US Regulators Bail Out SVB Customers, Who Can Access All Their Money Monday (cnn.com) 227
Breaking news from CNN:
Treasury Secretary Janet Yellen on Sunday instructed the Federal Deposit Insurance Corporation to guarantee Silicon Valley Bank customers will have access to all of their money starting Monday.
By guaranteeing all deposits — even the uninsured money customers kept with the failed SVB bank — the government can ensure public confidence in America's banking system, said Yellen, Federal Reserve Chair Jerome Powell and FDIC Chairman Martin J. Gruenberg in a joint statement....
The FDIC opened an auction Sunday for bids to acquire the bank, the Treasury Department said in a briefing with lawmakers in the California delegation, two sources familiar with the briefing told CNN.... Under Secretary for Domestic Finance Nellie Liang and Assistant Secretary for Legislative Affairs Jonathan Davidson led the briefing, during which they told members that the FDIC is prepared "to operate the institution" to ensure depositors can maintain payroll for their employees and that more operations will emerge in coming days, one of the sources said.
The treasury secretary's statement clarified that "No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer." We are also announcing a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state chartering authority. All depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer. Shareholders and certain unsecured debtholders will not be protected. Senior management has also been removed. Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law.
Finally, the Federal Reserve Board on Sunday announced it will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors.
Meanwhile, congresswoman Nancy Pelosi said there are multiple potential buyers for SVB, and "What we would hope to see by tomorrow morning is for some other bank to buy the bank." The UK arm of the bank has already received a bid from the Bank of London.
From the treasury secretary's statement: The U.S. banking system remains resilient and on a solid foundation, in large part due to reforms that were made after the financial crisis that ensured better safeguards for the banking industry.
Those reforms combined with today's actions demonstrate our commitment to take the necessary steps to ensure that depositors' savings remain safe.
By guaranteeing all deposits — even the uninsured money customers kept with the failed SVB bank — the government can ensure public confidence in America's banking system, said Yellen, Federal Reserve Chair Jerome Powell and FDIC Chairman Martin J. Gruenberg in a joint statement....
The FDIC opened an auction Sunday for bids to acquire the bank, the Treasury Department said in a briefing with lawmakers in the California delegation, two sources familiar with the briefing told CNN.... Under Secretary for Domestic Finance Nellie Liang and Assistant Secretary for Legislative Affairs Jonathan Davidson led the briefing, during which they told members that the FDIC is prepared "to operate the institution" to ensure depositors can maintain payroll for their employees and that more operations will emerge in coming days, one of the sources said.
The treasury secretary's statement clarified that "No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer." We are also announcing a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state chartering authority. All depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer. Shareholders and certain unsecured debtholders will not be protected. Senior management has also been removed. Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law.
Finally, the Federal Reserve Board on Sunday announced it will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors.
Meanwhile, congresswoman Nancy Pelosi said there are multiple potential buyers for SVB, and "What we would hope to see by tomorrow morning is for some other bank to buy the bank." The UK arm of the bank has already received a bid from the Bank of London.
From the treasury secretary's statement: The U.S. banking system remains resilient and on a solid foundation, in large part due to reforms that were made after the financial crisis that ensured better safeguards for the banking industry.
Those reforms combined with today's actions demonstrate our commitment to take the necessary steps to ensure that depositors' savings remain safe.
Privatize the profit, and nationalize the risk (Score:5, Insightful)
Corporate welfare ladies and gentlemen.
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Corporate welfare ladies and gentlemen.
Yeah, I never want to hear again how students "knew what they were getting into when they took out their loans", when businesses can't even be bothered to read the FDIC placard that is literally right in your face at every bank, yet they get bailed out. Must be nice to be a big wealthy business and have the ear of politicians.
Re: Privatize the profit, and nationalize the risk (Score:5, Informative)
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Most of which are small startups
I'm sure there must be a few rich friends of politicians in there too.
Maybe even one or two congressmen who saw their money going away. Action had to be taken!
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You're apparently an ignorant peasant that has no clue to the nature of business transactions.
