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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

#761

Post by matheusmoreira »

Aperocky wrote: post #739
machina_ex_deus wrote: post #702

Earlier quoted context omitted.

Banks have lost all excuses to be making money out of other people's deposits. If those deposits are guaranteed by the government, and backstopped by the government, then there's absolutely no reason banks should be able to invest any of them. There's absolutely no excuse left for why banks get to invest any of their clients money. They get free leverage from their clients for free. They can send it to zero and the e…

The banks are still gone though, once they get taken over, their equity zeroes out. All owners of the bank will end up with nothing, I think that's a good enough deterrence against bad things.

> I think that's a good enough deterrence against bad things.

Nah. They should liquidate the owner's private property as well to cover uninsured depositor losses. Better than making them whole by printing money and having everyone else pay for it indirectly through inflation.

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

#762

Post by cragfar »

noitpmeder wrote: post #455
cragfar wrote: post #164

It's pretty embarrassing how many people thought depositors should be on the hook for this. A banking system where companies or people would actually lose money due to bank failures (especially one caused by a run on the bank) would just lead to people only using BOA, JPM, and some merged WF/Citi/whoever else.

I think they are not completely blameless. Companies deposited money in a riskier-bank because they got more favorable terms/perks/... compared to other options. Now they don't have to bear the results of that risk because the Govt has stepped in. Similar to the current US discussion around Student Loan repayment. Bailing students out of loans disadvantages everyone else who did not take those loans, or who paid them…

> Companies deposited money in a riskier-bank

It's a top 20 bank that had passed all regulatory compliance and has been around for 40 years.

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

#763

Post by machina_ex_deus »

Aperocky wrote: post #739
machina_ex_deus wrote: post #702

Earlier quoted context omitted.

Banks have lost all excuses to be making money out of other people's deposits. If those deposits are guaranteed by the government, and backstopped by the government, then there's absolutely no reason banks should be able to invest any of them. There's absolutely no excuse left for why banks get to invest any of their clients money. They get free leverage from their clients for free. They can send it to zero and the e…

The banks are still gone though, once they get taken over, their equity zeroes out. All owners of the bank will end up with nothing, I think that's a good enough deterrence against bad things.

They got to play with 10x leverage with their client funds for free. You can't barely get 2x leverage at broker, you pay interest rates much higher and they actually enforce strict margins.

Minewhile these people out of their privilege as bankers got to play with much bigger leverage, while paying zero interest rates to their counterparty which turned out to be fully paid for by the government in the end.

100% investment loss in this case is hardly enough, with the leverage levels banks can access they can literally collect pennies in front of a train and have positive expectation values for shareholders, while investing in negative expectation value investments.

And they did collect pennies in front of a train. Bought 10yr treasuries at historical lows. They paid their customers nothing for it.

VC investment strategy for VC bank. They took the zero or hero attitude until the end. Again, we're taking about people with already VC mentality of "worst case 100% loss, best case 1000%".

No wonder that once VCs recognized their own shadow they fled so fast.

And now they are pretending as if it's the fate of the banking system on the line.

VC bank, managed like VC venture for VC firms. They deserve to lose VC money.

Their loans are probably also worthless than they claim, but they managed to successfully swindle the Fed in the most VC way ever with the shortest deadline. I'm betting FDIC is going to pay twice as much as expected in the end.

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

#764

Post by drcode »

Taniwha wrote: post #318
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…

One reason why it's not (mostly) a bailout is that SVB's deposits are (as far as we know) still backed by bonds and mortgage backed securities, the problem is that those securities can't be easily sold right now (because people want higher valued investments) - a sudden forced sale means selling at a loss (or a cash flow crisis which is how SVB got into this state), holding on to them and letting them play out and th…

> the problem is that those securities can't be easily sold right now

they can be sold easily, they just happen to not be worth very much

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

#765

Post by ojbyrne »

machina_ex_deus wrote: post #702
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…

Banks have lost all excuses to be making money out of other people's deposits. If those deposits are guaranteed by the government, and backstopped by the government, then there's absolutely no reason banks should be able to invest any of them. There's absolutely no excuse left for why banks get to invest any of their clients money. They get free leverage from their clients for free. They can send it to zero and the e…

Define “invest.” Banks invest. That’s literally what they do. People deposit their money rather than put it under their mattress, and the banks reward them by giving extra money to them.

Then the banks figure out a way to put that money somewhere else that rewards them more than what they are giving the depositors.

Basically that’s the foundation of civilization.

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

#766

Post by throwaway1851 »

dumdumdumdum wrote: post #729
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…

> 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. The criteria isn't threatening a "wider disruption to the economy", it's threatening the quality of life of a certain class of people. When unions threaten a wider disruption to the economy…

Cynicism isn't interchangeable with critical thinking.

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

#767

Post by fullshark »

Octokiddie wrote: post #270

Translation: the Fed is done raising interest rates. Period. Forget all of the tough talk by the team over the last few months. We raise until we break something. Now that we broke it, that's that. As for that inflation problem... It will require another solution...

Wishcasting

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

#768

Post by animex »

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…

This is exactly how crypto exchanges recover after hacks/losses. Interesting.

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

#769

Post by bcantrill »

nailer wrote: post #759
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…

> many of us have been outspoken about our disagreements with the techbro culture This is an odd thing to read. I always thought you were one of the people that began SV techbro culture when you replied to David Miller’s technical critique of Solaris with “have you ever kissed a girl?”

Yes, you have brought this up before.[0] And as I have said before[1] -- and will presumably say for the next 26 years as well -- I very much regret that quip. (The irony is that that was dredged up in part because people very strongly disagreed with my handling of the Noordhuis incident a decade ago.) But I will stand by my assertion that I have been outspoken about my disagreements with what I have found to be problematic in modern Silicon Valley, e.g. [2][3][4].

[0] https://news.ycombinator.com/item?id=8958705

[1] https://news.ycombinator.com/item?id=9041086

[2] https://www.youtube.com/watch?v=px9OjW7GB0Q

[3] https://www.youtube.com/watch?v=0wtvQZijPzg

[4] https://www.youtube.com/watch?v=VzdVSMRu16g

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

#770

Post by hartator »

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…

> [svb.com] 4.50% APY on deposits

Well, my accounts don't pay as much. Are you okay refunding the extra APY you get by having your bank takes more risks for the past years?

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