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America's pensions can't beat Vanguard but they can close a hospital

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Re: America's pensions can't beat Vanguard but they can close a hospital

#81

Post by YetAnotherNick »

munk-a wrote: post #54
triceratops wrote: post #40

Earlier quoted context omitted.

Banking is a basic utility. Penalizing customers of a business for the business going under is bonkers. We learned this lesson during the Great Depression. Bank shareholders or creditors are engaging in risky behavior and should face the full consequences of bank failures. No bailouts for them.

I dislike that the SVB bailout happened without a revision to FDIC insurance rules. It felt like a good time to reevaluate those rules (if the limit needs to be raised then lets raise it) and encode the new version to ensure consistency of insurance going forward. SVB accounts getting a full bailout without any formal shift towards that being the future policy felt arbitrary - either we want that policy or we don't -…

> SVB bailout

There wasn't any bailout at all. This entire thread is so confusing. But yes they got 2 days or something of deposit freeze IIRC.

Re: America's pensions can't beat Vanguard but they can close a hospital

#82

Post by bpt3 »

lotsofpulp wrote: post #53
bpt3 wrote: post #46

Earlier quoted context omitted.

Taxpayers don't bail out bank depositors, the FDIC (which is insurance paid for by the banks) does. And banks do a lot more than what you described, which I have to assume you know already.

Insurance priced for damages capped at $250k per person per bank or whatever it is. If the insurance covered unlimited damages, then this wouldn’t be a discussion.

Yes. What are these repeated bailouts by taxpayers that you mentioned?

And you can't think of any way that the federal government providing retail banking services could possibly go wrong?

Re: America's pensions can't beat Vanguard but they can close a hospital

#83

Post by cogman10 »

AnimalMuppet wrote: post #66
bondarchuk wrote: post #49

Earlier quoted context omitted.

The student loan system is fucked up, so what should happen is an acknowledgement that it's fucked up, forgiving the fucked up loans, and also changing the system to be less fucked up so it won't have to happen again.

A reasonable option. But was that on the table? Or was "just student loan forgiveness with no change to the system" what was being proposed? And if that was the proposal, would that be better or worse than the current status quo?

Healthcare is in exactly the same boat.

A major part of why it's so expensive is because of government subsidies to private healthcare insurance. No or little public option is exactly what allows insurance companies to go hog wild on their premiums.

The ACA subsidies are simply a bandaid on a broken system which allows insurance to further break the system as they adapt to what people are willing to pay for a necessity.

Re: America's pensions can't beat Vanguard but they can close a hospital

#84

Post by ajross »

jazz9k wrote: post #45
epistasis wrote: post #24

> Larry Summers warned against “moral hazard lectures” and demanded SVB depositors be made whole immediately in 2023, months after calling student loan relief inflationary and unfair. Moral hazard for borrowers, bailouts for banks. Not lost on the public. I can't believe I'm about to say something that could be construed as a defense of Larry Summers, but here goes: bank depositors are not engaging in risky behavior,…

I disagree about student loans. The entire system needs to be dismantled. Universities don't care if their majors will result in a job and the student loans are a source of risk-free money. They need to start taking on the risk of all student loan, not me, the tax payer.

That doesn't work, because the Universities benefitting from the high-risk student loans are not the ones making bank from their grants and endowments. This is an imagined enemy fallacy. What you're really doing is demanding that Harvard somehow make whole the defrauded students of the University of Phoenix.

Now, sure, there's a genuine argument that those diploma factory schools aren't providing valuable service and are just parasites subsisting on public loan guarantees while their students bear the risk. But that's not a financial argument, it's a regulatory one.

No one thinks that people shouldn't be allowed to float a Stanford degree on loans, and "dismantling the entire system" just guarantees that we return to the era where only the rich could afford Ivy degrees.

Re: America's pensions can't beat Vanguard but they can close a hospital

#85

Post by devman0 »

stanmancan wrote: post #42
lotsofpulp wrote: post #31

Earlier quoted context omitted.

> bank depositors are not engaging in risky behavior, Because the taxpayers (and all users of USD) repeatedly bail them out. I could define anything as not being risky if I knew taxpayers would bail it out. More importantly, if there is no risk, what purpose does a bank serve? They’re a pretty bloated middleman if their sole purpose is to update a database to reflect incoming and outgoing cash flow. The government sh…

> Because the taxpayers bail them out. I could define anything as not being risky if I knew taxpayers would bail it out. I feel like I must be misunderstanding something here because it sounds like you're saying depositing funds in a bank is considered risky behaviour?

It is supposed to be if the amounts are above $250,000. I have no problem with the first $250k being risk free, that is a policy that is well published and that we all "agree" on. Making arbitrary policy decisions that in some cases depositors should be made whole when risky behavior (such as depositing above the insurance limit) bites them is problematic. Stick to the policy or change the policy don't make one off exceptions because that sets weird expectations.

