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Joint statement by the Department of the Treasury, Federal Reserve, and FDIC
- FormerBandmate 4y agoIt was announced as a footnote in this Treasury announcement , which also guarantees 100% deposits for both SVB and Signature Bank above 250k
- jmclnx 4y agoSo we have a bailout. In case you missed it, SVB successfully lobbied Congress to weaken dodds regulations. So in a way, similar to 2008, Main Street pays so the rich will not loose their funds. https://www.theguardian.com/business/2023/mar/11/silicon-valley-bank-weaken-risk-regulations-svb https://www.theguardian.com/business/2023/mar/11/silicon-val... https://fortune.com/2023/03/11/silicon-valley-bank-svb-ceo-greg-becker-dodd-frank-trump-rollback-systemically-important-fdic/ https://fortune.com/2023/03/11/silicon-valley-bank-svb-ceo-g... https://www.dailymail.co.uk/news/article-11847295/CEO-collapsed-Silicon-Valley-Bank-successfully-lobbied-Congress-avoid-imposing-extra-scrutiny.html https://www.dailymail.co.uk/news/article-11847295/CEO-collap...
- christkv 4y agoIt's not a bailout it's a backstop. All shareholders of SVB are done for.
- unity1001 4y agoBank bailouts in 2008 were not made to bail out 'the shareholders'. They were made to bail out the sunken assets inside the banks so that those banks could continue operating, including still 'having' the depositors' deposits. Because if the bailout was not made, all of those deposits would go away due to there not being assets enough to cover the deposits. That's what a bailout is. And this is precisely that.
- colinmorelli 4y agoThis is not a bailout in the historical sense of the word. Equity holders in the bank are getting nothing. They'll be wiped out. Senior leadership has been removed. All this did was protect _depositors_, the people who put their money in the bank and thought it would be there tomorrow. And it's being done by dipping further into the FDIC fund, which is paid by banks. It will reach down to taxpayers likely through reduced rates or increased fees.
- zzleeper 4y agoWell you are bailing out unsecured depositors who should have known what they were doing.
- colinmorelli 4y agoIt is absolutely in the collective market's best interest to retain confidence in the bank infrastructure of the nation. There were already people lining up at First Republic over the weekend, Signature Bank was shut down as part of this same announcement, and almost certainly more would have come in the following week. The collapse of a ~$200B bank was going to have significant ripple effects that would almost certainly have exceeded the fees that banks will pay to fill in any shortfall resulting from this backstop, whether they're ultimately charged down to account holders or not.
- ITB 4y agoWhy are people so freaking obsessed with passing responsibility onto depositors. It’s perfectly reasonable for the government to be responsible for protecting money as property, just like we do with every other property. Unlike a house which needs maintenance, money is a virtual good. There’s nothing I should have to do to maintain my claim on my bank account.
- college_physics 4y ago> There’s nothing I should have to do to maintain my claim on my bank account. Thats a wrong statement. You are thinking of money as a public good and thats how it should be, but thats not what it is now. Your claim is against a private enterprize. You could have access to risk free sovereign money with the central bank and its entirely possible. But private banks are livid against it because it would deprive them of precisely the kind of game that blew up in their face with rising interest rates and discounted government securities. Ultimately this is not about idiot VC depositors and whether they deserve a haircut or not. Its about idiot bank managers and whether they deserve extracting rents from the entire economy doing basically nothing.
- deleted 4y ago[deleted]
- abcleb 4y agoCan crypto currencies solve this problem? Why yes and why not? I am still learning and my first impression is it could work if done correctly and transparently.
- pc2g4d 4y ago"Chancellor on brink of second bailout for banks" redux?
- deleted 4y ago[deleted]
- ZachPruckowski 4y ago> "Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law." Very curious to see who ends up paying this special assessment. Are we all going to pay in lower deposit/investment interest from banks? Are bank shareholders/profits gonna eat it?
- loeg 4y agoThe balance sheet hole is likely to be relatively small. > Are we all going to pay in lower deposit/investment interest from banks? Are bank shareholders/profits gonna eat it? Some combination of this, I think.
- mskec 4y ago> Shareholders and certain unsecured debtholders will not be protected. Shareholders and bondholders will likely lose everything as nothing will be left after selling off assets.
- akavi 4y agoMy reading is that the "assessment" (tax) will be borne by all banks, not just the bank that fails. My gut says that the incidence will fall primarily on deposit holders (likely in the form of marginally lower interest rates), and not significantly on bank equity holders, but I suspect it'd take an econ phd to fully parse that out.
- ummonk 4y agoBank market caps had fallen something like 100 billion last week. Compared to that the cost of any special assessment will be miniscule.
- azundo 4y agoSort of burying the lede - also states that all SVB depositors will be made whole along with Signature depositors.
- refulgentis 4y agoOddly, that's whats happening on Twitter too: the haute couture space ppl ran to start a space and frame it as "the contagion beginning" I find this to be an odd moment in internet history, a lot of its senior elders seem to have forgotten the odd effects it has on discourse and are unintentionally leaning into it
- ummonk 4y agoSignature Bank going under is proof that contagion was indeed happening, contra what some people (e.g. Paul Krugman) were saying. This decisive action by the government (both ensuring depositors will be made whole immediately, and the Federal Reserve giving out extra liquidity) should ensure that the contagion doesn't spread any further though, an banks like First Republic will avoid going under as well.
- archgoon 4y ago[dead]
- FormerBandmate 4y agoI could have sworn that was already posted here, my bad. Can mods change the thread title?
- clessg 4y agoIt's early enough that you might still be able to do so yourself. I'm not sure, though. Cmd-f (or ctrl) edit! :)
- FormerBandmate 4y agoGood catch
- swyx 4y ago> After receiving a recommendation from the boards of the FDIC and the Federal Reserve, and consulting with the President, Secretary Yellen approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors. Depositors will have access to all of their money starting Monday, March 13. this is also material. means the fear for SVB depositors being unsecured creditors stops today.