1) The $250K FDIC insurance is a feature for individual consumers. That's people who live on their W-2 and own modest homes on Long Island, NY. Many Fortune 10K companies (small regional businesses, for example car dealerships) are handling cash in the millions of dollars. They can't get the equivalent of FDIC insurance.
2) At a certain point, they can only go to a TBTF bank to hold their 2 million in cash (so
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If you have more than $250k, you can either spread it around to multiple banks or insure it privately. The cost of insurance is hardly an unreasonable burden if you're sitting on that much cash.
Re: Privatize the profit, and nationalize the risk (Score:4, Insightful)
If you have more than $250k, you can either spread it around to multiple banks or insure it privately
$250k is nothing for even a medium company. It's just a few days of normal expenses. This makes it impractical to use multiple accounts.
Also, there's no easily available private insurance for cash in bank accounts for any non-trivial amount. SIPC can insure up to $500k, but that's about it.
In practice, most companies just buy Treasuries (typically T-Bills). But it makes sense to offload these kinds of securities juggling to a third party, that would do this for you. This third party will provide you with a slightly smaller interest rate, in exchange for management services.
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It's almost like there is a solution for this. https://www.intrafinetworkdepo... [intrafinet...posits.com]
Re: Privatize the profit, and nationalize the risk (Score:5, Informative)
SVB instead bought long-term T-notes, the ones that mature in 10 years. They pay interest every 6 months, but at the moment of purchase, the interest rate was about 0.5%. So if you want to sell these T-notes right now, investors will agree to buy them only at a discount.
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There's no corporate bailout here (Score:5, Informative)
Per Janet Yellen [apnews.com], there's no corporate bailout. This instead looks more like helping customers with deposited funds, lines of credit, etc.
I wouldn't have covered above and beyond the $250K insurance limit for individual customers (people need to appreciate the FDIC coverage), but otherwise this looks like it's on the up and up - an extreme rarity in the banking industry and government intervention.
SVB wasn't an bank for individuals (Score:5, Interesting)
Depends on what you count as "individual customers" - does that include an entire startup, or are you talking about "individuals" as actual people?
Because the latter doesn't exist with SVB, it was a pure "corporate" bank, no individual accounts. At which point the $250k becomes something of a joke.
Let's say that you have a bunch of $60k employees. That's $5k/month, which means that if you have more than 50 employees, you need $250k in the bank just for payroll.
Do anything else, such as pay your lease with that account, and the amount goes up even more.
And note I mentioned payroll - that's why they're ensuring the customers keep access to their funds, because, well, we don't want the businesses to default on their payroll, that means employees not getting paid. Which is bad on the individual level.
And from what I've been seeing, the bank actually has the assets to pay out all the funds, it's just that because of the run, they can'd do it right now. So the FDIC will get their money back soon enough.
Re:SVB wasn't an bank for individuals (Score:5, Interesting)
At which point the $250k becomes something of a joke.
Which really does seem like an issue that the FDIC should address with higher levels of insurance specifically for business accounts, and funding such insurance accordingly. Bending the rules arbitrarily because you're too lazy to address an obvious issue is just bad governing.
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Which really does seem like an issue that the FDIC should address with higher levels of insurance specifically for business accounts, and funding such insurance accordingly.
It could also include a few rules about what to do with bankers who gamble and cause this situation
eg. Some time in prison.
Re:SVB wasn't an bank for individuals (Score:5, Informative)
We had them, then Trump signed a law exempting SVB sized banks from a bunch of them.
Re:SVB wasn't an bank for individuals (Score:4, Insightful)
SVB, like our mid-sized bank peers, does not present systemic risks.
https://www.govinfo.gov/conten... [govinfo.gov] - page 115
And in 2018, Trump relaxed the Dodd-Frank regulations, so here we are.
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I'll point out here that the FDIC coverage amount is set by congress, so they have to be the one changing it, not the FDIC itself.
So, given the deadlock there, they're just doing the best they can to protect ALL depositors.
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It's worth pointing out that they aren't bending the rules here. It just so happens that SVB already had sufficient assets to make its former customers whole, so the USG is simply informing the public of a distribution plan that allows them to provide those assets back to customers. Anything less would mean the USG was robbing those customers.
