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

Post by rftyuikdjhgvcf » Mon, Mar 13, 2023, 5:31 AM UTC

hn_throwaway_99 wrote: post #181

mgraczyk wrote: post #61

Earlier quoted context omitted.

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 mostly agree with this, but I feel like the past 25 years or so, ever since "the Greenspan put", has just gone more and more in the direction of telling people that they don't need to worry about doing adequate risk assessments, because if you have powerful people that yell loud enough, and you can cause enough damage, that Washington will come to the rescue. Eventually, I just don't see this ending well. As someon…

Post by __turbobrew__ » Mon, Mar 13, 2023, 5:36 AM UTC

walrus01 wrote: post #667

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 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.

Post by paulddraper » Mon, Mar 13, 2023, 5:39 AM UTC

BCM43 wrote: post #530

Dem_Boys wrote: post #493

With this news, I'm opening a bank. Here is my business plan: 1. Make risky investments and offer better terms than other banks 2. Watch business flock to me 3. Get filthy rich on yearly bonuses 4. 10 years later my risky investments blow up (Make sure to sell stock before) 5. Get taken over by the FDIC 6. Don't return those years of bonuses 7. Let other banks pay for my wrongdoing with a "special assessment" 8. Walk…

Is this any different without steps 5 and 7? I don't understand how the FDIC actions change the incentives here.

Post by fsckboy » Mon, Mar 13, 2023, 5:40 AM UTC

Post by onionisafruit » Mon, Mar 13, 2023, 5:42 AM UTC

seo-speedwagon wrote: post #444

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…

> If you had the wit to think "hey, maybe I should be careful with $5 million" and bothered to put it in T-bills or an insured sweep, you're just a nerd who should know the Government will take care of such things. It creates the precisely wrong incentives. If you run startup and spend any time, effort, or money to mitigate these risks, you're being irresponsible. The Fed will bail you out, stop wasting your precious…