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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

#861

Post by weixiyen »

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…

> the general presumption that Big Government will protect you from yourself is extended just another smidge

What would be a better alternative? Asking a top 20 bank for their data room whenever I need to deposit something over $250k?

At some point, there needs to be some level of trust with simply putting money in a place and not a single cent disappearing. That should be a reasonable expectation in any functional society.

Anything otherwise would be highly inefficient, creating unnecessary work that produces little to no value.

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

#862

Post by AdamN »

lamontcg wrote: post #359
dev_tty01 wrote: post #287

Earlier quoted context omitted.

>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. No, there are systemic risk exceptions within the rules. If a bank is large enough, then the systemic risk to the economy as a whole is large enough to warrant this step. "Too big to fail" is…

> I hope it is clear to all of us that avoiding the economic disruption of a cascade of bank failures is in our interest. Very clearly there is a large chuck of this forum that doesn't understand that.

The really rough part about HN is the low level of knowledge about how governments and politics work. It's ok to judge these outcomes harshly but many commenters here intermingle their judgements with their mental models that seem to have not evolved beyond what they were taught in secondary school.

It's really quite concerning because some of these people have tremendous power. I suppose the only positive is that a number of titans of Silicon Valley are not savvy enough to challenge increasingly assertive governments.

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

#863

Post by bagels »

noobermin wrote: post #843
VoodooJuJu wrote: post #834

We deserve to see more useful top comments on this matter. The top ones in this and the main announcement thread [1] are just ad hominem complaining against some ostensibly "salty" or "cognitively dissonant" majority. Let's talk about skin in the game and bailouts. Explain to a peasant why he should have to share the risk you took with your money. Explain to him this game being played where he gains nothing when you…

A charitable response I think is that depositors did not choose to make risky bets, the bank did. It's a shame really. So, you're blaming the wrong party. Somehow, the bank definitely needs to be punished, but I'm not sure how or if that can happen in this current system.

We could learn the lesson of 2008 again, but this time actually regulate banks instead of just saying we should regulate banks more.

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

#864

Post by nwiswell »

bagels wrote: post #859
VoodooJuJu wrote: post #834

We deserve to see more useful top comments on this matter. The top ones in this and the main announcement thread [1] are just ad hominem complaining against some ostensibly "salty" or "cognitively dissonant" majority. Let's talk about skin in the game and bailouts. Explain to a peasant why he should have to share the risk you took with your money. Explain to him this game being played where he gains nothing when you…

It's sleight of hand. I'm guessing the solution is that the money comes from all of us, but just through bank fees, higher interest rates on loans, and lower interest rates on deposits because the banks are paying more to the FDIC, as opposed to the money coming directly from the treasury and thus our taxes.

That is a reasonable sacrifice in exchange for a functional financial system.

For what it's worth, TARP ended up turning a profit for the government, so in my mind there's some track record of stiff-nosed decision making at Treasury. I'd feel differently if SVB stockholders were getting something out of this.

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

#865

Post by thesimon »

epups wrote: post #858
VoodooJuJu wrote: post #834

We deserve to see more useful top comments on this matter. The top ones in this and the main announcement thread [1] are just ad hominem complaining against some ostensibly "salty" or "cognitively dissonant" majority. Let's talk about skin in the game and bailouts. Explain to a peasant why he should have to share the risk you took with your money. Explain to him this game being played where he gains nothing when you…

Companies making payroll or not is where the general public's skin in the game comes from. We can let them fail by crossing our arms, but this would lead to mass layoffs and financial turmoil as otherwise healthy companies have to shut doors due to this bank's mistakes. This would then also likely lead to a huge bank run, as most other companies realize they have to diversify their accounts and start scrambling to di…

> I would also like to add that the vast majority of people losing their money were not betting on a risky asset

But keeping all your money in one bank is surely a huge, obvious risk?