In short, SVB's problem wasn't a lack of assets—their assets actually exceeded their debts—but rather that they weren't liquid enough to keep up with a run
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The paper is not worthless, but it's not liquid, they can't sell it today for its face value. The bond will be worth its face value sometime in the future, but they need the money today.
So basically they need the Fed to be a payday lender. It's not exactly reassuring, but the lender of last resort is in the Fed's job description.
Where the Fed will fail is in jailing the C-level executives who bungled their jobs or the regulators who who bungled theirs.
One other note, the bank run supposedly moved $42 billio
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But the high end depositors should not have been made whole, not 100% not this soon.
Give them enough liquidity to run payroll and pay the bills. Give 75% back immediately. 20% more after checking the books, the last 5% subject some cap.
The depositors who chased returns should have to take a haircut. Else there is moral hazard.
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They probably did check the books. It's just that, well, being a bank and not a cryptocurrency exchange, their books were actually in good shape and didn't take that long to verify that after giving the shareholders and lenders a haircut, the depositors could all get their money.
Given interest rates well under 1% for deposit accounts, my question would be "what returns were they chasing?". FDIC insured accounts, which these were other than the "pretty much everybody exceeds the limits", don't pay much.
It
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But fundamentally you are correct. The bank was solvent. It was just on the cusp of being rated Aa to Aaa thats all.
It was the liquidity crises, sparked by a Peter Thiel hedge fund advisory that triggered a run on the bank.
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are mostly corporations like Roku, so yeah, it's a corporate bail out.
And if there ever was an example of what corporate stagnation can lead to, it's Roku. Their cheapest streaming stick still doesn't even support 5GHz WiFi [reddit.com], and there was an article recently about how Roku doesn't support IPv6 [slashdot.org].
Some companies need to be slapped down by the free hand of the market so newer, more innovative competitors can take their place. Roku has just been Scrooge McDucking their cash rather than dumping it into much needed R&D, and losing that money would've been well-deserved karma.
Re: There's no corporate bailout here (Score:3)
It's per account of different types. If you have a checking and savings account each at two different banks, each of the 4 accounts is insured to $250k.
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You say they are terrified of a depression, but it's quite clear that the Federal Reserve is trying to engineer a recession. Incidentally, one of the reasons this bank failed is rate hikes by the Fed.
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Sort of but no. They put most of their deposits in USG bonds instead of spreading their risk around. Failed Investing 101.
Re:Privatize the profit, and nationalize the risk (Score:5, Insightful)
nailed it. the reason the FDIC is going to insure all accounts even ones that exceed $250k is because they're _terrified_ the entire system would collapse and we enter a depression. this is just more evidence of how fragile the financial system is thanks to endless QE and ZIRP.
It's about confidence. 20 years ago SVB could have weathered this with ease because without social media and instant communication there wouldn't have been a run of 1/4 of their deposits in a mere day. There isn't any bank that can withstand that.
There are 4 banks that are "Tier 1, too big to fail". Everybody else is Tier 2 or less. If they don't guarantee the deposits for the smaller banks then why would anyone keep their money there after seeing this?
This had to be stopped
Re:Privatize the profit, and nationalize the risk (Score:5, Informative)
No it isn't. The bailout is of depositors not investors or corporate debt holders, and the money is paid in by the banks themselves to FDIC. All this does is shuffle the chairs a bit.
Protecting the depositors was actually pretty important, as businesses have to keep a lot of cash in the banking system to cover operating expenses. SVB specifically had a lot of business accounts which added to their risk.
The corrupt portion of it (which will likely be pursued by the government) was the CEO selling shares before the liquidation and certain people having adance notice that the bank was in peril and moving their money out. Rumors that Peter Theil both transferred all his money out and shorted the bank, which will be interesting if true.
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Rumors that Peter Theil both transferred all his money out and shorted the bank, which will be interesting if true.
I wouldn't say that's a rumour, Theils Founders Fund specifically and publicly advised companies to pull money out of SVB several days before the bank's collapse.
The only question is on what basis did Peter Theil short the bank. If it was on publicly available information then that's fair game. If it was on privileged / confidential information then he may have a lot to answer for.
