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I’d argue preventing a total financial collapse in 2020 is more important than SVB and some startups failing.

twoodfin 4y ago
Sure, but it's debatable whether spending a few $T more in early 2021 was more helpful than not.
CydeWeys 4y ago
Yup. FDIC insurance exists for this reason -- you can let a bank that made bad decisions fail without causing a chain reaction through the economy.
- rootusrootus 4y ago
  It's great, but it punishes the smaller banks while leaving the 'too big to fail' conglomerates in a position to be bailed out by taxpayers. We need to chop down any bank that poses a systemic risk so that it's small enough for the FDIC to handle.
  - dahdum 4y ago
    TARP arguably turned a profit, so a bailout isn't necessarily bad. Might be better to let them fly high, get burned, and then let investors get wiped out while keeping customers whole. What we don't want is socialized losses, but distressed investment gains are a-ok with me.
- flutas 4y ago
  > FDIC insurance exists for this reason Good luck to all the startups that might have just lost anything they had in SVB over $250k.
  - vkou 4y ago
    FDIC being involved doesn't actually mean you lose everything above 250k. Assuming that the bank's problem was liquidity, and not fraud, it's very likely that no depositor will end up taking a haircut.
    - dragonwriter 4y ago
      > It's quite possible that no depositor will end up taking a haircut. It's possible that uninsured deposits will eventually be recovered at full value, but losing access to depository funds is itself a loss which often has a very real costs, and when the Depository Insurance National Bank taking SVBs place opens no later than Monday, uninsured depositors are going to only have a claim against the potential realized value of SVB assets beyond what is necessary to cover the insured deposits, while insured depositors will have access to actual money in actual deposit accounts in an actual (solvent) bank.
- loeg 4y ago
  Yeah, although SVB's failure demonstrates a major shortcoming with deposit insurance (in its role as a deterrent for bank runs). If you have more than $250k in assets, or are worried about short-term liquidity, you're still incentivized to run from the bank.
  - capableweb 4y ago
    Correct me if I'm wrong, but FDIC insurance is mainly to protect individuals / small businesses from lose their entire livelihood, they're unlikely to have more than $250k in their bank account at any given time. If you do, you're most likely in/above the 1% and will survive by other means if you lose everything above $250k (or, rightly be "punished" for not having any other survival mechanism)
    - loeg 4y ago
      Part of the reason to protect retail customers is to reduce runs on banks.
ezekg 4y ago
> I’d argue preventing a total financial collapse in 2020 is more important You mean the one that would have been caused by the government's draconian lockdowns? Good thing the government came in to rescue everybody...

Sure, but it's debatable whether spending a few $T more in early 2021 was more helpful than not.

Yup. FDIC insurance exists for this reason -- you can let a bank that made bad decisions fail without causing a chain reaction through the economy.

rootusrootus 4y ago
It's great, but it punishes the smaller banks while leaving the 'too big to fail' conglomerates in a position to be bailed out by taxpayers. We need to chop down any bank that poses a systemic risk so that it's small enough for the FDIC to handle.
- dahdum 4y ago
  TARP arguably turned a profit, so a bailout isn't necessarily bad. Might be better to let them fly high, get burned, and then let investors get wiped out while keeping customers whole. What we don't want is socialized losses, but distressed investment gains are a-ok with me.
flutas 4y ago
> FDIC insurance exists for this reason Good luck to all the startups that might have just lost anything they had in SVB over $250k.
- vkou 4y ago
  FDIC being involved doesn't actually mean you lose everything above 250k. Assuming that the bank's problem was liquidity, and not fraud, it's very likely that no depositor will end up taking a haircut.
  - dragonwriter 4y ago
    > It's quite possible that no depositor will end up taking a haircut. It's possible that uninsured deposits will eventually be recovered at full value, but losing access to depository funds is itself a loss which often has a very real costs, and when the Depository Insurance National Bank taking SVBs place opens no later than Monday, uninsured depositors are going to only have a claim against the potential realized value of SVB assets beyond what is necessary to cover the insured deposits, while insured depositors will have access to actual money in actual deposit accounts in an actual (solvent) bank.
loeg 4y ago
Yeah, although SVB's failure demonstrates a major shortcoming with deposit insurance (in its role as a deterrent for bank runs). If you have more than $250k in assets, or are worried about short-term liquidity, you're still incentivized to run from the bank.
- capableweb 4y ago
  Correct me if I'm wrong, but FDIC insurance is mainly to protect individuals / small businesses from lose their entire livelihood, they're unlikely to have more than $250k in their bank account at any given time. If you do, you're most likely in/above the 1% and will survive by other means if you lose everything above $250k (or, rightly be "punished" for not having any other survival mechanism)
  - loeg 4y ago
    Part of the reason to protect retail customers is to reduce runs on banks.

ezekg 4y ago

> I’d argue preventing a total financial collapse in 2020 is more important You mean the one that would have been caused by the government's draconian lockdowns? Good thing the government came in to rescue everybody...