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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

#611

Post by bcantrill »

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?

We were required by covenant to bank exclusively with SVB as part of the venture debt line we had with them. This is a condition that is (was!) very standard and non-negotiable. This is part of what I mean about the real talk: that venture debt line was clutch for us -- and I would wager than any hard tech company that you revere has used venture debt at one time or another.

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

#612

Post by JumpCrisscross »

mgraczyk wrote: post #61
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…

In cases where you can't predict the future appropriately, sometimes it's better to make prudent decisions that help everyone instead of attempting to punish the sinful. Keep in mind that bank shareholders and senior management are going to get wiped out and fired.

> sometimes it's better to make prudent decisions that help everyone instead of attempting to punish the sinful

I'm conflicted about this. In the last seventy-two hours, I made a ridiculous amount of money standing still because risks that shouldn't have paid are being done so by people who shouldn't have to pay them. I personally benefit. But we've given tech companies a visible privilege American farms, factories and municipalities don't enjoy. T

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

#613

Post by ketzo »

beezle wrote: post #477
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…

Worse, it is also a lie that the cost will not be paid by taxpayer. Of course it will be - the remaining banks are going to pass the cost on via fees, higher loan rates and lower deposit rates? Yellen is not clueless. She knows exactly how this will play out but as it will be spread over time and to many counterparts she simply does not care. This is terrible moral hazard. Uninsured depositors should have taken whate…

Lol. If every depositor at SVB just instantly took the straight-up haircut — to the tune of -20% or worse - 50 more banks would fail in the next week.

Feds are averting national crisis here.

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

#614

Post by twblalock »

chernevik wrote: post #377

It's a bailout. They're putting the cost, presently unknown and probably not huge, on the other banks. But the message to depositors everywhere, of every size, is "don't worry about your bank's solvency, we'll protect you". So market scrutiny is removed as a discipline on bank asset strategy. That leaves regulation as the only control. That politicizes and bureaucratizes bank lending. And the general presumption that…

> But the message to depositors everywhere, of every size, is "don't worry about your bank's solvency, we'll protect you".

Good, because that is the message the public needs to hear right now, if you don't want a domino effect to destroy the banking industry because customers freak out.

Obviously some regulations need to change but it's not worth sacrificing the economy and hurting everyone to make that point.

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

#615

Post by pclmulqdq »

jaxr wrote: post #590
chernevik wrote: post #377

It's a bailout. They're putting the cost, presently unknown and probably not huge, on the other banks. But the message to depositors everywhere, of every size, is "don't worry about your bank's solvency, we'll protect you". So market scrutiny is removed as a discipline on bank asset strategy. That leaves regulation as the only control. That politicizes and bureaucratizes bank lending. And the general presumption that…

Who scrutinizes the banks they make business with? To me, that is exactly the role of the regulators. Make sure the banking system is sound, and if you get the license to run a bank, you do it under certain rules that will protect depositor's money. I don't see how depositors should be held responsible in this case. And worst of all, you are actually punishing depositors who trusted the bank and the banking system, v…

If you're depositing $10 million, you should be willing to spend $100k reading a few balance sheets. That's why the limit is $250k.

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

#616

Post by mgraczyk »

hayst4ck wrote: post #604
mgraczyk wrote: post #61

Earlier quoted context omitted.

In cases where you can't predict the future appropriately, sometimes it's better to make prudent decisions that help everyone instead of attempting to punish the sinful. Keep in mind that bank shareholders and senior management are going to get wiped out and fired.

By game theory, if you let sinners prosper, you will produce more sinners. In the most pure sense not punishing the sinful is wrong, always. That misses the point that it is possible to both help everyone and punish the sinners. Here is a game I recommend that you play: https://ncase.me/trust/ I think it gives a great explanation why what you are saying in good faith is not quite right. Not punishing the sinful both…

We tried it your way many times, and it failed in every case (civil war reconstruction, Treaty of Versailles, Iraq provisional authority, response to the great depression, etc).

When we do the other thing and focus on protecting the innocent instead of punishing the guilty, things have worked out far better (Marshall Plan, Covid response, this).

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

#617

Post by hardstartuper »

smoovb wrote: post #575
hardstartuper wrote: post #568

$42B was withdrawn from SVB on Thursday. That's a lot of $$$ in one day. No wonder this collapsed. CRO/CEO should be held accountable, including their poor messaging that started this. So should anyone who was spreading the panic including some VCs and startups.

Poor messaging amplified by speed of light communications (twitter) and fast online redemptions. We're in a new era of flash mob bank runs. Likely time for a rethink on regulations - like moving to daily mark-to-market of bank security holdings.

Well said

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

#618

Post by dumbfounder »

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…

Not sure I follow the logic. SVB is done right? Saving the companies that banked there is very different than saving the bank. Yes, it might invite more risk by big banks if they know there is a parachute for their clients, but if we close the bank anyways or clear out all parties involved and they have large black marks then there are deterrents (theoretically at least). I like that the gov is acting more like a scrappy company here and getting some shit done when the stakes are high. I dunno, just spitballing here, curious about the counterpoint.

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

#619

Post by rsync »

jnmandal wrote: post #595
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 off…

"...they want stricter vetting of what constitutes a problem worth working on."

How should we choose the approved projects and to whom should we assign them ?

Where shall I pick up my work-book for the month ?

Who will stamp it for me ?

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

#620

Post by paulddraper »

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…

Presumably, #2 is only possible with a government guarantee for depositors.
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