- tazjin 4y agoThere used to be a TV show in Europe called "Domino Day", where teams competed to build very elaborate domino structures. Used to love the sound of the dominos falling ...
- oblio 4y agoIf you don't know what the other dominoes are or when they'll fall, it makes for a very boring game of dominoes.
- mkmk 4y ago“After receiving a recommendation from the boards of the FDIC and the Federal Reserve, and consulting with the President, Secretary Yellen approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors. Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.”
- FormerBandmate 4y agoThis should stop the contagion, hopefully. No losses to depositors, so no risk of depositing at regional banks
- kqr2 4y agoThis special fee will most likely be passed onto bank account holders either through lower interest rates or higher fees, so most taxpayers with bank accounts will likely be affected indirectly.
- jachee 4y agoWonder how it applies, if at all, to credit unions.
- mixdup 4y agoit does not, credit unions are not members of the FDIC. They are members of the NCUA, which serves the same purpose as the FDIC for credit unions
- bombcar 4y agoIf anything they’ll benefit slightly by being able to offer slightly higher rates. Though hopefully the total cost after everything is worked out is vanishingly small - otherwise we have a much larger problem.
- chernevik 4y ago
- The28thDuck 4y agoI feel like the global banking system is surfing a wave that’s just about to pull all of us under. I wonder if today will be an entry in a Wikipedia page.
- serf 4y ago> No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer. i'm out of touch with how much of this works, can someone explain how this is paid without burden to the taxpayer?
- morelisp 4y agoIt's coming out of the insurance fund, which is paid into by banks. So the cost is still ultimately borne across a wider sphere, but not the government per se. (This is what's meant by "Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law.") The costs aren't borne by "the taxpayer", but an awful lot of taxpayers who had nothing to do with this or even purposely avoided it may be paying higher banking fees as a result.
- salawat 4y agoTranslation: cost is being bore by the taxpayer but people are staking out the stop posts on their analysis to avoid admitting it.
- yadoomerta 4y agoyupppp at least they have to pay lipservice now and not just printing billions and handing them straight to the rich
- arunabha 4y agoMentioned later in the announcement. > Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law.
- MuffinFlavored 4y agowhich banks will recoup by higher interest rates/fees? :P
- jakubadamw 4y ago
- shippintoboston 4y agoHow exactly are they guaranteeing all deposits? They claim to not be bailing them out and they haven't found a seller. I'm smelling bullshit.
- pcl 4y ago“Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law.”
- nemo44x 4y ago[flagged]
- idiotsecant 4y agoThis isn't reddit.
- scatters 4y agoThe rest of the industry is paying. "Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law.". RIP the $250k FDIC limit, I guess.
- colinmorelli 4y agoDipping into the FDIC pool beyond what's needed to cover the $250k. That, combined with the ability to sell of SVBs assets must give confidence to cover all deposits without burdening taxpayers.
- deleted 4y ago[deleted]
- taeric 4y agoMy understanding is that all of the assets are still there. Moreover, many of them were expected to be safe for long term holding, such that anyone that can play a long game with a diversified portfolio could welcome these assets onto the books. Problem, of course, is that they were some massive assets and adding them to a book without unbalancing it is going to be difficult to do.
- nemo44x 4y agoAll depositors will be made whole. Good news. Wonder how many more will still fail this week.
- noelsusman 4y agoIt's a bit embarrassing to have to invoke the systemic risk exception when regulations on these banks were relaxed in 2018 on the theory that they wouldn't pose a systemic risk if they got into trouble. This should spark some serious soul searching from everyone involved in that effort, but I'm not holding my breath. Anyway, I'm happy for all the depositors.
- AH4oFVbPT4f8 4y agoWhy are you happy for the depositors? They took a risk depositing more than what was covered by fdic. to clarify, i'm happy for the employees, workers, etc that will remain employed while their company made poor decisions. My beef is that companies knowingly took risks. Would this even be an issue if all the VC companies didnt all try to pull their money out on Thur/Fri ?
- zachrip 4y agoI'm very ignorant on the subject - what else would they do with the money?
- hobo_mark 4y agoBuy treasury bills?
- erik_seaberg 4y agoPeople have pointed out brokers that will shotgun your deposits across many banks to game the deposit insurance limit, and apparently the FDIC is fine with that. But if every employer needs to do this, they can’t vote with their feet anymore, and I’m not sure there’s still a reason for separate banks to exist and compete.
- Me1000 4y agoAs others have pointed out there are of course options: multiple accounts, buying safe bonds, etc. But those are all pretty unrealistic for most small businesses. Startups with 3 or 4 people aren't going to spend a lot of time learning all the ins and outs and risks of the options available.
- startupsfail 4y agoShould the title of HN post be changed to the “Joint statement…”
- yawnxyz 4y agoIncredible that this can just be done over a weekend. Is there a good writeup of (what I assume is a mountain-load of work) of how this works, and what happens during this process? Also, will the FDIC just eventually feed SVB's MBSs back into its insurance fund once they mature?
- wmf 4y agoPeople can work fast when it matters. https://patrickcollison.com/fast https://patrickcollison.com/fast
- winterqt 4y agoSee https://www.npr.org/2009/03/26/102384657/anatomy-of-a-bank-takeover https://www.npr.org/2009/03/26/102384657/anatomy-of-a-bank-t... for some more info on how efficiently the FDIC works.
- hammock 4y agoLehman Brothers collapse, bailout negotiations and bankruptcy happened over a weekend. AIG also bailed out 24hrs later https://www.brookings.edu/research/history-credits-lehman-brothers-collapse-for-the-2008-financial-crisis-heres-why-that-narrative-is-wrong/ https://www.brookings.edu/research/history-credits-lehman-br...
- greatjack613 4y agoIt’s not enough for senior management to be removed. Malfeasance like this needs to have real life consequences.
