It is not clear to me why only these depositors of SVB deserve special treatment of full reimbursement of their funds. Is this not unfair towards those that held > $ 250 K in other bank failures where the rule of law was applied of not insuring such deposits?
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
#942It'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…
Modern civilized societies enable specialization. You don't have to study plumbing, electricity, medicine, etc - you can buy all this stuff as a service. If something breaks, a person comes and fixes it. This allows you to specialize on whatever you want to do - say, build a startup. Software. Painting. This is absolutely, definitely more efficient than forcing everyone to learn plumbing. Financial system is basicall…
You realize that if there was such a model SVB wouldn't have existed and startup founders would have to turn to e.g. BoA, which ... would have turned them down? So those startups wouldn't have existed in the first place just as SV as a whole. Problem solved! Back to the USSR!
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#943As pointed out a totally avoidable problem. Glad Fed backstopped. Also dont like calling this a bailout - it's not.
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#944The more things like this happen, the more I get the sense that the medieval Muslim world did this right: your market can only be free if the state does not intervene whatsoever in matters of debt or interest. Someone doesn't pay, that should be the creditor's problem, they shouldn't get to use the government as a recollection agency.
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#945The market is buying this up, failing to realize that things will continue to break as interest rates are increased further. The Fed isn't interested in saving banks. They're there to quell inflation.
> The market is buying this up, failing to realize that things will continue to break as interest rates are increased further. Expectations of Fed action haven’t changed, expectations of FDIC/Treasury action to protect banks have. The information not already priced in is positive.
That's incorrect. Last week, the market was expecting a 50BPS increase. Now it has suddenly decided there is a 0% chance of 50BPS, an 81% chance of 25 BPS and a 19% chance of no hike.
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#946Yellen 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…
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Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#947We 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, 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.
The only problem with this line is that a ton of people on here are explicitly against social safety nets. Now that they need one, all kinds of equivocation and hand waving.
Safety nets for all (or none)! FWIW, I prefer the former.
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#948Earlier quoted context omitted.
I just posted this on mastodon but I think maybe the community here knows better: If you ran a bank that required insurance on all deposits over the $250k FDIC coverage, and then offered 3rd-party insurance as a convenience for those who wanted it... your bank would be much less likely to suffer a blow up due to a bank run and therefore that insurance should be relatively cheap. Furthermore, people should prefer to b…
> Why is this not commonplace? Simply because the additional fee discourages it? You actually answer this question in the second half, because banks have been treating the government as free unlimited insurance.
I guess all the more reason for Yellen to mandate it.
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#949Crazy. I wonder how this will play out in the market.
First Republic continues to drop. Trading at ~$28/share (previously ~$80/share on 3/10).
Schwab is also feeling the pain. I guess their investments are tied up mostly in the tech sector?
Either we will see a dead cat bounce in the next few months or continued hemorrhaging. I can’t say for sure.
Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
#950Yellen 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…
Well that's far from the complete picture. It's not that the gov't is backstopping all bank stupidity -- the new facility simply says that for redemptions, US government bonds and MBS can be valued at face value not market value. Only for the purpose of ensuring liquidity for redemptions