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Did they help depositors that lost money in the last 500+ bank collapses? Why do they get special treatment? The government has laws and rules the depositors
by NotACop182 4y ago
Did they help depositors that lost money in the last 500+ bank collapses? Why do they get special treatment? The government has laws and rules the depositors are insured up to 250k. Either they liquidate and everyone takes a hair cut. Or they wait till the bonds mature and can pay them out. But the government should not relieve anyone past what is legally available.
- sithlord 4y agoMy guess ( I havn't looked at is the last ones ) is that the majority of deposits were well under 250k, and that hundreds of thousands of jobs weren't on the line. Also, you are talking about a major banking collapse if people start thinking that their deposits aren't safe. (a lot of people will start pulling money, even if under 250k). There are so many irrational people out there... edit: I guess somewhere in what I said was confusing, I was referring to past fails where most deposits were likely well under the 250k. NOT SVB where the vast majority were well above that threshold.
- deleted 4y ago[deleted]
- lkschubert8 4y agoI can't seem to find it now, but either here or on reddit someone had numbers from a filling indicating ~8% of accounts were below 250k.
- deleted 4y ago[deleted]
- Mistletoe 4y agoWith this place the majority were over 250k. Something like 97% or something. It was a big bank for businesses. Why they were bizarrely keeping such large sums in one bank account I don’t understand. Roku had almost $500 million there.
- deleted 4y ago[deleted]
- rapsey 4y agoSVB claimed the money is in treasury bills not just cash in the account. Which is a completely sensible place to put it.
- chipgap98 4y agoNo it isn’t. You’re exposing yourself to interest rate risk when doing that
- Kephael 4y agoYeah, you can short eurodollars or maybe something else to hedge risk. At a certain point, you need to be sophisticated enough to manage your funds.
- ehzy 4y agoNot in any meaningful sense if you are only looking to park the money safely and hold to maturity. Buying 3 month T bills won't pay much, but it will pay more than the interest SVB pays on your checking account balance and importantly is backed by the full faith and credit of the us govt.
- tsimionescu 4y agoApparently much of the money was in long-term treasury bills, which is only perfectly sensible if you believe you will not have to access that money for 5-10 years.
- deleted 4y ago[deleted]
- IG_Semmelweiss 4y agoThats not true. It was said elsewhere in HN thread and also in several articles online. The majority of avg deposits were NOT < 250K. Only 3-7% of SVB accounts under FDIC limits. Edit: corrected to have specific languange
- rtpg 4y agoI think this is referring to other banks, not SVB’s special case.
- giaour 4y agoWhere did the 3-7% of accounts number come from? According to [0], regulatory filings disclosed that 85% of deposits (not accounts) were uninsured. [0]: https://time.com/6262009/silicon-valley-bank-deposit-insurance/ https://time.com/6262009/silicon-valley-bank-deposit-insuran...
- IG_Semmelweiss 4y agotheir 12/31 10k. no one knows what it was as of 3.10.23
- wheelerof4te 4y agoHey, the FDIC coould raise the limit to, say, 10 million, and just let the FED reserve print out the moneys to everyone. Not much different than what the US government is already doing. Reached the debt limit? Just raise it again, lol. /s
- sithlord 4y agoI am stating for prior fails, the number from SVB was that only ~3% were insured. Which was my point, that in the past, there wern't as many e(a)ffected (and they (uninsured) could have received special treatment for all I know).
- bostik 4y agoI'm going to copy-paste a good chunk of my answer from an earlier thread. (Original: https://news.ycombinator.com/item?id=35101797 https://news.ycombinator.com/item?id=35101797) - the article "The Demise of Silicon Valley Bank" wasn't on the front page long, probably because it was slightly dry and didn't provide any new hot take angles. But it did give out actual numbers: > As at the end of 2022, it had 37,466 deposit customers, each holding in excess of $250,000 per account -- and -- The bank does have another 106,420 customers whose accounts are fully insured but they only control $4.8 billion of deposits So SVB had only about ~150k banking customers. And of those, less than 40k are actually affected by this debacle. -- -- -- -- The numbers are being mixed up, it feels. Only 3% of total deposits are covered witn the guaranteed FDIC insurance. The rest are spread across less than 40k depositors. And the average (not median, but plain mathematical average) amount on those accounts appears to be $4M.