- twiddling 4y agoa stern talking to is in order
- weard_beard 4y agoA stern talking to about using their infinite money wisely, and not charging customers for the convenience. Perhaps a finger wag about doubling overdrafts to pay for their infinite money. A tsk for tripling monthly payments for student checking accounts.
- twiddling 4y agohmm. perhaps even a blue ribbon commission...
- readthenotes1 4y agomisfeasance, in this case, more than malfeasance. And of course there are consequences to senior management. <s> Since they cashed out a bit and got their bonuses, they can probably take a vacation for a month or two and then come back and get a promotion in some other part of the financial industry. After all, they have learned a multi-billion dollar lesson. Don't want to throw that away!
- loeg 4y agoIt's not clear that there was malfeasance. Bad business performance isn't criminal.
- brunooo 4y agoOh, surprising re Signature, but 100% backstop should calm things down. Any fiat <-> crypto rails left in the US, after the FDIC buries SEN on, I dunno, Tuesday?
- VagueMag 4y agoSo without Signet, does Circle have any means to satisfy USDC redemptions?
- wmf 4y agoWire transfers?
- AH4oFVbPT4f8 4y agoIt was announced as a footnote in this Treasury announcement , which also guarantees 100% deposits for both SVB and Signature Bank above 250k How?! Who is funding this and if they sell the bank assets who is covering the losses?
- xenadu02 4y agoIf you look at the FDIC data for bank closures a lot of times the ultimate resolution is over 90% payback - the FDIC calls these "dividends". In some cases the payback is 100% to depositors and general creditors get some money. It just takes time - a 2009 bank failure may not finish dividend paybacks until 2014. The odds are the FDIC will ultimately (in the next 5 years) wind down SVB's assets with enough excess to nearly cover all deposits. The amount the insurance fund will eat isn't likely to be very large. The statement about an assessment on member banks is just how the fund works normally: whenever there's a large payout event exceeding normal reserves the fund recoups the money by assessing member banks.
- belter 4y ago> whenever there's a large payout event exceeding normal reserves the fund recoups the money by assessing member banks. The point you are missing is that would be to pay the required excess to cover the 250K per depositor, but this is a bailout of all depositors money.
- NKosmatos 4y ago“Depositors will have access to all of their money starting Monday, March 13.” So, they can all go tomorrow morning and withdraw/transfer their money out of SVB?
- loeg 4y agoYes, that's my read of what it means. (Although the carcass of SVB was renamed to "DINB.")
- hn_throwaway_99 4y agoYellen and the FDIC is in a tough spot. This is the important line, "Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law." Thus, on one hand, I'm glad they're doing this, as it should help prevent wider bank runs, and it ensures that banks are the ones that are actually paying for it. At the same time, this is yet another example of changing the rules in the middle of the game. Yellen has just broadcast that FDIC insurance is essentially unlimited, as long as you can threaten wider disruption to the economy. I understand part of this is human nature but I really wish we could plan for these entirely foreseeable events ahead of time so that it's not just cases of "selective justice" with regards to who gets bailed out.
- bruiseralmighty 4y ago> Yellen has just broadcast that FDIC insurance is essentially unlimited Although I agree with the Treasury's actions here so far, this is a potential issue. They should instantiate more stringent rules for banks that who cater to business accounts and then raise the cap for insurance on those accounts to a number that makes sense for small businesses across the country. Too many CEOs and CFOs were allowing their business checking accounts to sit in dangerously uninsured positions. Headliner being Roku with nearly a half a billion dollars sitting in a single checking account with SVB. But plenty of smaller businesses leave ten million plus dollars in their accounts as a course of business as well. The actual amount those accounts can be insured for needs to be formalized and it should probably be higher than the standard quarter million for consumer accounts as this is way too low for business larger than a half dozen employees.
- ttfkam 4y ago> but I really wish we could plan for these entirely foreseeable events ahead of time We did with Dodd-Frank after the 2008 housing crisis, signed into law by Obama. Would have stopped over leveraging found at SVB. Then it was rolled back in 2018, signed by Trump. Wasn't a hard sell to Trump at the time. "Obama did it? Okay, let's undo it!"
- deleted 4y ago[deleted]
- zamfi 4y agoWow, here’s the real news: > Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law. Note the uninsured depositors clause in there — FDIC &co seem to have acted unilaterally to extend deposit insurance beyond the 250k and to the full amounts of any deposit account. And they are charging the banks for it. If this doesn’t stop a run on the banks, nothing will, frankly.
- chejazi 4y agoAnd yet, socializing any potential losses across banks (as opposed to homeowners, back in 2008) feels like the appropriate move.
- MuffinFlavored 4y ago> Shareholders and certain unsecured debtholders will not be protected. Senior management has also been removed. how do you interpret this part? what is an example of somebody who would be an unsecured debtholder? as in somebody with a stake in SVB the buisness? https://finance.yahoo.com/quote/SIVB/ https://finance.yahoo.com/quote/SIVB/
- loeg 4y agoYeah, someone who bought SVB's corporate bonds.
- ummonk 4y agoYeah it's an investor who invested in a debt instrument offered by the bank. So CD holders will be made whole but holders of any corporate bonds won't.
- pgwhalen 4y ago> how do you interpret this part? what is an example of somebody who would be an unsecured debtholder? as in somebody with a stake in SVB the buisness? Bondholders, not just shareholders. The implication is that every security here is wiped out: https://ir.svb.com/shareholder-and-bondholder-information/offerings/default.aspx https://ir.svb.com/shareholder-and-bondholder-information/of...
- balozi 4y agoSo, is this a bailout, that we are definitely absolutely not calling a bailout?
- baal80spam 4y agoYup, and we can expect a movie in a few years.
- loeg 4y ago> 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.
- nostromo 4y agoIt’s a bailout with the costs borne by other banks. And those costs will be paid by anyone with a bank account.
- loeg 4y agoThe typical bailout doesn't zero shareholders. Here, shareholders were zeroed. You can call it a bailout of depositors, but the association with bailouts that didn't zero shareholders is bogus.
