How exactly are they guaranteeing all deposits? They claim to not be bailing them out and they haven't found a seller. I'm smelling bullshit.
You know what they say, if it looks like shit and smells like shit. It's shit.
Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
691–700 of 1001 posts
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#692What does it mean "Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer."? How is the taxpayer not bearing the losses? Did the gov't just make a special exception to release the treasury bonds SVB has in order to provide the missing liquidity? What exactly is happening?
Yeah this all stinks. I think they are playing games with words. The US taxpayer was the beneficiary of those cheap bonds, so releasing them early IS the taxpayer footing the bill.
Well, not if the FDIC holds the bonds and floats the cash. I just wish the statement had more details.
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#693The 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…
Exactly. The VCs were right, this saved a lot of regional banks and may just stave off a major recession
Is a recession this year still not considered likely, even before this SVB meltdown?
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#694The 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…
Precisely. This was not about SVB, or any morality tale on VC etc. Any other action would create systemic contagion that could spread far and wide.
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#695It'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…
I would add, it's just hilarious to see so many claim "it's not a bailout because shareholders were wiped out!" Everyone knows bailouts are bad, and that people shouldn't rely on them. But they want their money, so of course _their_ protection isn't a "bailout". It's just . . . depositors made whole! Yah. A "bailout" is any injection that makes whole any interested party facing losses. As in "The depositors were bail…
I don't understand. You think the depositors should be punished for...trusting SVB? Do you expect every startup to run their own little hedge fund to manage their cash?
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#696Yellen 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…
They really need regulation that requires banks to hold more funds. They have to be able to withstand small runs.
That wouldn’t have helped here? The run was something like 30% of all deposits at the time of halt
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#697Yellen 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…
I just posted this on mastodon but I think maybe the community here knows better:
If you ran a bank that required insurance on all deposits over the $250k FDIC coverage, and then offered 3rd-party insurance as a convenience for those who wanted it... your bank would be much less likely to suffer a blow up due to a bank run and therefore that insurance should be relatively cheap.
Furthermore, people should prefer to bank someplace where all of the depositors are covered. Why is this not commonplace? Simply because the additional fee discourages it?
I think if Yellen announced this as a requirement it would remove that incentive to treat FDIC like free unlimited insurance.
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#698> Finally, the Federal Reserve Board on Sunday announced it will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors. This tells me there were other banks in a similar position, and those other banks are being offered free money... And those banks don't even have to get rid of their shareholders, bondholders, or upper ma…
An analogy: Smart guy is on the freeway when he's passed by someone going 90. Smart guy pushes up to 90 also, but stays 1/4 mile back. A lot of miles later, flashing blue lights pull up behind the leading speeder. SG slows to the limit and congratulates self on the early arrival.
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#699Yellen 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…
The “ahead of time” component is partially addressed by the Office of the Comptroller of the Currency which conducts period stress tests of banks. The people doing the testing know their stuff. These bank evaluations have likely caught and mitigated many issues like SVB ahead of time, and we will never know how many more failures would’ve occurred if it weren’t for their efforts and those of other auditors.
Source:
https://www.occ.treas.gov/topics/supervision-and-examination...
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#700It'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…
+1.
To add, now banks will have no incentive to be careful about who they lend to. In fact they will in all probability begin making riskier and riskier loans knowing fully well that if they make enough loans to become a "systemic risk" they will be bailed out by future tax payers.