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Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
71–80 of 1001 posts
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#72It was announced as a footnote in this Treasury announcement , which also guarantees 100% deposits for both SVB and Signature Bank above 250k How?! Who is funding this and if they sell the bank assets who is covering the losses?
If you look at the FDIC data for bank closures a lot of times the ultimate resolution is over 90% payback - the FDIC calls these "dividends". In some cases the payback is 100% to depositors and general creditors get some money. It just takes time - a 2009 bank failure may not finish dividend paybacks until 2014.
The odds are the FDIC will ultimately (in the next 5 years) wind down SVB's assets with enough excess to nearly cover all deposits. The amount the insurance fund will eat isn't likely to be very large.
The statement about an assessment on member banks is just how the fund works normally: whenever there's a large payout event exceeding normal reserves the fund recoups the money by assessing member banks.
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#73Yellen 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…
"...recovered by a special assessment on banks, as required by law..." - Would love to know what law/regulatory framework she is referring to. Janet Yellen is ready to become a US based Liz Truss...
Now expect a contagion effect next week, if SVB liabilities are shown worst than currently known, and made to bare on other banks capital requirements...
"US banks sitting on unrealized losses of $620 billion" - https://edition.cnn.com/2023/03/12/investing/stocks-week-ahe...
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#74So, is this a bailout, that we are definitely absolutely not calling a bailout?
Yup, and we can expect a movie in a few years.
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#75It’s not enough for senior management to be removed. Malfeasance like this needs to have real life consequences.
misfeasance, in this case, more than malfeasance.
And of course there are consequences to senior management.
Since they cashed out a bit and got their bonuses, they can probably take a vacation for a month or two and then come back and get a promotion in some other part of the financial industry. After all, they have learned a multi-billion dollar lesson. Don't want to throw that away!
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#76> "Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law." Very curious to see who ends up paying this special assessment. Are we all going to pay in lower deposit/investment interest from banks? Are bank shareholders/profits gonna eat it?
> Shareholders and certain unsecured debtholders will not be protected.
Shareholders and bondholders will likely lose everything as nothing will be left after selling off assets.
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#77So, is this a bailout, that we are definitely absolutely not calling a bailout?
> As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer.
> Shareholders and certain unsecured debtholders will not be protected. Senior management has also been removed.
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#78Yellen 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…
Well one way to do this would be to regulate banks more, like we used to:
https://www.cnbc.com/2018/05/24/trump-signs-bank-bill-rollin...
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#79Yellen 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…
Well, paying for it by a special assessment on banks means the banks aren't going to get a free ride. They, as a group, have to get their shit together otherwise they will pay dearly
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#80How long until the usual crowd are back to full Ayn Rand/rugged individualist mode after getting their asses saved by the Fedora Reserve?