- avalys 4y agoIt's not a bailout. Silicon Valley Bank will cease operating, the shareholders get zero, anyone who loaned them money likely gets zero, the executives have been fired, the employees will all be laid off within two months. The point of this action is to ensure that Silicon Valley Bank's customers, however, will not be harmed by doing business with a regulated major bank.
- dathinab 4y agoNo it's not because it only covering deposits. If you want to call it a bailout it would be an bailout of investment/company money parked in SVB but _not of SVB itself_. Furthermore SVB might still have enough assets to cover that (or most likely a very huge part of it), they just don't have enough cash/liquidity to continue on as a company.
- belter 4y ago"...Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law..." Is this what passes for a FED press release? Which law? Clear as mud. Did the Fed just established an infinite deposit insurance coverage in the US?
- spdustin 4y ago12 U.S.C. 1817(b)(5) (starting on the bottom right of the page numbered 980, page 5 of this PDF [0]) [0]: https://www.govinfo.gov/content/pkg/USCODE-2021-title12/pdf/USCODE-2021-title12-chap16-sec1817.pdf https://www.govinfo.gov/content/pkg/USCODE-2021-title12/pdf/...
- belter 4y agoYes but also interestingly in Page 4 of that PDF under (2) Setting assessments (A) In general - (B) Factors to be considered Besides the we can do anything, anytime mentioned in that Pag 5, there is the requirement to in general look at the impact on other banks. Something they clearly could not have the time to do in this short time. (2) Setting assessments - (A) In general - (B) Factors to be considered Section (iii) "The projected effects of the payment of assessments on the capital and earnings of insured depository institutions."
- deleted 4y ago[deleted]
- ecommerceguy 4y agoI'm just curious, who was running the investment / risk team at SVB and why should they get a pass for doing such a terrible job?
- mgraczyk 4y agoThey don't, they got fired already.
- Mountain_Skies 4y agoPretty mild consequences considering the magnitude of their screw up. Doubt they're going to be missing any meals or have trouble paying the electric bill.
- college_physics 4y agoThey'll be recycled soon enough like the Lehmann guy. There is a talent shortage in the industry.
- TigeriusKirk 4y agoThey've been fired and their bank has been shut down. Not sure how they're getting a pass.
- spencerflem 4y agobecause they're not losing any money. we all are (collectively) by bailing them out
- debacle 4y agoHow is this not a bailout?
- loeg 4y agoWell, the term "bailout" usually implies two facts: (1) Shareholders aren't zeroed in a bailout (2) The government pays for a bailout Neither is true here.
- dmm 4y ago> (1) Shareholders aren't zeroed in a bailout If uninsured depositors took losses in the run on SVB, lots of other banks were going down too in the coming weeks. I think the argument is not that SVB is getting bailed out but investors in all the other poorly funded banks that won't fail.
- jen20 4y agoBecause the shareholders lose their shareholding.
- macintux 4y agoTaxpayers are not paying for this, banks collectively are.
- deleted 4y ago[deleted]
- nostromo 4y agoThe Venn diagram showing federal tax payers and people with a bank account is a circle.
- bo1024 4y agoImportant to note shareholders, executives, etc still get nothing.
- unity1001 4y agoIt is a bailout - the 2008 bailouts were done to save the deposits and investments inside the banks, not 'the shareholders' as so many seem to try to use as an escape argument. Its because if the banks' hollowed assets were not 'made whole', the depositors would not have their money anymore. Precisely the case with SVB as of this very moment - a sunken bank that does not have enough assets to cover its deposits is being bailed out by the state. By the state and taxpayer money, make no mistake - even if the funds will not directly come from the US govt., the fees that they will impose on the banks by using the nation-wide bank insurance fund will eventually get imposed on everyone with a bank account in the US by those very banks in turn. So again, the public will pay. Actually, its beyond using taxpayer money - if you are a taxpayer and your children have bank accounts too, they will also pay the fee instead of just you paying a tax.
- pdq 4y agoYet another new precedent by the Fed and FDIC. All depositors are now guaranteed their funds if a bank fails. This is the definition of Moral Hazard [1]. [1] https://en.wikipedia.org/wiki/Moral_hazard https://en.wikipedia.org/wiki/Moral_hazard
- oblio 4y agoIf payment is done by other banks, doesn't that serve as mitigation? Sure, when the government pays, it's super risky. However if other banks pay, for sure they'll either self regulate or push for better legislation.
- expazl 4y ago> If payment is done by other banks, doesn't that serve as mitigation? Seems the exact opposite. Why would any bank ever conduct risk assessment if their potential failure will be paid by the industry as a whole. This effectively tells any other bank that might be fearing for a bank run to stock up on super risky assets and to let the dice roll to see if they end up winning big, or if their competitors end up paying for their losses.
- buffalobuffalo 4y agoThis is not the moral hazard risk he was referring to. The bank still has no incentive to load up on overly risky investments because in the case of an FDIC takeover, they (the investors and executives) will still loose everything. The moral hazard here is for depositors. They have an incentive to put their money in the bank with the highest possible yield no matter what the bank's investment portfolio looks like, since their deposits are now seemingly guaranteed by the banking system as whole. To be fair, I'm not sure if this is necessarily a bad thing for certainly types of very low yield accounts (checking accounts with no interest, etc). But there certainly is an element of moral hazard at play.
- post-it 4y agoBecause the owners of SVB lost everything, it's only the customers that are being made whole.
- nostromo 4y ago> No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer. Unless you’re a taxpayer with a bank account.
- optimalsolver 4y agoHow long until the usual crowd are back to full Ayn Rand/rugged individualist mode after getting their asses saved by the Fedora Reserve?
- jen20 4y agoSeeing how quickly David Sacks turned from anti government to practically begging the government to save him was one of the highlights of this weekend for me. It’s almost a shame they couldn’t carve out a few exceptions for those who don’t believe in regulation.
- not_the_fda 4y agoProbably Monday.
