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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

#871

Post by fsckboy »

auntienomen wrote: post #800
fsckboy wrote: post #797

if this is the way we're going to behave, then cap the maximum size of accounts at the FDIC coverage limit (implement account software in Rust, not C, no overruns :) If you go over this amount, the bank should automatically create a new account for you and put the excess in there. done, you're 100% insured, we don't have to do anything special to protect you. . Probably that means (I don't know the regs) that the ban…

It would have to be a new account at a different bank. FDIC coverage is per bank, per depositor, and per ownership category (e.g. single vs joint account).

i'm pretty sure you're wrong about that, but not invested enough to check.

but if you're right, it seems a little silly, why impose that "diversification" on bank customers? if 100 millionaires live in a city, why should they all have accounts at all the different banks, as if that's somehow safer for the FDIC than have the same funds spread around in the same quantities across the same banks, just under different names.

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

#872

Post by twblalock »

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…

You are better off because the government is helping, and so are all of the people in the country who need to work for a living and need companies to work for. You can't let the banking system collapse and expect it will only hurt the people you don't like.

> If these statements are true, can someone explain how it's possible that despositors are fully protected, far beyond what FDIC insures, without the taxpayer bearing any of the burden?

"The FDIC is not supported by public funds; member banks' insurance dues are its primary source of funding. When dues and the proceeds of bank liquidations are insufficient, it can borrow from the federal government, or issue debt through the Federal Financing Bank on terms that the bank decides."

https://en.wikipedia.org/wiki/Federal_Deposit_Insurance_Corp...

On top of that, SVB has the money to pay back almost all of the depositors. They just don't have it liquid right now because it's in bonds that won't mature for a while and would need to be sold for a loss. So the obvious and sensible thing to do is have the government lend money to cover the time until the bonds mature, in addition to using the FDIC's money which did not come from public funds.

> And please inform him the recourse he has should he disagree with sharing your loss.

You can vote for people who are dumb enough to let the entire banking system collapse because they want to hurt rich people. But of course that would probably put "peasants" out of work while the rich get slightly less rich.

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

#873

Post by xthrown1 »

oarabbus_ wrote: post #771
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…

>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. >Revoke banks ability to invest deposits. They can't get to have the cake and eat it too. They could offer higher interest rates for non guaranteed accounts which bear risk, or zero risk for the already zero interest rates. You are missing something cruc…

>Who will loan the government tens or hundreds of billions of dollars besides the banks? The [Fed/Treasury/FDIC] has no incentive to prevent banks from loaning customer deposits, because the Treasury needs banks to purchase government bonds

War bonds were bought by people directly. I see no reason why we can't have the same today. God knows the US needs a WWII sized investment in repairing infrastructure.

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

#874

Post by raspberry1337 »

LewisVerstappen wrote: post #235
version_five wrote: post #112

So they made their decision, everyone can move on. I just hope nobody forgets how prominent VCs behaved during the brief period of uncertainty. The idea of some noble class of investors championing disruption is dead. They're just a bunch of rent seekers like everybody else. For some silly reason I had some respect for the startup industry before this, now I see it as a joke. It's great at a personal level that "foun…

> prominent VCs behaved during the brief period of uncertainty A ton of the prominent VCs were writing out checks from their personal bank accounts so that founders could meet payroll. > For some silly reason I had some respect for the startup industry before this, now I see it as a joke Wait seriously? You somehow lost more faith from this than you did from - crypto - Adam Neumann - $100m seed rounds and like 30 oth…

>Having your bank account randomly disappear isn't one of the risks that anyone should have to take.

This bank choose to _avoid_ safety regulations from the 2008 financial crisis, which is completely open information. They used this avoidance to pursue greater risk.

What is "randomly disappear" about putting your money into such a bank?

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

#875

Post by unicornmama »

twblalock wrote: post #872
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…

You are better off because the government is helping, and so are all of the people in the country who need to work for a living and need companies to work for. You can't let the banking system collapse and expect it will only hurt the people you don't like. > If these statements are true, can someone explain how it's possible that despositors are fully protected, far beyond what FDIC insures, without the taxpayer bea…

> SVB has the money to pay back almost all of the depositors.

There seems to be this myth floating around that bond losses aren’t real. They are very real.

An 80 cent on the dollar (purchase price) bond is a loss of 20 cents. And it doesn’t matter if the holder holds to maturity.

Welcome to interest rates.

Edit: Fundamental fallacy here is not understanding the time value of money. Thinking of money without the time dimension is like thinking about space without time.

See https://www.investopedia.com/terms/t/timevalueofmoney.asp

Secondary fallacy here is equating value in the financial sense with gain/loss in the accounting sense.

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

#877

Post by RandomLensman »

twblalock wrote: post #872
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…

You are better off because the government is helping, and so are all of the people in the country who need to work for a living and need companies to work for. You can't let the banking system collapse and expect it will only hurt the people you don't like. > If these statements are true, can someone explain how it's possible that despositors are fully protected, far beyond what FDIC insures, without the taxpayer bea…

Someone has to pay for the cost of lending the money. If the aim is to ensure that in the future depositors are always safe, then it might be cheaper to offer anyone an account at a risk free institution rather than backstop commercial banks.

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

#879

Post by andersentobias »

Yesterday, high-profile investor types declared that the govt should definitely bailout SVB.

Now the govt are "refunding" the depositors, but not the shareholders.

In what way is this a bad thing, if someone is willing to play the devil's advocate for a second?

Either these high-profile investors only want to save their own asses OR they ostensibly have a bigger plan to rescue the banking system in some unbeknownst way.

I'm interested in hearing the rationale for the latter.

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

#880

Post by chucklenorris »

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…

The taxpayer won't bear the burden, at least theoretically. The money still exist in the form of bonds which are not liquid right now. The FDIC will provide the liquidity so one of the most important sector of the us economy doesn't implode. This is not the same situation as FTX
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