4 ms·

I didn’t say that? I asked, what’s to disincentivize executives if the Fed backstopped all depositors money, now and perhaps in perpetuity? (Forgive me if I mis

I didn’t say that? I asked, what’s to disincentivize executives if the Fed backstopped all depositors money, now and perhaps in perpetuity? (Forgive me if I misinterpreted your position here. I have also edited this post for clarity.)

dmix 4y ago
Which plan exactly? Yellen specifically said they have no interest in bailing out the bank itself and only care about depositors. > “Let me be clear that during the financial crisis, there were investors and owners of systemic large banks that were bailed out . . . and the reforms that have been put in place means we are not going to do that again,” Yellen said on Face the Nation. > “But we are concerned about depositors, and we’re focused on trying to meet their needs.”
- bentlegen 4y ago
  I think there’s confusion in this thread, as some are advocating that depositors be made fully whole, and some are interpreting Yellen’s comments to mean that’s what will happen.
grey-area 4y ago
Other laws, which have nothing to do with depositors and how to treat them. I’m confused as to why you think these two issues are linked. I would hope these execs are prosecuted and any bonuses clawed back but that would be under the purview of a different agency (sec) not fdic, and is not an immediate concern, whereas a massive financial shock and 100s of companies closing due to lack of funds is.
- bentlegen 4y ago
  I’m not a lawyer, but it’s unclear to me - a random internet observer - that anyone performed anything illegal. It strikes me more as a bet gone colossally wrong, basic human mismanagement, capitalism in action, etc.
  - baq 4y ago
    Depends on the deals with startups and their founders. Look up tied selling.
- tome 4y ago
  I think the implication is that if you make depositors take some of the risk then they'll be more proactive in their oversight of their banks' executives. I'm not sure how realistic that assumption is in practice though ...
  - KptMarchewa 4y ago
    In practice, they yell for what's happening - making depositors whole through government means. Or maybe additional regulation.
csallen 4y ago
Aren't the execs in this case losing the vast, vast, vast majority of the money they old in the bank? I haven't seen anything that makes it seem like they're getting out of this unharmed, and especially not at anyone else's expense. I also don't know how refusing to make depositors whole would disincentivize bas behavior by execs, anyway? Seems like two unrelated issues.
- lotsofpulp 4y ago
  The depositors may have been able to borrow money at excessively favorable terms. For example, the bank lending money to businesses that otherwise would not have been lent to, or lent to at a higher interest rate. Or home mortgages for the business’s employees at lower rates, subsidized by the bank’s mismanagement (taking excess risks).
ummonk 4y ago
How would punishing depositors disincentivize this behavior from executives?

dmix 4y ago

Which plan exactly? Yellen specifically said they have no interest in bailing out the bank itself and only care about depositors. > “Let me be clear that during the financial crisis, there were investors and owners of systemic large banks that were bailed out . . . and the reforms that have been put in place means we are not going to do that again,” Yellen said on Face the Nation. > “But we are concerned about depositors, and we’re focused on trying to meet their needs.”

bentlegen 4y ago
I think there’s confusion in this thread, as some are advocating that depositors be made fully whole, and some are interpreting Yellen’s comments to mean that’s what will happen.

grey-area 4y ago

Other laws, which have nothing to do with depositors and how to treat them. I’m confused as to why you think these two issues are linked. I would hope these execs are prosecuted and any bonuses clawed back but that would be under the purview of a different agency (sec) not fdic, and is not an immediate concern, whereas a massive financial shock and 100s of companies closing due to lack of funds is.

bentlegen 4y ago
I’m not a lawyer, but it’s unclear to me - a random internet observer - that anyone performed anything illegal. It strikes me more as a bet gone colossally wrong, basic human mismanagement, capitalism in action, etc.
- baq 4y ago
  Depends on the deals with startups and their founders. Look up tied selling.
tome 4y ago
I think the implication is that if you make depositors take some of the risk then they'll be more proactive in their oversight of their banks' executives. I'm not sure how realistic that assumption is in practice though ...
- KptMarchewa 4y ago
  In practice, they yell for what's happening - making depositors whole through government means. Or maybe additional regulation.

csallen 4y ago

Aren't the execs in this case losing the vast, vast, vast majority of the money they old in the bank? I haven't seen anything that makes it seem like they're getting out of this unharmed, and especially not at anyone else's expense. I also don't know how refusing to make depositors whole would disincentivize bas behavior by execs, anyway? Seems like two unrelated issues.

lotsofpulp 4y ago
The depositors may have been able to borrow money at excessively favorable terms. For example, the bank lending money to businesses that otherwise would not have been lent to, or lent to at a higher interest rate. Or home mortgages for the business’s employees at lower rates, subsidized by the bank’s mismanagement (taking excess risks).

ummonk 4y ago

How would punishing depositors disincentivize this behavior from executives?