Earlier quoted context omitted.
> 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 scr…
Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
631–640 of 1001 posts
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#632Yellen 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…
Its incredible incompetence that the fed doesn't fully guarantee all deposits at FDIC member banks. The liability side of banking is not the place for disciple. MMT founders and Bill Black have been saying this since 2008. Insure depositors and blow out shareholders and management for making bad investments.
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#633Tell me you're doing a bailout without telling me you're doing a bailout
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#634Yellen 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 based entirely on consumer confidence
Not typical consumers, right? Typical bank consumers have < $250k in their account, and thus there's no reason for them to cause a run.
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#635So 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.
> 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.
Isn't that the whole point of this decision -- giving depositors at non-top banks confidence in the system?
If the FDIC et al. had done the opposite here (let SVB depositors take losses) then the takeaway would have been "bank only with a top-3".
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#636The 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.
That’s pretty extreme. There’s plenty of blame for SVB, but the depositors? That’s victim blaming.
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#637It'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…
People with money and a brain. Smart businesses have a treasury department, one job of which is to look at the risks of where their money is.
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#638Earlier quoted context omitted.
> 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 scr…
From the perspective of just the people working at SVB, I guess so? But from the perspective of people putting lots of money in one place, it's a reinforcing signal that the most important part of picking a bank is that it be big enough to get bailed out in case of poor planning.
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#639It'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.
But the message in this announcement is pretty clear, the put is there and none of that turned out to be necessary and won’t be going forward. It will be financially worse for you to put your money into less liquid things.
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#640The 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.
No, they don’t know about the risks and they’re shouldn’t be any to the depositors. Banks are highly regulated institutions and the creation of the FDIC was intended to prevent a systemic bank run, with people shoving cash into their mattress. This is precisely what would’ve happened had SVBs depositors taken any form of haircut.