissonance here at HN -- which I feel is really saying something! As an SVB customer who had to wire payroll on Tuesday, our perspective is naturally sharpened, but I found the lack of empathy here over the weekend galling. On the one hand, this is understandable, and Silicon Valley has done much to earn collective distrust. On the other hand, this is emphatically not all of us: many…

Did you diversify your banking?

That's answered I think.

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

#594

Post by jacquesm »

unyttigfjelltol wrote: post #143
zamfi wrote: post #42

Wow, here’s the real news: > Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law. Note the uninsured depositors clause in there — FDIC &co seem to have acted unilaterally to extend deposit insurance beyond the 250k and to the full amounts of any deposit account. And they are charging the banks for it. If this doesn’t stop a ru…

This round of bank failures was special because the debt held by these banks lost value because there is better stuff on the market, not because there was anything intrinsically uncollectable about the original debt. In fact, the debt probably is pretty similar to stuff held by everyone else in this ecosystem. This provides flexibility to meet the urgency of the situation, and FDIC, Fed, Treasury are simply saying "w…

I would be careful using the past tense on this one. Tomorrow morning will be very interesting in a bad sort of way. A war, a pandemic, a financial crisis. What's next?

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

#595

Post by jnmandal »

bcantrill wrote: post #490

I have never seen such cognitive dissonance here at HN -- which I feel is really saying something! As an SVB customer who had to wire payroll on Tuesday, our perspective is naturally sharpened, but I found the lack of empathy here over the weekend galling. On the one hand, this is understandable, and Silicon Valley has done much to earn collective distrust. On the other hand, this is emphatically not all of us: many…

This is so aloof. People are engaging in a conversation about how to structure innovation. Many, many people don't want to see "startups solving hard technical problems." That's the nature of the guillotine images. They want a more equitable system and they want stricter vetting of what constitutes a problem worth working on.

The fact that you can't see that in the discourse -- that you instead just take personal offense despite the need in your message to claim you are sort of outlier -- is emblematic of our community's lack of self awareness, constant need for praise, and general ego. Much of the criticism being leveled right now is deserved. While you can complain about civility, you shouldn't expect that critics sentiments would not exceed your own critiques when you stand to gain by the continuation of the system.

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

#596

Post by H8crilA »

twblalock wrote: post #591
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…

> Yellen has just broadcast that FDIC insurance is essentially unlimited, as long as you can threaten wider disruption to the economy. I think everyone knew that already. Since 2008 at least. It's very possible that if this is not done, the only banks left at the end of the week will be the "too big to fail" ones. A domino effect is very hard to prevent when it's based entirely on consumer confidence and those consum…

And perhaps there's no other way? The Japanese did the same with their overpriced real estate provlem, Europe did the same with their almost defaulting countries.

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

#597

Post by nullc »

bcantrill wrote: post #490

I have never seen such cognitive dissonance here at HN -- which I feel is really saying something! As an SVB customer who had to wire payroll on Tuesday, our perspective is naturally sharpened, but I found the lack of empathy here over the weekend galling. On the one hand, this is understandable, and Silicon Valley has done much to earn collective distrust. On the other hand, this is emphatically not all of us: many…

There are a lot of vicious and blood thirsty people on the internet. It isn't specific to you or this event. Hardly any big event goes by without calls for executions.

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

#598

Post by markus_zhang »

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.

Now I want to see hedge funds and bankers call the bluff and continue to run other smaller regional bank.

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

#599

Post by selimthegrim »

bombcar wrote: post #217
avidphantasm wrote: post #96

What if the Federal Reserve offered retail banking. Would it stabilize the banking sector? They wouldn’t be forced to try to find loans to pay interest on deposits. Where do private banks add value over what the Fed could do. ELI5.

The banks don’t want the competition but in theory it could be done, perhaps through the USPS, and as a modified form of I-bonds or something.

Was this not tried with little uptake? Or am I thinking of a Treasury Direct product?

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

#600

Post by joe_the_user »

dragonwriter wrote: post #384
joe_the_user wrote: post #368

Earlier quoted context omitted.

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, that's been the implicit rule since 2008 at least (arguably earlier). If anything, not supporting all depositors would have been changing the rules mid game and so would have lead to massi…

> No, that’s been the implicit rule since 2008 at least (arguably earlier). No, depositors have lost money in failures since 2008. Its true that, for a long time, the FDIC has tried to resolve failures in a way which protects as much of the uninsured deposits as possible, but it has very much not been a guarantee. The systemic risk exception invoked here is an exception.

"The systemic risk exception invoked here is an exception."

Yes but it's not a new exception.

The OP claims Yellen implicitly announced something new. She didn't. She's following the playbook from 2008+. The policy isn't new, it's not unexpected, it's kind of like ... a rule.

And whether a new rule is being created matters for moral hazard purposes and all.

Edit: My above quote could have been read as talking about all depositors in all banks but I meant all depositors in the SVB.

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