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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

#981

Post by Cipater »

samch wrote: post #699
hn_throwaway_99 wrote: post #40

Yellen 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…

The “ahead of time” component is partially addressed by the Office of the Comptroller of the Currency which conducts period stress tests of banks. The people doing the testing know their stuff. These bank evaluations have likely caught and mitigated many issues like SVB ahead of time, and we will never know how many more failures would’ve occurred if it weren’t for their efforts and those of other auditors. Source: h…

Why didn't they catch it in this case?

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

#982

Post by [deleted] »

DebtDeflation wrote: post #901
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…

>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 shareholders already lost everything and unsecured creditors are about to lose everything. That's still not enough to make all depositors whole though, which is why the statement said the FDIC will be paying for the rest and fundin…

[deleted]

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

#983

Post by xdennis »

soheil wrote: post #939
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…

> Explain to a peasant why he should have to share the risk you took with your money. Dear Peasant, I empathize with your pain and suffering on a daily basis. I know life isn’t easy being a peasant, you perhaps work as hard as anyone in Silicon Valley. You pay taxes just like everyone else and expect your government to protect you and provide opportunities not just for you but for your children and their’s. Silicon V…

> It means better lives for all of us benefiting from innovations that happen there. You no longer need to farm in freezing weather when your John Deere tractor can drive itself

That's not done out of charity, it's done for profit. And when they're good enough they won't need the farmer. Forget about the grand grand children, what opportunities will the government provide for him when when he's no longer needed?

It's all about solidarity when the VCs are hurting, but what about poorly educated in the middle of nowhere?

It should be the same for everyone: you make your own choices, and if that has bad consequences you should suffer them alone. VCs don't share profits when things are good because stocks aren't taxed.

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

#984

Post by runeks »

snarf21 wrote: post #933
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…

While what you say is true, maybe we shouldn't allow mergers and other avenues to allow these banks (and other verticals) to be too big to fail. We've made that a target for all companies. Just get too big to fail and you get all the upside and none of the downside for free. That is my main complaint. By allowing deposits to be invested without risk, these too big to fail banks are encouraged to chase the highest yie…

Isn’t that prevented by making only the depositors whole but wiping out the capital of shareholders?

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

#986

Post by drc500free »

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…

I personally don't think the thing holding banker-bros back from risky investment strategy is fear that their depositors won't get back 100% of their deposits.

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

#987

Post by Gene_Parmesan »

s_dev wrote: post #903
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 have never seen such cognitive dissonance here at HN The cognitive dissonance is that most sv startups and SVB clients are run by people with very strong right wing economic beliefs. Suddenly when they're affected they're asking for bailouts of the parent institution so that they're not affected because of "too big to fail". This is quite simply capitalism for the poor and socialism for the rich.

Yes, this is exactly my issue. Libertarianism only lasts as long as it's not your $3bil at risk. Then it becomes "oh but the government can't let ME fail."

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

#988

Post by yunwal »

Eji1700 wrote: post #757
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…

> and maybe stop tweeting images of guillotines when our employees are anxious about their next paycheck? This is the unfortunate outcome of just mass producing us vs them rhetoric at EVERY level of discourse. Nuance is dead.

It’s also the unfortunate outcome of no one taking moderated concerns seriously.

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

#989

Post by joe_the_user »

dumbfounder wrote: post #618
twblalock wrote: post #591

Earlier quoted context omitted.

> Yellen has just broadcast that FDIC insurance is essentially unlimited, as long as you can threaten wider disruption to the economy. I think everyone knew that already. Since 2008 at least. It's very possible that if this is not done, the only banks left at the end of the week will be the "too big to fail" ones. A domino effect is very hard to prevent when it's based entirely on consumer confidence and those consum…

Not sure I follow the logic. SVB is done right? Saving the companies that banked there is very different than saving the bank. Yes, it might invite more risk by big banks if they know there is a parachute for their clients, but if we close the bank anyways or clear out all parties involved and they have large black marks then there are deterrents (theoretically at least). I like that the gov is acting more like a scr…

"Yes, it might invite more risk by big banks if they know there is a parachute for their clients, but if we close the bank anyways or clear out all parties involved and they have large black marks then there are deterrents (theoretically at least)."

* As the gp said, it's done. The guarantee isn't new, it's how thing are done now. The Fed is not changing things by doing this, the Fed is doing things as they are expected to be done. Anything else would be changing things, anything else would panic people. Is the Fed "scrappy"? IDK, the "scrappy" efforts to stop crises began with the "plunge prevention team" in the 1990s and have continued more systematically since then, if you want to call that scrappy.

* As to whether there are black marks on people - only the companies who can whether to hire these people later can decide that. Financial companies hire people who've done time for financial fraud so it's questionable what sort of "black marks" the Fed could give if it wanted to (People mention the Lehman guy but was Lehman really worse than the others in 2008 or just a scapegoat - like fricken Martha Stewart. Was that guy involved in excess or just a random manager? I recall he was now managing a stock subsidiary that's being spun-off whole. But still).

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

#990

Post by hellojesus »

ketzo wrote: post #613
beezle wrote: post #477

Earlier quoted context omitted.

Worse, it is also a lie that the cost will not be paid by taxpayer. Of course it will be - the remaining banks are going to pass the cost on via fees, higher loan rates and lower deposit rates? Yellen is not clueless. She knows exactly how this will play out but as it will be spread over time and to many counterparts she simply does not care. This is terrible moral hazard. Uninsured depositors should have taken whate…

Lol. If every depositor at SVB just instantly took the straight-up haircut — to the tune of -20% or worse - 50 more banks would fail in the next week. Feds are averting national crisis here.

The crisis needs to happen to correct badly allocated capital.
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