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Privatize the profit, and nationalize the risk
Corporate welfare ladies and gentlemen.
No one other than SVB is paying for their mistakes.
You seem to have missed that SVB is being allowed to fail, as well as the "No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer" in the summary. No one is paying for their mistakes, other than SVB itself, which is now a—past tense—failed bank (i.e. they are not getting a bailout like you suggest).
Lest you object on the basis that someone has to pay...no, no one does, because SVB already had sufficient ass
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Re: Privatize the profit, and nationalize the risk (Score:2, Insightful)
It was when you went over the 250k FDIC limit and chose not to further insure it.
Re: Privatize the profit, and nationalize the risk (Score:4, Insightful)
Re: Privatize the profit, and nationalize the ris (Score:3)
Re: Privatize the profit, and nationalize the risk (Score:4, Insightful)
Re: Privatize the profit, and nationalize the risk (Score:4, Interesting)
There's an overwhelming body of evidence that shows diverse teams produce better outcomes that non-diverse teams even if the latter is of higher technical skill.
Color me sceptical on this one. I understand that different viewpoints within a team can be a good thing, it helps avoid groupthink (although if the viewpoints are so different that you can't reach any consensus at all, that's also bad). The problem is, that 'diversity' has become one of the woke buzzwords and has come to mean purely 'people of different race, sexuality or gender' (women in practice). Diversity of ages, of educational and work backgrounds, family backgrounds, of personalities, extroverts and introverts, detail-oriented vs big picture oriented, any other ways people can be different is not important apparently. But get a couple of black lesbians in your team and boom, you're now diverse.
Re: Privatize the profit, and nationalize the ris (Score:3)
Diversity (be it racial, ethnic, gender or orientation) does not trump knowledge or experience. Simply adding a woman or a PoC to a group doesn't mean the fmgroup makes better decisions.
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How is a savings account at a bank a "bet"
Simple: When you over-lend you're gambling on future inflation.
In this case inflation went up and the bank lost their bet.
Comment removed (Score:4, Funny)
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Let no billionaire suffer losses...
Re:Privatize the profit, and nationalize the risk (Score:5, Insightful)
Wouldn't it be nice to bet your* money and get it back if you lose?
It's ironic that in a sense SVB failed because they didn't "bet their money" and were too conservative.
Of course, the blame is on Congress and the lobbyists that relaxed the 2008-era laws that regulated banks (regulations are bad!). Those regulations that were eventually relaxed likely would have uncovered the SVB weaknesses.
The really big blame is on the SVB CEO who seems to have been very lucky or traded on inside information when he sold $3.6 million of SVB stock at $287.42. He also actively lobbied Congress to exempt SVB from the regulations that could have prevented this mess. And SVB donated/paid money to legislators to secure their votes.
Furthermore, this mess was predictable [theguardian.com]:
In 2019, when the Federal Reserve proposed regulations implementing the deregulatory law, financial watchdogs warned that its regulations on Category IV institutions – as SVB was later classified due to its size and other risk factors – were far too weak.
“The proposal to significantly weaken enhanced prudential standards for Category IV firms could be disastrous,” Better Markets, a non-profit advocating for stricter financial regulations, wrote in a comment on the Federal Reserve’s proposal. “Moreover, these are not small or insignificant firms. Recall that the smallest among this class of banks is over twice the size of the $50bn banks that automatically required enhanced prudential regulation under the Dodd-Frank Act as originally enacted.”
Re:Privatize the profit, and nationalize the risk (Score:5, Informative)
Re:Privatize the profit, and nationalize the risk (Score:5, Insightful)
The problems really started in 1999 when Glass-Steagall was largely repealed, which set the stodge for all the shenanigans that led up to the 2008 WFC and the subsequent regs that has been chipped away at ever since. And so history repeats itself, maybe not at the same scale but...
