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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

#881

Post by 317070 »

epvgwwqe wrote: post #869
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…

That sounds an awful lot like "too big to fail". Are we here again? Why do we still have companies that big?

Why do we let companies grow that large then? Or maybe the FDIC protection should be increased for everyone?

I don't disagree that what you say is right when the argument doesn't go beyond the short term. But I expect to see protest against this from tax payers whose wealth is lower than the FDIC limit. Again.

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

#882

Post by creato »

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.

What greater penalty for a bank or any other corporation is there than what has already happened to SVB? The shareholders are wiped out. The only thing left would be pursuing individual executives for… something, but aside from possible insider trading it’s not clear what.

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

#883

Post by [deleted] »

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…

[deleted]

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

#884

Post by roenxi »

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…

> You are better off because the government is helping

If they believe they are helping, why does the response always emerge suddenly on the day of the crisis with no debate or well explained contingency plan being activated?

The whole system seems to be built on one group revealing a sudden crisis that have obviously been building for a while. Then another group of people explaining that they have a plan, there is no time to explain, no need to explain and the objections are all mean-spirited fools who don't understand the plan. The plan which will be clearly explained sooner or later.

They're acting like people running a scam. None of these crisises are that surprising. Raising interest rates were likely to lead to this sort of fireworks display at some point in the short term. If the panic is genuine they should all be removed on the basis that they can't spot a tree in a forest. This has to be a long-planned contingency.

> You can't let the banking system collapse and expect it will only hurt the people you don't like.

The hurt happened a while ago now; banking collapses are the market recognising that it was mistaken about actions that it thought were wealth-creating but turned out not to be. This isn't a question of trying to "hurt" rich people, whatever that means. This is about concentrating the pain on people with skin in the game.

If people with skin in the game eat the losses, losses will happen less often. If the losses are diffuse, then losses happen more often. They're trying to cover up for incompetents because they meet them at parties, go to the same schools and have the same friends. And invest in similar assets, one suspects.

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

#885

Post by fidgewidge »

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…

It is not inept. People aren't however pointing out the actual switcheroo here: by the definitions everyone was using just 48 hours ago SVB was not systemically important nor did it post systemic risk. That designation was meant to be for financial institutions that were directly depended on by other financial institutions. Nobody is saying that's true here.

What Yellen has done now is redefine "bank that poses systemic risk" to mean "any bank at all", which in turn shows that the insurance limit was never real, and that in turn the winners of the system are those who don't believe in the rules, but rather those who gamble on duplicity and the socialist leanings of government employees. Those who tried to believe in the honesty of the system got burned, again, and those who bet on it being meaningless won, again. The long term consequences are fearful.

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

#886

Post by fidgewidge »

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.

Way fewer people hate you at the end, which is a meaningful disincentive otherwise.

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

#887

Post by hackernewds »

Atsuii wrote: post #719
bcantrill wrote: post #490

I have never seen such cognitive dissonance here at HN -- which I feel is really saying something! As an SVB customer who had to wire payroll on Tuesday, our perspective is naturally sharpened, but I found the lack of empathy here over the weekend galling. On the one hand, this is understandable, and Silicon Valley has done much to earn collective distrust. On the other hand, this is emphatically not all of us: many…

There has been so many great reply to this comment already about how the lack of empathy is directed at the financial system itself rather than the small businesses and individuals directly impacted. The other thing that make it hard for me to have sympathy for a government backed solution is what makes these small companies and individuals anymore worthy of being 'bailed out' than any other small business that finds…

you don't see the govt support that kick started all of the inflation and following rate hikes. I agree with the sentiment, however we can't thumb our ears to the facts that the govt HAS taken extraordinary measures to prop up the non-taxed fraction, at the expense of the middle class this decade

https://www.sba.gov/funding-programs/loans/covid-19-relief-o...

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

#888

Post by dangwhy »

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…

>no ad hominems

>> it will only hurt the people you don't like.

>> people who are dumb enough to let the entire banking system collapse

when did gp expresses his dislike for people who banked with svb :D

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

#889

Post by hackernewds »

markus_zhang wrote: post #656
bcantrill wrote: post #490

I have never seen such cognitive dissonance here at HN -- which I feel is really saying something! As an SVB customer who had to wire payroll on Tuesday, our perspective is naturally sharpened, but I found the lack of empathy here over the weekend galling. On the one hand, this is understandable, and Silicon Valley has done much to earn collective distrust. On the other hand, this is emphatically not all of us: many…

I think the concern is: this time they covered every cent of deposits to prevent systemic risk from spreading. Now, what if, I, as a senior banker, start to abuse this policy. I'm not sure how senior bankers can abuse this policy but this is the concern here. So basically, if the FED can guarantee 100% of deposits, it encourages riskier moves. Worst case my equity gets wiped out, i.e. most of my unsold compensation v…

that worst case sounds pretty worse? there's already inherent risks, why would anyone want that

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

#890

Post by xorfish »

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…

> 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.

The cost of the loans should be in the same ballpark as the losses on the long term bonds.

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