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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

#781

Post by HPMOR »

sanderjd wrote: post #756
HPMOR wrote: post #606

The 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…

I don't get how your comment demonstrates that the rest of the conversation is inept. The whole conversation everywhere has been about this trade off.

People are arguing whether SVB depositors should’ve been permitted to take a haircut. This not a discussion. Had depositors lost a SINGLE penny, there would be a very widespread run on bank deposits as people try to get below the $250k figure. There was never a question that the Treasury was going to ensure that uninsured depositors were made whole. To argue about whether the depositors should’ve been made whole or not is tantamount to arguing whether we should willfully inflict a depression worse than 1929 on American citizens. It’s unconscionable and profoundly stupid.

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

#782

Post by rib3ye »

matheusmoreira wrote: post #773
noelsusman wrote: post #15

It's a bit embarrassing to have to invoke the systemic risk exception when regulations on these banks were relaxed in 2018 on the theory that they wouldn't pose a systemic risk if they got into trouble. This should spark some serious soul searching from everyone involved in that effort, but I'm not holding my breath. Anyway, I'm happy for all the depositors.

Fractional reserve banking doesn't pose a systemic risk, it pretty much is the systemic risk. The system will never lobby against itself. There's too much money to be made in risking other people's money.

It's not just the profit incentive.

Imagine a world without lending against liabilities: yes, some people will be able to buy a home, pay for college, buy a car without a loan, but the financial friction will keep a vast majority of people in poverty.

And then it's going to be someone's full-time job to manage those liabilities. Should they do it for free?

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

#783

Post by mike_d »

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…

> it's threatening the quality of life of a certain class of people.

Like the jerks who chose to work for a company that picked a specific SaaS payroll provider. Or those entitled Etsy sellers that expected to get paid. The absolute nerve.

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

#784

Post by CSMastermind »

dannykwells wrote: post #694
HPMOR wrote: post #606

The 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.

> Any other action would create systemic contagion that could spread far and wide.

They could increase the FDIC coverage limit to a level that would avert a run, shoring up public confidence in other U.S. banks.

The BTFP if I'm reading this correctly values assets at par instead of face which is wild. It's not just providing liquidity to banks but rather giving them free money.

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

#786

Post by malborodog »

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…

Yep but look how hard the Fed has fought to prevent the existence of 'narrow banks'. Cartel logic in full effect.

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

#787

Post by bioemerl »

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…

> the quality of life of a certain class of people

By that you're talking about the average citizen right? Suff like railroad strikes would dramatically affect the average citizen.

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

#789

Post by [deleted] »

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…

[deleted]
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