The repeal of Glass-Steagall had fuck-all to do with all the banking shenanigans we've had since 2008. GS simply mandated that investment banking... stocks, bonds, etc, couldn't be in the same business as your local banks that did checking and savings and loans. The idea was that if you wanted to, you could buy stocks or bonds at your local bank when you went to make a deposit. Not a bad idea, really. There's nothing there that's dangerous, and it never really took off anyway. What caused the crash of 2008 was almost completely related to mortgages. They were being sold to people that had no jobs, no income, and no one cared because of all the money being generated from them meant it was easy to hide the problem until it was too late. Agencies like Standard and Poor's pencil-whipped their ratings on the housing bonds as to not offend any constituency, political or business alike.
People say that banks didn't learn their lesson in 2008. Oh yes they did. They learned this from the government: You can lie, cheat, and fuck up as much as you like, and we'll always bail you out to prevent "panic".
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Inflation lags money printing by 18 months in average.
The inflation we're experiencing now started exactly 18 months after trump printed money like crazy to keep the economy afloat. Americans are now paying that loan. Because that's what it was: a loan.
The only possible way not to have crazy inflation now, is go back in time to 2020 and prevent trump from issuing money.
Re:Privatize the profit, and nationalize the risk (Score:4, Interesting)
By guaranteeing all deposits â" even the uninsured money customers kept with the failed SVB bank â" the government can ensure public confidence in America's banking system
ITYM:
By guaranteeing all deposits â" even the uninsured money customers kept with the failed SVB bank â" the government can ensure that casino banking continues for the indefinite future
Inconceivable! (Score:2)
By guaranteeing all deposits â" even the uninsured money customers kept with the failed SVB bank â" the government can ensure public confidence in Americaâ(TM)s banking system, said Yellen, Federal Reserve Chair Jerome Powell and FDIC Chairman Martin J. Gruenberg in a joint statement.
You keep using that word. I do not think it means what you think it means.
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Wish I could bet on a "sure thing" and get all my money back after it all went to hell.
But the second strangest part is that statement about confidence in America's banking system; last I checked, companies with "Bank" in the name are not literally required to be FDIC insured, they'll just have trouble competing...unless they can gener
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But the second strangest part is that statement about confidence in America's banking system; last I checked, companies with "Bank" in the name are not literally required to be FDIC insured, they'll just have trouble competing...unless they can generate enough buzz and groundswell and wtf-ever, apparently. If that's their interpretation, then FDIC insurance should be mandated and the premiums be assessed in line with other insurance products (including risk-factors).
The bank is FDIC insured. The problem is the bank's customers are tech businesses, not individuals. $250K insurance is a lot for a personal account, but it's nothing for the account that handhelds payroll for a team of engineers.
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The bank is FDIC insured. The problem is the bank's customers are tech businesses, not individuals. $250K insurance is a lot for a personal account, but it's nothing for the account that handhelds payroll for a team of engineers.
How do real businesses with actual professional accounting staff deal with this problem? It does not seem insurmountable.
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They normally have their accounts with very large banks who specialize in corporate banking, and depend on the banking regulations to prevent their banks from taking risks that could cause the entire bank to go under without any warning. Then they take out additional private insurance to cover known liabilities like payroll, at reasonable rates because the risk of the insurer having to pay out is (supposedly) very low. FDIC insurance isn't relevant to this situation. This all is also why banking regulations
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You trust the banking system. You can break accounts up for a few logical pools of money like business units, payroll, receivables, payables, reserves, but most of your pools are going to be over $250k. My company (~40 employees) has four accounts-- one with a small bank and three with one of the big banks; all are over the FDIC limit. Back in 2008 when we were smaller we had accounts at four different banks, but that is really a pain in the butt.
(Oh, and if you are really smart you also have some T-Bill
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Wish I could bet on a "sure thing" and get all my money back after it all went to hell.
Remember, this isn't the investors getting their money back, this is the depositors getting their money back.
As for the FDIC bank thing, that gets complicated. Yes, you can get told off for calling yourself a "bank" and not being FDIC. But there are some exceptions for stuff like "Seed bank", where they store seeds for the future, not money.
Re: Inconceivable! (Score:3)
It's a horrible judgement! It makes the FDIC and non-FDIC banks idiots. It erodes the FDIC system. This was a bad move. They should have left the damage to as small of a market segment as possible. The rest of the market can put up shields to stop the contagion.
