TIL that most of HN has no clue how banking or finance works.
Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
921–930 of 1001 posts
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#922Yellen and the FDIC is in a tough spot. This is the important line, "Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law." Thus, on one hand, I'm glad they're doing this, as it should help prevent wider bank runs, and it ensures that banks are the ones that are actually paying for it. At the same time, this is yet another exam…
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…
> Revoke banks ability to invest deposits.
This is literally the purpose of holding deposits for banks.
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#923We 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…
Our society has created a complex set of rules and regulators to prevent bank runs. That system society created failed to detect a problem in one of the top 20 banks in our country. What other problems is it not detecting? The full backstop to the depositors is because this should have never happened - the system should have prevented it. An organization with over $250,000 in cash is not an outlandish amount. Employe…
people will once again try to defend the indefensible. antediluvian fractional reserve banking as it currently stands is not fit-for-purpose and the price paid by society is high and will keep growin.
The other side of lazy private profits from "riding the yield curve" or which-ever else inane business model is recurrent crises and social costs, sometimes overt, sometimes obscure.
Arbitrary and ad-hoc explicit or implicit insurance schemes and put options, obfuscation and complexity, moral hazards and perverse incentives under every carpet.
A fair and democratic society, especially in the hyperconnected digital age must very seriously consider the wiring of the monetary/credit system. The rule should be simplicity, transparency and working hard for the money: return strictly coupled to risk.
Core to a better design will almost certaintly have to be the concept of risk free deposits with the central bank that are not subject to runs. The rest needs to be worked out.
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#924We 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…
I like this all upside, minimal downside method of business. How can I set up a nice company that will partially insure the money I get but ensure a bailout will cover the rest should the risks come to fruition?
Also, how do I make it hard for my customers to understand the risks they are taking on so that I can use compassion to ensure such bailouts?
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#925Yellen and the FDIC is in a tough spot. This is the important line, "Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law." Thus, on one hand, I'm glad they're doing this, as it should help prevent wider bank runs, and it ensures that banks are the ones that are actually paying for it. At the same time, this is yet another exam…
Tech company lays off 10K workers, HN is like, well, they have a fiduciary responsibility to their investors!
SVB takes a dive and wants a bailout, HN is like, think of the workers!
WTF?
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#926We 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…
> 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?
No one can tell you what will happen because to my knowledge the FDIC hasn’t told us yet. They may not have settled on a final outcome yet — there may be multiple options still live — finding a buyer for the assets of the bank, for instance. All this statement is saying is that they’ve verified that even in the worst case, the resources exist to make the depositors. whole.
Meanwhile,’bullshit’ is a strong claim. And I’m not going to fight you on the trustworthiness of government officials in general. But someone who’s been at this as long as Yellen isn't going to blow the Treasury Department’s credibility on a dumb, easily-discovered, get-you-through-the-day-and-then-fall-to-pieces sort of lie.
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#927Yellen and the FDIC is in a tough spot. This is the important line, "Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law." Thus, on one hand, I'm glad they're doing this, as it should help prevent wider bank runs, and it ensures that banks are the ones that are actually paying for it. At the same time, this is yet another exam…
> 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. The criteria isn't threatening a "wider disruption to the economy", it's threatening the quality of life of a certain class of people. When unions threaten a wider disruption to the economy…
> The criteria isn't threatening a "wider disruption to the economy", it's threatening the quality of life of a certain class of people.
In support of this view, they could have easily extended FDIC on a dynamic metric, for example 20k for each employee. If you are 5 employee VC fund sitting on 0.5 billion in cash, no bailout for you from taxpayer money (because let's be real, FDIC is all taxpayer money, it's irrelevant if that tax is collected by the govt directly or indirectly via mandatory banking fees).
An alternative path was to provide zero interest loans against your SVB holdings, with the expectation that you are on the hook for the shortfall that would be yielded by the liquidation. If SVB is well capitalized as the Fed claims it is and there is "no cost for the taxpayers", then this shortfall should be relatively small if any.
Another, even more radical option would be to quickly set-up a secondary market for the debt issued by these banks and let the market provide liquity and discover the value of the assets. This is one of the few innovations form the crypto world I wish we could see in traditional finance, we can't keep bailing out rich mofos like it's 2008 when we have all these wonderful new technologies which can stop contagion and bank runs, protect depositors and zero in on those responsible.
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#928This seems like that thing with power companies offering varying rates based on demand, then when power failed people's bills went sky high and someone just has to resume them.
What I mean is, all this risk was baked in by design, with some stupid assumption of "well that won't happen." Now it's happened and the response is "well that's not supposed to happen, please rescue."
Rules for me and not for thee.
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#929Yellen and the FDIC is in a tough spot. This is the important line, "Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law." Thus, on one hand, I'm glad they're doing this, as it should help prevent wider bank runs, and it ensures that banks are the ones that are actually paying for it. At the same time, this is yet another exam…
> 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
And it doesn’t have to be that wide a threat. The threat here was pretty localized. Aside from blue chips that everyone has their pensions invested in (which don’t seem to be at risk) the rest of the country doesn’t have much exposure to this.
Maybe I’m wrong but that seems like a significant shift in policy, where the government will change the rules to respond to a localized crisis.
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#930So 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…
What are you on about? The final decision was eminently reasonable. The bank's shareholders are getting wiped out. The depositors are protected. Banks -- who depend on the continued faith of the public -- chip in a little more in insurance. The taxpayer pays nothing. A bunch of software companies get to succeed or fail now on the basis of whether their business models and execution make any sense, as opposed to wheth…
> The taxpayer pays nothing.
Money to cover deposits that didn't previously didn't exist, suddenly exists, and there are people like you trying to tell everyone else that everything is rosy and that it's not going to cost the taxpayers anything.
It sounds like a revolutionary system that you're working with and if it truly costs "nothing", may I ask where I can sign up to have my bad financial investments refunded for free?