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> not enough to spark a mass exodus from small and regional banks into the "systematically important banks" This line needs to stop making the rounds. It’s a p
by swatcoder 4y ago
> not enough to spark a mass exodus from small and regional banks into the "systematically important banks"
This line needs to stop making the rounds. It’s a part of the political game playing for a bailout.
Nothing fundamental about deposit risk has changed this weekend vs the last few decades. The rules have been established, well known, and integrated into the market as it currently stands. Those small and regional banks got wherever they are in that market and the collapse of SVB doesn’t change that any more than the collapse of the other 576 banks in those decades.
There are well-established practices for managing the risks associated with your deposits. People like Ackman and other vocal VC folks just thought they could get away with cheating the system (disruption!) and are now crying for the taxpayer money they built into their risk strategy.
- dannyw 4y agoIs a startup that having one banking partner "cheating the system"?
- swatcoder 4y agoIf the startup was advised to do that by a VC who believed the government would come in and rescue uninsured deposits, then yes. And they should take up their frustration with that VC, not the rest of us. Because banks use deposits to fund investments, deposits have a risk of loss. That’s why there’s insurance available for them. Businesses and wealthy individuals have been navigating their way through this risk for a long time. The need to do so is not rarified knowledge and the means are not secret.
- wpietri 4y agoNo, but expecting their uninsured deposits to be retroactively insured is. Imagine some homeowner called up Allstate saying, "Hey, my house burned down last week, can I get that covered even though I don't have insurance?" We'd laugh at them. I get that it sucks for them, and they're going to have some Kubler-Ross time ahead. But that doesn't mean that somebody else should bail them out.
- bombcar 4y agoHealth insurance now works basically that way. And some other forms let you actually “come current” before a claim, but it varies.
- wpietri 4y agoIs there a health insurance provider that will cover past costs? I've never heard of one. They do of course cover future costs of existing illnesses, but that's thanks to a fair bit of special lawmaking and cost-sharing mechanisms. Neither of which exist for homeowner insurance. Or bank failure, for that matter.
- lazide 4y agoCOBRA is retroactive.
- SoftTalker 4y agoYeah but you have to pay the premiums retroactively also.
- lazide 4y agoBut you can decide to do so only after you have a reason to do so. Which is the retroactive part.
- bombcar 4y agoAs mentioned COBRA is actually retroactive but even normal insurance can be bought after a diagnosis and before a treatment. Which would be like buying fire insurance after calling 911 but before the trucks arrive.
- FireBeyond 4y agoHealth insurance is really only insurance in name only. In between deductibles, and then copays, and then coinsurance, denials for all sorts of things, health insurance is really just amortized payments + cost negotiations.
- treis 4y agoI think it makes sense. If some banks are too big to fail then they're too big to lose customer deposits because that means they're a failed bank. The only way out of that logic trap is if the Feds are willing to bail out the bank but not the depositors. That seems like a politically very difficult thing to do.