Imagine if you paid the same amount of insurance for your civic as the lamb owner. But when both of you crashed, you both got the full amount of your car's value... even thou the insurance over-covered yours and only 50% of the lamb's. That's
Precedent has been set (Score:5, Insightful)
The next time a bank, any bank goes under, everyone gets their money, even if it's above the $250,000 FDIC limit.
To do otherwise would be the ultimate act of hypocrisy.
Re:Precedent has been set (Score:4, Informative)
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I hope so.
The more the banking system protects depositors, the better it is.
Now if the FDIC has to take measures to make this possible (for example charge banks a small percentage higher) its well worth it to live in a country where the FDIC insures all or even most of your funds, no matter how large they are.
It helps banks, people, companies and the economy as a whole. And there's no reason it should cost the taxpayers a cent.
Re: Precedent has been set (Score:2)
There is already an option for that. DIF! Has been around for a LONG time. Insures your entire account.
These banks and their customers chose FDIC limits.
FDIC shouldn't have raised the rate to $250 back then and this is just dumb. You don't change limits before the insurance rate change. They should happen at the same time.
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DIF is really just used by a (small number of) small banks. As I understand it (which could be incorrect) it is to give confidence to depositors at smaller banks. I couldn't find any of the top-20 banks listed as members, nor could I find any smaller banks I know with deposits of around $2-3B listed as members.
I don't know if there are similar dif's for larger banks, but I couldn't find any information on them.
Precedent was already set (Score:2)
Actually, this is far from the first time this has happened. Generally speaking, if there are enough assets remaining to make everybody good, then they do so.
Indeed, in various interests, the FDIC will often cover all deposits under the limit, THEN the remaining assets go towards making those with uncovered over $250k investments whole. At which point most of the time enough money/assets can be found to make them fully whole.
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In this case, the bank had assets to cover the deposits, so the FDIC is providing liquidity to cover the assets. All the money gets returned in the end.
I don't know what everyone is whining about. The bank faced a liquidity crisis due to the run; it isn't insolvent.
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Stop voting for right wing, pro-corporate politicians, and if you already have get your friends and family to stop.
On April 22, 1994, President Bill Clinton announced his intention to nominate Yellen as a member of the Federal Reserve Board of Governors, alongside Alan Blinder, who has been designated as vice chairman, the first Democratic appointee to the Board since 1980. source [wikipedia.org]
Granted, a lot has changed in both parties since the mid-90s, but being disingenuous with the facts isn't a good look. We're primarily in this situation because corporate money corrupting politicians has been a thing for a lot longer [wikipedia.org] than Cit
Re: "Shamelessness is their super power" (Score:3, Informative)
Charge large depositors (Score:4, Insightful)
I think FDIC should insure all deposits. It would only make the banking system stronger.
There is no benefit for depositors to lose their money. It's not them that did any risky investments.
Instead maybe the FDIC could provide (maybe optional) extended insurance where 0.1% (or some other small number) is paid on deposits to fund a safety net fund for deposits say, over 1M dollars. Then when a bank fails, the FDIC can pay back maybe up to some percentage like 80% of the amount in the bank.
But companies with 10 million dollars in the account don't have to close because they cannot make payroll and have to lay off thousands upon thousands of their employees.
The depositors shouldn't be punished, but rather the shareholders. They should lose it all.
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Re: Charge large depositors (Score:2)
Depositors Insurance Fund. Just as old. Private.
The federal government should NOT cover Jeff Bezos personal bank account with tax payers' funds.
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The purpose of the FDIC is not to manage risk. It is to eliminate risk for the average depositor so the banking system will remain vibrant even if bankers donâ(TM)t manage risk.
The only thing we might do dif
Re: Charge large depositors (Score:3)
Kinda funny that that is what crypto was all about (Score:2)
Kinda. Because it's all a lie, like the rest of it. The system is rigged. You lose, you lose. They lose, there's a puff of smoke, the ground shifts, they win.
Signature Bank shuttered too (Score:2)
They also just shuttered crypto-friendly Signature Bank. About time.
https://www.coindesk.com/polic... [coindesk.com]
IANAB (I am not a Banker), but (Score:5, Insightful)
The implication I took from Yellen's remarks is there's enough there to make the depositors whole. There's some mention of "unsecured creditors" losing money (not sure who they are) and of course stockholders are SOL.