- obblekk 4y agoThe Fed is giving banks an infinite credit line at par value of their assets. This allows them to borrow and cash out any customer who wants, so long as they have assets. This program would have saved SVB last week. People may continue moving around money, but the runs are over.
- likeabbas 4y agoA bail out for the Bay Area. Should’ve just let them bust tbh
- avidphantasm 4y agoWhat if the Federal Reserve offered retail banking. Would it stabilize the banking sector? They wouldn’t be forced to try to find loans to pay interest on deposits. Where do private banks add value over what the Fed could do. ELI5.
- loeg 4y agoBanks use deposits to extend loans to other customers. A narrow bank wouldn't do that.
- avidphantasm 4y agoCouldn’t the Fed just offer retail loans at the Federal Reserver rate, with maybe some kind of premium if inflation is high, or discount if inflation is low? What am I missing? Why do we need all these banks, some of which catastrophically explode every decade or so?
- loeg 4y agoI mean, you would be substantially increasing the size of government. The federal government currently employs about 3 million workers. The banking sector employs 1.4 million. To perform similar functions, the US government would need (at least) a similar number of employees. That is probably politically disagreeable.
- avidphantasm 4y agoThey would be employees of the Fed, not the Federal Government, no? Also, I am not afraid of a big government so there’s that. Also, they would be paid well, but not get insane bonuses, etc. so that’s a distributive plus in my book (i.e., less wealth concentrated in a tumescent financial sector).
- deleted 4y ago[deleted]
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- seo-speedwagon 4y agoThis is 100% a bailout and the wording that “no losses […] will be borne by the taxpayer” is a shameful misrepresentation. Just because a bunch of VCs and founders didn’t realize they were at risk of this happening if they kept all their money in one bank, they still bear the responsibility of their losses. Looking forward to this new future where uninsured deposits are actually 100% backed by the FDIC, so actually if your company spends any money to diversify or de-risk your banking posture based on how the rules are written, you’re a rube and potentially being irresponsible towards your shareholders
- reso 4y agoI am also confused about where the money is coming from to cover SVB’s losses, if not from the taxpayer.
- Khaine 4y agoSo much for moral hazard. Capitalism is supposed to be about profit and loss, you bail out the losers, there is no end to the loss. I guess we still haven't learned the lessons from 2008. Effective regulation should have been put in place to oversee that banks are effectively managing their risks. Not bailing out companies whenever times get tough.
- dehrmann 4y ago> you bail out the losers, there is no end to the loss The difference here is that the "losers" made was supposed to be an incredibly safe bet. The people who made the actual bad bets are all losing their jobs. Shareholders are getting nothing (ish). It's the customer who's getting protected, here. > I guess we still haven't learned the lessons from 2008 Not my observation, but it's more like we were fighting the last crisis. Stress tests were focused more on bad assets, not safe assets in an environment with rapidly raising rates. Regulation and oversight only work for failure modes you're looking for. A handful of short sellers spotted this earlier in the year, but what happened is only obvious in hindsight.
- Mountain_Skies 4y agoThere are thousands and thousands of banks to choose from. Why did they pick this particular bank? High rates? Connections to the right people? It's not like it's the only bank in the Valley, much less the country. They chose to be with that bank above all others. That was their freedom, their choice. Now everyone with a bank account anywhere will have to pick up part of the cost for that choice.
- erik_seaberg 4y agohttps://news.ycombinator.com/item?id=35112295 https://news.ycombinator.com/item?id=35112295 talked about how SVB was one of a very few banks whose staff understood startup problems. And they didn’t fail because of bad loans to customers! Instead they had too many deposits locked into long term bonds, interest rates spiked, and some customers panicked.
- 4y ago
- AviationAtom 4y agoI'm surprised the top comment wasn't focusing on this bit of the statement: "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."
- cragfar 4y agoThis is probably why they had to make this announcement. Regional banks were going to be a bloodbath tomorrow morning.
- chrisgd 4y agoCrypto focused bank and pretty small, even in consideration of historical bank runs
- School-Cotton 4y agoSignature had 100Bn in assets and is the third-largest bank to have failed in US history (after WaMu and SVB).
- chrisgd 4y agoApologies. Thought it was something else. Much bigger than I thought.
- School-Cotton 4y agoI suspect you’re confusing it with Silvergate, another crypto-focused bank that is in the process of going out of business.
- AviationAtom 4y agoI was just surprised crypto hasn't caused more carnage in the banks. SBF had more or less made that small bank his and was pumping massive amounts through it. I feel like that couldn't have been the only bank tied up with crypto.
- version_five 4y agoSo they made their decision, everyone can move on. I just hope nobody forgets how prominent VCs behaved during the brief period of uncertainty. The idea of some noble class of investors championing disruption is dead. They're just a bunch of rent seekers like everybody else. For some silly reason I had some respect for the startup industry before this, now I see it as a joke. It's great at a personal level that "founders" and startup employees didn't have to do without. But it's important to remember that they no longer automatically deserve any credit for taking risks and doing something new. It might as well be a bunch of FAANG employees
- lambic2 4y agoI don't understand this comment. 1) SVB was not managed by VC's. 2) SVB went under because they bought US Treasuries, not because they took risky bets on startups.
- notfromhere 4y agoVCs started a bank run by telling all their portfolio companies to pull out
- lambic2 4y agoThat's just basic logic that anyone would follow to survive. VC's had nothing to do with SVB's bad money management.
- hello_moto 4y agoThey triggered the rush that exacerbate the downfall. If nobody is rushing, SVB could probably find ways to sell something before it's too late.
- labster 4y agoI see it the other way around. The VCs started a panic. Name one other bank that could survive $42 billion in withdrawals in a single day. Other than Bank of Zimbabwe, obviously. Even Wells and JP Morgan would collapse under that strain. The VCs caused their own pain.
