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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

#621

Post by insane_dreamer »

adharmad wrote: post #570
insane_dreamer wrote: post #560

It's the right move. If they didn't do it, every regional bank, especially those that primarily deal with businesses (which are likely to have more than $250K in deposits), would be at risk, since the expectation is that your "money is safe in the bank" is what allows the banking system as it is to exist.

None of the other regional banks had the investment risk profile or the depositor distribution (number of individual investors, SMBs, startups) of SVB.

It doesn't matter. The goal is to contain fear, and fear does not act rationally, nor do depositors try to understand all of the intricacies of their bank's risk profile--they'll figure that BoA or WellsFargo will be better because they are "too big to fail".

The fact is that if depositors hadn't run on SVB it also would have been ok.

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

#623

Post by phphphphp »

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…

The reason employees are anxious about their next pay checks is because of the VC-induced panic which is entirely self-serving and has not one iota to do with making payroll — that’s just a palatable hand-wavey justification for demanding government intervention because their precious points are at risk.

I have a great deal of empathy for the workers anxious about being paid, but that goes without saying, there’s nothing to discuss there. Workers are victims of the VCs who rightly deserve to be derided for their behaviour, both in this incident and more broadly in squeezing every last drop of profit from normal people.

I don’t understand what you’re asking of people on HN. Are you asking us to preface all our comments with “…not all SVB customers are leeches…”?

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

#624

Post by leot »

toughlover917 wrote: post #148
beebmam wrote: post #93

Earlier quoted context omitted.

How do you square this statement of yours: > Yellen has just broadcast that FDIC insurance is essentially unlimited, as long as you can threaten wider disruption to the economy. with this quote from the Treasury Dept statement? > "No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer."

EXACTLY! This will be born by the taxpayer. What were all the VCs f*cking thinking concentrating all their portfolio companies in one financial institution? This was terrible decision making on their part (and by the portfolio companies). Why does this all of a sudden become a taxpayer liability? Because All-In bros got on Twitter and started spamming people?

No one knows that taxpayers will have to pay anything for any of this. It's possible they'll end up ahead. The assets were/are there to cover depositors. The timing of the asset liquidation/redemption is the problem, and only the "bank of last resort" can help avert contagion from skittish depositors, mass layoffs, and pointless disruption.

As said above: would you prefer to see hundreds or thousands of small companies fail, their employees go on unemployment insurance, etc.?

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

#625

Post by Willson50 »

HPMOR wrote: post #606

The discourse on this thread and Twitter is astoundingly inept. If the FDIC had permitted uninsured depositors to not be made whole, there would’ve been a systemic risk to American banking. Confidence in the banking system is critical to its well functioning. Quite literally banks are built by confidence that their depositors will get their money back. Discussing whether SVBs depositors should’ve taken a haircut miss…

When the future cannot be predicted accurately, it may be wiser to prioritize making prudent decisions that benefit everyone, rather than seeking retribution against wrongdoers. It's important to consider that both bank shareholders and senior management could face significant losses and lose their positions.

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

#626

Post by moshegramovsky »

martythemaniak wrote: post #609
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…

I respect your work, but you have to realize that what many companies were doing with their money was the financial equivalent of developing by SSHing into prod and editing a 50kloc index.php. And when they got into trouble, they did not stop to asses their situation (possible 5-10% haircut, nbd), but went into full blown existential meltdowns. One minute crying and begging, next minute threatening. In fact, after re…

> This episode makes me embarrassed to be part of this industry.

I'm feeling that more and more these days. I don't want to wake up one day and think "what have I done?".

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

#627

Post by machina_ex_deus »

tppiotrowski wrote: post #579
machina_ex_deus wrote: post #572

Earlier quoted context omitted.

This is going to be the beginning of the end of the banking system. I foresee a huge dollar collapse, the US banking system has just lost its final shred of credibility. It's only a facade of a bank at this point. It's just privileged people with a government mandate to leverage on everyone else's money with no consequences.

Crypto undergoes hard-forks when "special" circumstances arise. It's not immune to unpredictable events.

It's more immune to moral hazards. But I'm not really into crypto, I'm just purely frustrated by the current system. It's an absolute joke at this point.

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

#628

Post by bko »

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…

> 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.

I don't get it. Doesn't the unlimited FDIC insurance encourage mega-banks? If funds were only insured up to 250k, wouldn't that just mean we would have to spread money across multiple banks. And sure some banks would be wiped out but new better banks would take their place. It's not a closed system

Banks used to fail and be smaller failures. Now we removed almost all failures except when we have a failure its huge:

Total number of bank failures: 512

2023 1

2022 0

2021 0

2020 4

2019 4

2018 0

2017 8

2016 5

2015 8

2014 18

2013 24

2012 51

2011 92

2010 157

2009 140

https://www.bankrate.com/banking/list-of-failed-banks/

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

#629

Post by leot »

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…

If you've been privy at all to the conversations founders etc. have been having for the last 48 hours, I don't think they're going to come away from this feeling like "don't worry". There was never a guarantee that the fed would step in, and there won't be a guarantee going forward. Treasury management will be a thing that all VCs worth their salt will insist on going forward.

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

#630

Post by bryan_w »

skwirl wrote: post #381
version_five wrote: post #112

So they made their decision, everyone can move on. I just hope nobody forgets how prominent VCs behaved during the brief period of uncertainty. The idea of some noble class of investors championing disruption is dead. They're just a bunch of rent seekers like everybody else. For some silly reason I had some respect for the startup industry before this, now I see it as a joke. It's great at a personal level that "foun…

The people I lost respect for was a large portion of HN commenters calling on bank depositors - largely small businesses - to be snuffed out because there was a run on their bank. The comments have largely been factually wrong, misleading, and downright psychopathic. I am glad our government is not controlled by such people, but I question the value of this forum going forward given the large portion of it that is so…

These are the same people that influenced most of the recent opinions around Google, Amazon, Meta, etc. I'm not saying everything is peachy keen at those companies, but just keep this in mind next time you see the next "Google eats babies" or similar un-nuanced headline and comments section.
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