Failing to do this would have added substantial economic risk to the US economy, I think. Thus if Yellen is correct and no taxpayer dollars get spent, this is absolutely the right call. (FDIC will burn a lot of its capital reserves executing the liquidation, both of secured deposits and of the rest of the deposits, but that's what FDIC gets paid to do!) At some point, I'm presuming we'll get to see a final balance sheet to understand how the bank was liquidated and who didn't get their money back.
Actions (criminal or 'just' regulatory/administrative) taken against the SVB officials and employees will also be interesting to watch.
Thus I come down on the side of "We probably shouldn't have gotten here, but we seem to be doing the best to dig back out of the hole."
You know what else adds substantial risk? (Score:3, Informative)
It was Trump & the GOP that repealed the regulations that would have stopped this. They did it in a sneaky way. Instead of repealing Dodd-Frank (which would've made headlines) they passed laws removing all of it's provisions and left the law *technically* in place. And we let them, because reasons.
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This is true. Trump and his ilk weakened smaller bank regulations. Also, SVB lobbied against regulations.
AND THEY FAILED!
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SVB was the 16th largest bank in the country.
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The fix is class warfare and socialism, right?
Or maybe you're just wrong and they went under because they violated very basic investment safety concepts by putting most of their eggs in one basket and got it wrong.
Re:You know what else adds substantial risk? (Score:5, Insightful)
Trump dumped far more money into the economy than Biden did yet you don't seem to be blaming him. We had 10-years of low rates followed by repeated shocks to global supply chains, manufacturing, and shipping thanks to COVID and Russia invading Ukraine.
Yes inflation is higher, rates are higher but look around you this isn't the financial crisis which resulted in mass unemployment in the USA. The economy isn't crashing which is exactly why central banks are raising rates not lowering them.
Re:You know what else adds substantial risk? (Score:4, Insightful)
because Biden tanked the economy
/me looks at the recent GDP report: 2.7% growth in Q4 2022 and 3.2% growth in Q3 2022. Very tanky indeed.
No amount of TDS is going to change who's in the White House while the economy collapsed.
The last time it happened during the Bush administration. You Trumpbots always try to forget who unscrews up the economy.
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It's pretty amusing because we literally know the direct cause of this: the Fed continuing to raise rates, because Biden tanked the economy and inflation is skyrocketing thanks to Biden's policies.
It's pretty amusing that everyone on both sides of the US political spectrum blindly blame the other side while often spewing irrelevant BS that has nothing to do with the conversation. Inflation is a lagging indicator (18 months is often used as a rough ballpark), which makes 2023 the first year we will start to see any Biden policies having a meaningful effect on inflation. But that doesn't mean it is all Trump's fault either, because it was a divided Congress which voted for all the stimulus packages dur
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That is explicitly NOT how I read the Yellen announcement. "all depositors" is a VERY DIFFERENT proposition than "all guaranteed depositors". The latter group is protected no matter what Dr Yellen said, because of the FDIC.
I don't know the order of repayment by law in a bank default. But I would generally expect that depositors are 'secured creditors' with the security provided by the bank, distinct from "unsecured creditors" who for example loaned the bank money without getting collateral.
Save the account holders, let the banks fail. (Score:2)
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How SVB failed (Score:5, Informative)
Matt Levine at Bloomberg summed it up pretty well
And so if you were the Bank of Startups, just like if you were the Bank of Crypto, it turned out that you had made a huge concentrated bet on interest rates. Your customers were flush with cash, so they gave you all that cash, but they didn't need loans so you invested all that cash in longer-dated fixed-income securities, which lost value when rates went up. But also, when rates went up, your customers all got smoked, because it turned out that they were creatures of low interest rates, and in a higher-interest-rate environment they didn't have money anymore. So they withdrew their deposits, so you had to sell those securities at a loss to pay them back. Now you have lost money and look financially shaky, so customers get spooked and withdraw more money, so you sell more securities, so you book more losses, oops oops oops
This explains the Dow futures (Score:4, Interesting)
NOT FINANCIAL ADVICE. Do your own DD.
