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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

#661

Post by MrStonedOne »

paulddraper wrote: post #610
fwlr wrote: post #238

A lot of people are asking “how is this not a bailout?” right now. I would caution against dismissing them, it’s a legitimate question. Pointing to the “Taxpayers will not pick up the bill” line counts as dismissive: this is a press release, and it’s from the government, that’s two strong reasons for some skepticism. So, in earnest, how is it not a bailout? Feel free to offer your answer! Mine is: “Banks are required…

If the shortfall is indeed "small" as you claim, why not let it be borne, instead of redistributed? I find the dissonance deafening.

[dead]

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

#662

Post by ChatGTP »

bart_spoon wrote: post #344
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…

Why should they not get credit for taking risks or doing something new? How is that related at all? The risks they take are based on the viability of their product. It was never (supposed to be) based on the risk of if their banking institution could provide them with their cash as needed. None of that has changed.

We’ll because taking risks by definition means you could end up in a negative situation and so it should be more of a personal decision?

It seems like SVB took a risk and lost.

If the majority of Americans voted for SVB taking higher risks it would be understandable but now who comes up with the missing money ? The government, which is tax payers who are already probably getting the raw end of the stick financially compare to silicon valleys.

I think this bailout will see a lot of political backlash.

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

#663

Post by harimau777 »

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.

I think that's fine as long as you are willing to then help anyone in that situation in the future. Not just people who are big enough to be "important".

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

#664

Post by loaph »

twblalock wrote: post #614
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.

I'm not saying you're right or wrong, but if this is true why have the $250k limit to begin with?

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

#665

Post by twblalock »

Thorrez wrote: post #634
twblalock wrote: post #591

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…

>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.

That didn't prevent multiple runs against Washington Mutual in 2008, and it won't prevent runs now. People are worried that they won't be able to get to their money even if it is insured.

Plus, even if the "typical" consumers don't freak out, businesses might. There are a lot of businesses with accounts over the FDIC limit. Only about 60% of bank deposits in the US are insured.

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

#666

Post by csomar »

lamontcg wrote: post #359
dev_tty01 wrote: post #287

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, 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…

> I hope it is clear to all of us that avoiding the economic disruption of a cascade of bank failures is in our interest. Very clearly there is a large chuck of this forum that doesn't understand that.

But is anything being done about it? It is both unequality and bananism at its best. You give money to the "rich" (though this time indirectly), you encourage recklessness and you also change the rules when you see fit.

All of these described above are "disrupting" the economy. And none of them is in our interest.

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

#667

Post by walrus01 »

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

It'll look not very much unlike Canadian domestic banking which has the "big 5" of banks: TD, CIBC, RBC, BMO, Scotiabank.

But instead, with Wells Fargo, Citibank, BOA, etc.

And everything else is really quite tiny in comparison.

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

#668

Post by btilly »

bko wrote: post #628
twblalock wrote: post #591

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…

> 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 s…

That article is already out of date. Signature Bank also failed today.

I suspect that Signature Bank's failure is tied to their crypto activity. But the sight of 2 banks failing while there was an ongoing run on at least one more bank does seem like the kind of thing that could start a panic.

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

#669

Post by nrmitchi »

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 understand what you mean here. I don't think it's people having no empathy for employees (or even founders) who did not act in bad faith.

We are (or were) in a situation where the entire ecosystem blew up because VCs and funds inadvertently incited a bank run.

Backstopping capital so payroll can be made obvoiusly helps out employees, founders, and companies alot, but the ones that benefit the most financially on an absolute basis are these investors.

It just feels a bit disingenous to hear an argument that "this small company out of the Midwest needs to make payroll" (which is an example I just made up, any relation to real companies are entire coincidental), while ignoring the argument that "If the government doesn't backstop this my $3B fund goes to $0".

In summary I have a lot of sympathy for employees, and even founders who were held to terms that were completed standard and seemed reasonable at the time.

I have less empathy for the group that are (were) vocally calling for bail-outs and trying to incite further panic in an effort to protect their own investments.

Edit: switch the example to avoid inadvertently matching a real life example way too closely.

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

#670

Post by hd95489 »

tropicaljacket wrote: post #607
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…

How does this "special assessment on banks" work? Does the FDIC charge all US banks to cover the missing amount? How are the charges distributed? And what law is this? Also if this option was available, why did they just bring it up now?

Poor people will get no interest on deposits to bail out the rich.
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