- spdustin 4y agoThe “special assessment” is levied directly on banks, and is referenced in 12 U.S.C. 1817(b)(5): In addition to the other assessments imposed on insured depository institutions under this subsection, the Corporation may impose 1 or more special assessments on insured depository institutions in an amount determined by the Corporation if the amount of any such assessment is necessary (A) to provide sufficient assessment income to repay amounts borrowed from the Secretary of the Treasury under section 1824(a) of this title in accordance with the repayment schedule in effect under section 1824(c) of this title during the period with respect to which such assessment is imposed; (B) to provide sufficient assessment income to repay obligations issued to and other amounts borrowed from insured depository institutions under section 1824(d) of this title; or (C) for any other purpose that the Corporation may deem necessary.
- bombcar 4y agoI love how © makes a and b pointless.
- Waterluvian 4y agoNot a lawyer but a lawyer once attempted to explain this common legalese pattern to me. Here’s my terrible attempt: It’s not like a programming type system where C widens the type to make A and B meaningless. It’s that A and B are communicating intent. “It’s meant for these things… and maybe something else we don’t yet know.” Apparently this is important if you ever had to fight over it.
- gnicholas 4y agoInteresting that they're announcing this for SVB and Signature. I infer from this that they will backstop the depositors at these two banks, and they assume that by doing so no other banks will be 'run' by depositors.
- dzink 4y agoSo 3 out of 7 Circle USDC bank partners failed in a week. https://www.coindesk.com/markets/2023/03/10/scrutiny-falls-on-43b-usdc-stablecoins-cash-reserves-at-failed-silicon-valley-bank/ https://www.coindesk.com/markets/2023/03/10/scrutiny-falls-o...
- TacticalCoder 4y ago> So 3 out of 7 Circle USDC bank partners failed in a week. It's almost as if when a company (Circle) had actual assets under management, it was very hard to find honest banks able to deal with actual billions without fucking it up and you're better served yourself. Like Circle which decided to put 80% of the USD it holds to back USDC in short term US treasuries: 80% not at banks, 80% not in long term investments... But 80% in the one most stable and safe asset of them all. And Circle got in trouble for the 20% in actual USD which they thought they could entrust to banks. Kudos to Circle if they get out of this fine because it certainly seems hard to do business with monkeys.
- 323 4y agoAll bank deposits should be guaranteed by the state. Just like tap water is guaranteed to be drinkable, ... Bank accounts are the basis of many things.
- NotACop182 4y agoMaybe banks shouldn't be able to place bets with depositor funds.
- 323 4y agoThey aren't. The particular "bet" here, treasury bonds, are considered the safest form of US money, they are considered "risk-free".
- IAmGraydon 4y agoSee my other reply to the parent comment. Treasuries are not risk free.
- IAmGraydon 4y agoThey were returning interest to the depositors, so actually the depositors decided to take on the risk. You will never earn interest without risk. If you're told that any form of interest is risk free, it's not true. In the case of treasuries, the risk is not default - it's inflation risk. This is because there is a chance that inflation outpaces the bond yield, meaning you lose money over the life of the bond (as the principal will lose buying power) and the underlying bond will also lose it's value as higher yielding bonds are auctioned by the government.
- coffeebeqn 4y agoYeah as long as the banks hold actually valuable things- SVB had treasury bonds- no reason the federal government can’t treat those as cash. I mean it’s their own issued assets!
- 323 4y ago
- gonehome 4y agoProbably the best possible outcome. Protect depositors, allow stock holders to get wiped, prevent a cascade of runs from fear.
- kizer 4y agoLet's just not make this a habit!
- bradleyjg 4y agoSo depositors at banks taking on big risks get elevated interest rates or other perks for years, and when the shit hits the fan depositors that put their money in prudent banks get to bail them out through higher fees. And people wonder why turnout is low. There’s no way to vote for non captured politicians.
- deleted 4y ago[deleted]
- LatteLazy 4y agoWhich banks were offering elevated interest rates in the last decade?! I must have missed that memo...
- anonymous_sorry 4y agoSVB
- DubiousPusher 4y agoWell, wealthy people weren't dumping their money into these banks above the 250k FDIC limit for no reason.
- hizanberg 4y agoWe weren’t dumping money, SVB was our primary bank where sales we’re collected. It’s not hard to exceed 250k after 10 years of operations. We weren’t getting any interest % on our deposit balance, the only reason we chose SVB was because it was recommended for Startups.
- DubiousPusher 4y agoNo offense whatsoever intended but I think you were following some very poor financial advice.
- 4y ago
- raydiatian 4y ago> Today we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system. Ah cool, so you’re: (1) revoking the bailout money you took from us for the 2008 and 2020 crises (2) disallowing overdraft fees (3) reimplementing glass steagall (4) firing yourselves and then immediately committing seppukku Like my God, can the wording get any more toothless and cynical? “We know you don’t trust us, and you know we don’t care, but for fear of the nameless void possibly transmogrifying into an angry mob of tens of millions of Americans, we will keep up appearances.”
- cragfar 4y agoIt's pretty embarrassing how many people thought depositors should be on the hook for this. A banking system where companies or people would actually lose money due to bank failures (especially one caused by a run on the bank) would just lead to people only using BOA, JPM, and some merged WF/Citi/whoever else.
- lambic2 4y agoI have a feeling a lot of these people are Bitcoin maximalist. They want depositors to suffer so that they feel vindicated for their faith in Bitcoin.
- jnwatson 4y agoIn defense of Bitcoin, it would have taken a decade to process the $40 billion of withdrawals from SVB on the blockchain, so a bank run couldn't have happened.