This explains why Dow futures are up 0.9%, although NASDAQ is more relevant and those futures are up 1.3% as of this writing.
I was thinking "curbs in" on Monday, and I bet they were too. Nobody wants this to blow up if they can avoid it, but historically they're usually just sand-bagging against a tsunami. We had, IIRC several months of relative calm between Bear Stearns and Lehman. SVB could be the Bear Stearns of this Bear cycle (seriously, did they let that one collapse first on purpose?)
So what have we got now? Persistent high inflation, so if the Fed doesn't keep tightening you're looking at eggs for $20/doz and $10/gal gas. Bonds will keep selling off. This bank had significant assets in bonds. Those were marked to market, so the banks assets started to drop and people got spooked (allegedly Peter Theil yelled "fire", but it could have been anybody). So what other banks have a significant portion of their investments in these MBSs, which are falling in value? As long as people keep paying their mortgages, the notes will perform. They'll get their money, they just can't flip the bonds to pay depositors *RIGHT NOW*. Classic panic, but that doesn't mean it can't screw us, and if the Fed has to keep raising rates we'll see more of it. Eventually it might be too big to bail out and/or payrolls will stop for a while which was the really big fear here--a lot of Si Valley workers were not going to get paid because startups had huge uninsured deposits in the bank they thought was secure, and it mostly was because like I said, most people are paying their mortgages so the bank will *eventually* get principal and interest on the loans... just not today.
Finance, dude. Not even once. Glad I'm not directly involved.
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Persistent high inflation
Right now long-term bond rates don't indicate high inflation expectations. Neither do the numbers, from the high of 9.6% it's down to 6.4% and projected to fall further.
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You mean all the retired people, the disabled, and others on,fixed incomes are going to suddenly just magically get enough new money to account for inflation?
Where does that money come from? Oh,hey I know, we print it! And that causes inflation so we print more! Like some third world shit hole where the paper is worth more than the bill printed on,it.
Just stop. That's nonsense.
Why 100% why this soon? (Score:2)
Government is telling the depositors they can continue to seek highest return and dont have to pay attention to how well the bank is run.
All the hedge fundies, people pontificated about moral hazard on
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At least this time they bank share holders and the unsecured lenders to the bank are losing everything.
They should claw back insider sale proceeds, and they should also claw back shareholder dividends.
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Cool, progress. A few more tax payer fuck overs to the tune of several more trillion and we might have really learned something! Yay!
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As I understand it SVB wasn't run (too) poorly or engaging in shady or exceptionally risky practices. It's only mistake was to concentrate on a single sector for it's customers and depositors. It has enough assets to cover it's liabilities to depositors, it's making reasonable money on it's loans, it's not at any huge risk over the medium-to-long term. What is has is a liquidity crunch where a large percentage of it's depositors demanded their cash right now and it doesn't have enough cash or assets it can
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About how well the bank was run: T
SCOTUS fairness doctrine (Score:2, Interesting)
Would anyone sue the Fed under this doctrine? Companies that check the credit rating of the banks and avoid chasing that extra 0.25% lower interest rate in their LOC.. Is it fair to them? Banks that hedged their long Tbill pur
Re: They should have let the bastards burn (Score:5, Informative)
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Once again we savers are penalized for trying to secure our own future.
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Including all the companies who have payroll coming up? Are their employees bastards as well? So the delivery driver, the custodian, the receptionist are all bastards that should burn? Get a grip.
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They are like contractors for the Death Star.
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Including all the companies who have payroll coming up? Are their employees bastards as well? So the delivery driver, the custodian, the receptionist are all bastards that should burn? Get a grip.
Ever been laid off from a company that went out of business? I have.
Businesses sometimes make stupid decisions and the employees suffer, but it's all part of the great corporate circle of life. Savvy businesses that keep their funds properly insured prosper and the weaker businesses are culled from the herd. The void created allows for new opportunities for startups to bring fresh competition to the marketplace.
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Don't think for a second that this is about the little guys getting paid.
Re: Too big to lose money, then? (Score:2)