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

#866

Post by logifail »

epups wrote: post #858
VoodooJuJu wrote: post #834

We deserve to see more useful top comments on this matter. The top ones in this and the main announcement thread [1] are just ad hominem complaining against some ostensibly "salty" or "cognitively dissonant" majority. Let's talk about skin in the game and bailouts. Explain to a peasant why he should have to share the risk you took with your money. Explain to him this game being played where he gains nothing when you…

Companies making payroll or not is where the general public's skin in the game comes from. We can let them fail by crossing our arms, but this would lead to mass layoffs and financial turmoil as otherwise healthy companies have to shut doors due to this bank's mistakes. This would then also likely lead to a huge bank run, as most other companies realize they have to diversify their accounts and start scrambling to di…

> mass layoffs and financial turmoil as otherwise healthy companies have to shut doors due to this bank's mistakes

Perhaps I'm missing something, but I would suggest that one key aspect of a company being able to call itself healthy is that its finances are diversified.

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

#867

Post by AdamN »

plandis wrote: post #805
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…

> If there’s a shortfall they will charge the banks a little extra in their next insurance payment, but keep in mind we’re talking about at most a few billion dollars spread over every bank; they are unlikely to pass on a small cost like that, but even if they do pass on the cost to the taxpayer it will be something like $10 per person maximum. Regardless of size that sure sounds like “taxpayers will pick up the bill…

Bank customers will pick up the bill. There are actually a large number of US residents that aren't bank customers or are too small to meaningfully increase fees on. This will cost money but it will be smeared out across businesses and middle class/upper class individuals.

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

#868

Post by logifail »

noobermin wrote: post #843
VoodooJuJu wrote: post #834

We deserve to see more useful top comments on this matter. The top ones in this and the main announcement thread [1] are just ad hominem complaining against some ostensibly "salty" or "cognitively dissonant" majority. Let's talk about skin in the game and bailouts. Explain to a peasant why he should have to share the risk you took with your money. Explain to him this game being played where he gains nothing when you…

A charitable response I think is that depositors did not choose to make risky bets, the bank did. It's a shame really. So, you're blaming the wrong party. Somehow, the bank definitely needs to be punished, but I'm not sure how or if that can happen in this current system.

> depositors did not choose to make risky bets, the bank did

Umm, any and every bank deposit in excess of the deposit insurance limit has a risk associated with it.

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

#869

Post by epvgwwqe »

VoodooJuJu wrote: post #834

We deserve to see more useful top comments on this matter. The top ones in this and the main announcement thread [1] are just ad hominem complaining against some ostensibly "salty" or "cognitively dissonant" majority. Let's talk about skin in the game and bailouts. Explain to a peasant why he should have to share the risk you took with your money. Explain to him this game being played where he gains nothing when you…

Making depositors whole isn't coming from taxpayer money, it's coming from FDIC and potentially higher fees on banks if it's needed as a function of the end result of SVB liquidation.

But even if the only option was to use taxpayer money, clearly it would be need to be done. If depositors weren't made whole, this week would've been a disaster with multiple bank runs that could cause a huge systemic issue. Eventually the fallout from such an event would bite the economy and the average taxpayer very badly.

The amount of money required to make depositors in SVB whole is negligible compared to the potential damage not doing so would cause, so it doesn't really matter where that money comes from.

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

#870

Post by friend_and_foe »

mixologic wrote: post #840
VoodooJuJu wrote: post #834

We deserve to see more useful top comments on this matter. The top ones in this and the main announcement thread [1] are just ad hominem complaining against some ostensibly "salty" or "cognitively dissonant" majority. Let's talk about skin in the game and bailouts. Explain to a peasant why he should have to share the risk you took with your money. Explain to him this game being played where he gains nothing when you…

All banks take risks with the money that their customers deposit with them. Sometimes those risks are bad, and banks cannot fulfill their obligations to their customers, so the FDIC, which is funded by banks (its deposit insurance ) steps in and fixes a bank so that customers of that bank do not get screwed by picking a bad bank. I dont see how any peasants are 'sharing any risk' here. Everybody who held stock in SVB…

Alright, now what about this:

> Finally, the Federal Reserve Board on Sunday announced it will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors.

That sounds a lot like some type of bailout to me. What does "make funding available" mean? Where does that funding come from? It's going directly to banks, not to depositors. How does that work?

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