- kragen 4y agohmm, i saw somewhere that svb had some 37000 depositors there's no relevant limit to the amount of money in a bitcoin transaction, so this could have been one transaction with 37000 outputs, or 37000 transactions one output, or 370 transactions with 100 outputs, or whatever the latest block in the bitcoin blockchain is block 780'537 https://www.blockchain.com/explorer/blocks/btc/780537 https://www.blockchain.com/explorer/blocks/btc/780537 containing 1788 transactions, totaling 4489.31 bitcoin, which is currently about 98 million dollars; the block weighs 1847 kilobytes most of these transactions had 2 outputs, though many had more (7, 8, 9, 20) and a few had only 1. if we estimate this block as containing 3700 outputs we wouldn't be far wrong. in that case it would take 10 blocks (a little under two hours) to process all 37000 withdrawals processing 200 billion dollars of transactions at the rate that money was being transferred in this block would take 2000 blocks, almost two weeks, because the average transaction size in this block was much smaller than svb's average account size; this is still less than a decade consider transaction a400f39693ab997c162156a09599557b26c7a6d1efa711c49f4ccf5b12505b66 https://btcscan.org/tx/a400f39693ab997c162156a09599557b26c7a6d1efa711c49f4ccf5b12505b66 https://btcscan.org/tx/a400f39693ab997c162156a09599557b26c7a... with 21 outputs. this transaction is 837 bytes, so it's a little smaller than average for this block despite its large number of outputs; an 1837-kilobyte block consisting only of such transactions would contain 2206 transactions, paying out to 46326 different addresses so in fact the bitcoin blockchain could have processed all of svb's withdrawals in a single block the price of bitcoin would have to go up quite a bit for that to happen; bitcoin's market cap is currently only 389 billion dollars, so this one piddly bank would have been more than half of it, and transferring such a large amount of bitcoin around at once would likely freak people out enough to blow the whole system up but there's no technical reason in the bitcoin blockchain that dissolving such a bank would be impossible or even difficult there have been any number of bank runs in bitcoin already, unfortunately
- deleted 4y ago[deleted]
- celestialcheese 4y agoDoes Signature failing mean crypto in the US is finally dead? Silvergate and Signature both going to $0 is a strong signal. Why would any bank want to work with crypto after this?
- 0xDEF 4y agoThe Feds just saved a lot of crypto startups by doing this bailout. The crypto scam industry will be around for a few years more unfortunately.
- ivoras 4y agoA colleague said it best: Looks like freedom-loving tax-hating tough-love VCs have found communism this weekend.
- PaulHoule 4y agoSee... I told you this would be resolved quickly. Trouble is that Silicon Valley should have learned the lesson that dogpiling into the same bank is systemic risk.
- cm2187 4y agoInstead they learned that donating to the democratic party is a good insurance policy.
- PaulHoule 4y agoYeah, Peter Thiel donates to the Republicans but he so quick on the draw he got his money out in time to not need a baiout.
- rvz 4y agoThe regulators panicking and putting a tiny backstop of $25BN vs $150BN+ of uninsured deposits to attempt to stop a run on the bank is a resolution? This is only to calm the markets before market open. We'll see if that enough to stop a bank run when this time everyone knows about the SVB situation and withdraws all their money at the same time. Seems like this is an attempt to save the VC pyramid scheme that got caught up in the collapse and needed government intervention to 'save' them.
- jmyeet 4y agoThis is one of those situations where the Federal government is doing what it should be doing: protecting depositor funds, making banks pay for it and shareholders are left out in the cold if there's nothing left over. Also, the speed with which this is happening going from SVB insolvency late last week to an asset auction today and depositor fund access tomorrow is astounding. Most of this protection comes as a result of the Dodd-Frank Act passed in 2010 in the wake of the GFC. Senate and House Republicans largely voted against the bill. Remember that. It's also worth remembering that this is a huge example of how ridiculous libertarianism and deregulation is. Another takeaway is how central authority is a feature not a bug in the financial system. Just compar ethis to FTX or any other crypto collapse.
- fwlr 4y agoA lot of people are asking “how is this not a bailout?” right now. I would caution against dismissing them, it’s a legitimate question. Pointing to the “Taxpayers will not pick up the bill” line counts as dismissive: this is a press release, and it’s from the government, that’s two strong reasons for some skepticism. So, in earnest, how is it not a bailout? Feel free to offer your answer! Mine is: “Banks are required by law to pay for insurance on deposits they take. FDIC stands for Federal Deposit Insurance Corp, and they are the ones that manage the Deposit Insurance Fund, which is where that insurance money goes. The FDIC is going to take from that fund to pay out all the depositors in SVB in one go on Monday morning, and then over the next few weeks and months it is going to sell off SVB’s assets and put the proceeds back into the fund. SVB has plenty of assets, so the FDIC expects to recover 99% of the money. If there’s a shortfall they will charge the banks a little extra in their next insurance payment, but keep in mind we’re talking about at most a few billion dollars spread over every bank; they are unlikely to pass on a small cost like that, but even if they do pass on the cost to the taxpayer it will be something like $10 per person maximum.” Edit: if we take things like https://twitter.com/josephjacks_/status/1634569997266870272 https://twitter.com/josephjacks_/status/1634569997266870272 at their word, the FDIC will likely see asset sales produce >100% of deposits, so absolutely no bailout of any kind. A good reminder that SBV didn’t die because they lied about their value or invested in financial instruments that exploded; they died because they didn’t have the cash on hand on the one day it mattered.
- JamisonM 4y agoAgreed, not a bailout as this is the purpose of the insurance scheme. If someone gave me 10-to-1 odds that actually there will be no shortfall associated with this action I would happily take that bet. Shareholders will be wiped out but SVB's assets will cover all of the deposits, the regulator is just being extra-conservative.
- itake 4y ago> the FDIC expects to recover 99% of the money Where do you see the 99%? My understanding is the bulk of their assets (long-term bonds) dropped 30% in value. If these bonds are sold on the market, they wont have 99% of the money. Maybe the treasury is giving them the money back of the bond?
- poof131 4y agoThe part that annoys me the most is the idea that all the depositors are mom and pop small businesses or early stage startups. I’ve heard it said that Circle and USDC have an amazing business model: create a coin, call it a dollar, and deposit real dollars in the bank for interest while customers hold the coin. You don’t even have to offer a percent for the deposit like a normal bank. You can then make a couple percent on billions. With this bailout the US Government just backstopped the business model with no haircut for a total lack of risk management. But sure, punish all banks (and thus customers / taxpayers) since the costs will be spread to others. Protecting us from systemic risks always seems to create more systemic risk. I’m sure were done though, they are putting protections in place this time.