- chipgap98 4y ago> is that the majority of deposits were well under 250k What gives you that indication? The bank specialized in working with startups, most of whom have more than $250k in the bank
- QuantumSeed 4y agoS&P Global Market Intelligence reports that as of Dec 31, 2022, 97% of Silicon Valley Bank's deposit accounts exceeded the $250,000 insurance cap.
- orwin 4y agoHe wasn't talking about SVB but the other 500+ small banks that failed in the last 15 years.
- waboremo 4y agoBusinessInsider[1] has a different view: >About 37,000 customers accounted for nearly $157 billion or 74% of the bank's assets with an average account size of over $4 million So it seems the opposite is almost true, because the accounts are valued so high with generally more flexible account holders, they're able to move swiftly [1]: https://www.businessinsider.com/how-silicon-valley-bank-imploded-2023-3 https://www.businessinsider.com/how-silicon-valley-bank-impl...
- giaour 4y agoGP is talking about the majority of accounts, and the number you cite is a percentage of funds. If 98 people have an account with $1 in it and one person has an account with $102, then 51% of the bank's assets are in accounts > $100, and the vast majority of accounts have $1.
- waboremo 4y agoWhat makes you think the majority of accounts would operate that way? Seems ridiculous considering it's SVB, not your average bank.
- giaour 4y agoI would expect larger accounts to make the percentage of deposits in accounts with > $250K to be higher than the percentage of accounts with > $250K because that's how numbers work.
- ericmay 4y agoAverage or median?
- zamfi 4y agoNo one here actually reading the thread, all assuming you’re talking about SVB and not (as the parent says) previous bank failures. To address your actual point: we don’t know whether WaMu depositors had a lot in uninsured accounts, probably not as much as SVB, but we do know that all depositors were made whole when JP Morgan Chase bought the bank — from assets WaMu already had, not the FDIC’s pool. Even senior creditors received some amount back!
- Waterluvian 4y agoThe law is clear on the priority of claims. You can get a quick overview at the bottom of this page: https://www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/silicon-valley.html https://www.fdic.gov/resources/resolutions/bank-failures/fai... It makes sense that they’ll make depositors whole before even thinking about the rest. From the top of that page: “ All depositors will have full access to their insured deposits no later than Monday morning, March 13, 2023. The FDIC will pay uninsured depositors an advance dividend within the next week. Uninsured depositors will receive a receivership certificate for the remaining amount of their uninsured funds. As the FDIC sells the assets of Silicon Valley Bank, future dividend payments may be made to uninsured depositors.”
- booleandilemma 4y agoMore than 85% of Silicon Valley's Bank's Deposits Were Not Insured. https://time.com/6262009/silicon-valley-bank-deposit-insurance/ https://time.com/6262009/silicon-valley-bank-deposit-insuran...
- kelnos 4y agoSo? That doesn't change anything.
- Waterluvian 4y agoInsured means they’re guaranteed to get it back. But the uninsured deposits are at the very front of the line for all further fundraising efforts.
- kasey_junk 4y agoYes? Most famously when IndyMac failed they retroactively raised the insurance limits. It’s almost certainly not going to come to that in this case as the normal fdic playbook will work but the federal government has a history of taking action when extraordinary bank failures happen.
- deleted 4y ago[deleted]
- roseway4 4y agoYes, in the case of large retail banks, the government did help. In 2008, the federal government purchased stock in several banks in order to recapitalize them. One could argue this was a starker example of moral hazard than letting the bank fail, but making depositors whole.
- MomoXenosaga 4y agoWhich is why you should always bank at a "too big to fail" institution. Why America has 4000 banks is beyond me. In my country they all consolidated in the 60s and 70s into a half a dozen giants.
- anamexis 4y agoThat's all well and good until a "too big to fail" institution fails.
- kelnos 4y agoThe government, as we saw in 2008, won't allow those banks to fail. That's literally what "too big to fail" means. If the government doesn't have the ability to keep such banks afloat, then we have worse problems.
- altairprime 4y agoBy ‘afloat’, do you mean, “keep the depositors whole” or “keep the bank operating” or both? A lot of confusion centers around the assumption that any bailout will be for the bank’s operations, not for the depositor’s deposits. That’s perfectly valid confusion - historically it’s been the latter! - and the FDIC isn’t willing to talk about deposits yet, either.
- teawrecks 4y agoRight, which is literally the argument against a small set of giant "too big to fail" banks.