89% of deposits at SVB were uninsured.

Re: America's pensions can't beat Vanguard but they can close a hospital

#86

Post by chasd00 »

steveBK123 wrote: post #50
epistasis wrote: post #24

> Larry Summers warned against “moral hazard lectures” and demanded SVB depositors be made whole immediately in 2023, months after calling student loan relief inflationary and unfair. Moral hazard for borrowers, bailouts for banks. Not lost on the public. I can't believe I'm about to say something that could be construed as a defense of Larry Summers, but here goes: bank depositors are not engaging in risky behavior,…

> bank depositors are not engaging in risky behavior Supposedly intelligent investors leaving money in accounts above FDIC limits ($250k per holder per bank, so $500k for joint account) were engaging in risky laziness.

It is a little bold to ask FDIC to payout more than what the terms of the policy dictate. Try that with any other insurance on the planet!

Re: America's pensions can't beat Vanguard but they can close a hospital

#87

Post by sejje »

etchalon wrote: post #70
jazz9k wrote: post #45

Earlier quoted context omitted.

I disagree about student loans. The entire system needs to be dismantled. Universities don't care if their majors will result in a job and the student loans are a source of risk-free money. They need to start taking on the risk of all student loan, not me, the tax payer.

So you believe universities have taken advantage of students by crafting, encouraging and financing education programs with an understanding that those programs would not result in jobs which would be sufficient to repay the debt needed to complete them, but you think the 18 year olds who were taken advantage of should be forced to suffer for their failure to make perfect decisions at 18. Cool. Cool.

So you believe uninvolved taxpayers should be on the hook when the 18 year olds make bad decisions.

Cool cool.

Re: America's pensions can't beat Vanguard but they can close a hospital

#88

Post by toast0 »

estimator7292 wrote: post #41
lokar wrote: post #39

Earlier quoted context omitted.

One round of loan forgiveness is fine, but it builds an expectation of it in the future. All of the loans, growing larger and larger, just encourage universities to grow fatter and raise costs to students. If students could not borrow enough to attend, they would be forced to lower costs (not necessarily the very top universities, but all the rest).

It's already unaffordable, enrollment is dropping, and tuition has only continued to go up to offset lower enrollment. The incentives are not so naively simple

Population trends are a pretty big factor in enrollment. Most enrollment is by fresh high school grads. And there are significantly fewer of those then there were 10 years ago; you can make up some of that by expanding eligibility and encouraging more young people to go to college (even those that would be better served doing something else), or expanding international admissions (but maybe not in this administration).

Cost is certainly also a factor, but I suspect population is a bigger factor.

Re: America's pensions can't beat Vanguard but they can close a hospital

#89

Post by s1artibartfast »

epistasis wrote: post #52
lotsofpulp wrote: post #31

Earlier quoted context omitted.

> bank depositors are not engaging in risky behavior, Because the taxpayers (and all users of USD) repeatedly bail them out. I could define anything as not being risky if I knew taxpayers would bail it out. More importantly, if there is no risk, what purpose does a bank serve? They’re a pretty bloated middleman if their sole purpose is to update a database to reflect incoming and outgoing cash flow. The government sh…

The FDIC insures $200k of deposits because banks are not supposed to be risky. Thats taxpayers bailing out everybody in order to keep banks as "not risky" In particular the article incorrectly states that the bank was bailed out. It was not. The bank failed. Depositors who were running their non-profit in the Bay Area did not lost all their charitable contributions. The bank failed because it had placed deposits into…

What about banking regulations that mandated that SBC put those deposits into treasury bonds?

The bailout did not accelerate bond maturity. Those were picked up by other Banks when assets were sold off.

Last, who is the other banks that paid for the bailout, not taxpayers, at least not directly. If you call higher FDIC insurance rates for JPMorgan Chase a taxpayer cost, how does that logic scale to the rest of the economy?

Re: America's pensions can't beat Vanguard but they can close a hospital

#90

Post by munk-a »

YetAnotherNick wrote: post #81
munk-a wrote: post #54

Earlier quoted context omitted.

I dislike that the SVB bailout happened without a revision to FDIC insurance rules. It felt like a good time to reevaluate those rules (if the limit needs to be raised then lets raise it) and encode the new version to ensure consistency of insurance going forward. SVB accounts getting a full bailout without any formal shift towards that being the future policy felt arbitrary - either we want that policy or we don't -…

> SVB bailout There wasn't any bailout at all. This entire thread is so confusing. But yes they got 2 days or something of deposit freeze IIRC.

My apologies on the imprecise language - maybe "extension of FDIC account insurance beyond the standard 250k limit to depositors" is better terming?

SVB came out of this broke - as they should for such mismanagement - but the concern is that depositors were made whole beyond the amount usually insured by the FDIC.

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