- 4y ago
- SirensOfTitan 4y agoI’m inclined to agree, this kind of special treatment is fairly ridiculous, depositors in other bank failures with funds over FDIC limits have to wait for fire sales to recover, which can take years in some cases. I’m not sure exactly what Yellen is proposing (I only subscribe to print FT so no access), but it seems like special treatment for the well connected on Sandhill Road.
- deleted 4y ago[deleted]
- auntienomen 4y agoIt's not particularly unusual. The FDIC has generally arranged things via sales and capital injections so that the bank owners get ruined while the depositors, insured and otherwise, get just about every back. If they did otherwise, no one would bank at local banks. What is unusual is the Treasury secretary making public comment about it. But this is a unusually large bank failure and a rather critical moment.
- Mistletoe 4y agoThe response to this crisis has been very telling. No one I meet wants Big Tech to be saved or has any good response when asked about Silicon Valley. The response is one we would expect for a group of people that have enslaved us rather than liberated us. Made us miserable rather than delighted. I see two waves in Silicon Valley. Wave one was actual innovation, computers etc. Wave two was rent-seeking conmen fueled by zero interest rates and privacy thieves.
- omginternets 4y agoThis has nothing to do with Big Tech. This is about SMBs.
- nabla9 4y agoBecause there was a systemic risks. You let one bank collapse, OK. If the collapse causes other banks to collapse then it's bad. When WalMart, Costco can't transfer money to fill shelves, people go hungry. When people can't get their wages, they go hungry.
- wheelerof4te 4y agoThen, at least be fair and nationalize the big banks. There's no point pretending that the large banks are "private" if they are subjected to some special rules. People put their money there willingly, no one forced them to. Let them all feel the joys of "free market capitalism".
- Ekaros 4y agoOr we could just go with CBDC give everyone government paid 0-interest account at central bank. With zero risk to lose the money. As it could truly be cash equivalent while being there. Then if people want more they could get account somewhere else, but fully carry the risks from that.
- nabla9 4y agoPeople and businesses still need loans. When my business gets a new order, and needs $200,000 loan we don't have to buy the raw material, we need short loan of 1-2 months from the bank. The bank uses your deposits to make that loan.
- Ekaros 4y agoSo the people could instead give their money to a bank which then would offer various deals. Give money to 1 year and receive certain rate on it. Point is that no one should be forced to take on risk if they are using a bank. Instead it should work like any other investment.
- colinmorelli 4y ago
- skwirl 4y ago> Did they help depositors that lost money in the last 500+ bank collapses? Yes. Anything else?
- travisjungroth 4y ago[sounds of goalposts shifting]
- dap 4y agoNot special treatment? The FDIC has been doing this for recent bank failures: https://www.americanbanker.com/opinion/will-fdic-keep-protecting-failed-banks-uninsured-deposits https://www.americanbanker.com/opinion/will-fdic-keep-protec...
- kshacker 4y agoWe do not know what specifically they are going to do. Helping depositors may just mean expediting the recovery process even if there is a 10% haircut. It could mean something else. The government forced the sale of countrywide and other companies so this would be no different. Also the term "too big to fail" comes to mind. Isolated risk vs systemic risk. Which one is it now? We can have opinions but Yellen may have more informed data about the gravity of the situation. It does make sense for governments to intervene in systemic risks such as this and covid.
- drstewart 4y ago>But the government should not relieve anyone past what is legally available. The FDIC amount is a minimum, not a maximum. But I agree, college loans should not be forgiven past what is legally available ($0).
- komali2 4y agoThis seems to be a core argument for those in opposition to shareholders getting liquidated bank assets vs depositors, but I don't really understand it because it seems to be kind of arbitrary. So there's fdic insurance, that's nice, but why does that mean anything regarding whether depositors or investors should be made whole first? The more important and real question is which option has what outcomes in terms of future investor behavior, or future depositor behavior? If it's a question of rigid legality that also doesn't make sense to me, because from what I remember from 2008 was the government's legal options were incredibly widespread.
- stephen_g 4y agoShareholders are paid last by law. So if depositors are not made completely whole, shareholders don’t get anything. 1. https://www.fdic.gov/consumers/banking/facts/priority.html https://www.fdic.gov/consumers/banking/facts/priority.html
- deleted 4y ago[deleted]
- hyperpape 4y agoFDIC insurance covers protecting depositors if a bank fails. I don’t see how you could interpret that as allowing anyone to give money to investors.