- ITB 4y agoThis is not a story of class struggle. This is about a government driving confidence in property rights.
- poof131 4y agoConfidence in property rights? Not sure what you are talking about. They just provided guaranteed non-negative returns on loans. Put your dollars in a safety deposit box if you want property rights. Depositors need to be able to accept a haircut for banking to function, that's why you get interest and don't pay the bank.
- cragfar 4y agoYou're not thinking what the most logical course of action would be for all companies that use regional banks. It would be to get your money out ASAP on Monday and into JPM or BOA. That's why the treasury has stepped in.
- roflyear 4y agoMany of the big banks give effectively 0% interest right now for everyone, so it isn't really that much different, but yeah I agree with your sentiment.
- deleted 4y ago[deleted]
- i13e 4y agoRelevant: https://www.youtube.com/watch?v=qCGofLIzX6g https://www.youtube.com/watch?v=qCGofLIzX6g
- Octokiddie 4y agoTranslation: the Fed is done raising interest rates. Period. Forget all of the tough talk by the team over the last few months. We raise until we break something. Now that we broke it, that's that. As for that inflation problem... It will require another solution...
- SeanAnderson 4y agoWhat other solutions are available?
- daxfohl 4y agoOr maybe it's what they had to do to justify future rate hikes? I hope so, need some way out of this hole. But certainly billionaires are plotting how to capitalize on it. Feels like 2008 but in much slower motion so the wealthy can squeeze every dollar out of it on the way down.
- IAmGraydon 4y agoWrong. The Fed is well aware that things will break as they raise rate. That's the nature of what they're doing.
- fullshark 4y agoWishcasting
- lapcat 4y agoSocialism for VC but not for thee.
- somewhereoutth 4y ago> Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer. Not convinced both those statements can be true.
- tome 4y agoYes, there's a lot of sleight of hand going on here. This is also highly suspcious: > 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.
- chernevik 4y agoThey're passing any cost on to the other banks, who will pass those costs on to their various customers.
- lamontcg 4y agoGood thing some adults are in charge, and not HackerNews.
- DubiousPusher 4y agoIf this represented a systemic risk, I will eat my hat. This reeks of influence peddling, particularly given the significant growth in lobbying over the past two decades by the very kinds of people invested here.
- DubiousPusher 4y agoHat now partially digested.
- deleted 4y ago[deleted]
- speransky 4y agoso all other bank customers (who are taxpayers also) will pay indirectly through higher FDIC insurance rates/commissions, right ?
- dc_throwaway 4y agoTaking a bit of a longer term view into why this happens, I feel the Fed (and Treasury/FDIC/OCC) needs to do quite a bit of soul searching: 1) After the crisis the new Liquidity Coverage Ratio (LCR) regulation required banks to hold a lot of "high-quality-liquid-assets" (HQLA) for every dollar of deposits they have. Kinda like reserve requirements... 2) HQLAs include liquid assets (cash, Fed reserves) plus treasuries and agency bonds. Well cash pays zero so of course banks will be investing in the juicier long dated assets. This is the first mistake by the Fed (and Basel) who took the approach "treasuries have absolutely no risk" which ignores interest rate risk. For instance; say you bought a ten-year zero-coupon treasury when rates were 1; that's valued at 1/1.01^10 = 90.5 cents on the dollar. But if rates are now 5% that's worth only 61.3 cents of the dollar (!) but you are allowed to ignore this loss... 3) The way we allowed banks to hide these losses in the now popular Held-to-Maturity (HTM) category instead of Available-For-Sale (AFS). Any security put there can be valued for capital regulation purposes at the amount you paid for it, instead of it's actual value (i.e. market value). So in other words, we first incentivized banks to invest in these risky securities and then provided a way to hide the risks from capital regulations. 4) To make it worse, if you as a bank realize that "oh shit I have too much of this crap" there's another regulation disincentivizing you from fixing things. If you even sell $1 of the HTM bucket then ALL the assets of that class move into AFS and you are forced to realize all the losses. So you will only sell HTM at the very end, as SVB did. 5) Lastly, the govt flooded the markets with cash over the last years (zero interest rates) so everyone (firms, households) had lots of deposit. Lending opportunities were much lower than deposits so they had to put the money into these securities. 6) But central banks did QE, which drove the price of these assets very high (and thus the yield very low). For instance, SVB had agency bonds with 1.5% yields. So, to recap, banks were incentivized strongly to buy these securities which the govt made sure had terrible yields. 7) Then, once COVID ended and inflation started it was time to do quantitative tightening (QT) where the govt became a net seller of these securities, driving their price to the ground, creating huge losses for banks. And that's where we are now. Most banks have HUGE HTM positions of mostly long-dated bonds, with huge losses, not because they are all idiots, but b/c that's how the incentives were aligned. And now we are paying its cost, including the cost of QE/QT.
- mgav 4y ago"RE: student debt forgiveness, I think folks shouldn’t get a bailout (banks, airlines or students), as bailouts remove accountability for actions" ~Jason Calacanis, Twitter, Jul 27, 2019 link to Tweet: https://twitter.com/Jason/status/1155224393028476933 https://twitter.com/Jason/status/1155224393028476933
- turingfeel 4y agoI am really, really not a fan of the guy. However making cash deposits and taking out loans are two very different things.
- deleted 4y ago[deleted]
- chernevik 4y agoIt's a bailout. They're putting the cost, presently unknown and probably not huge, on the other banks. But the message to depositors everywhere, of every size, is "don't worry about your bank's solvency, we'll protect you". So market scrutiny is removed as a discipline on bank asset strategy. That leaves regulation as the only control. That politicizes and bureaucratizes bank lending. And the general presumption that Big Government will protect you from yourself is extended just another smidge. If you had the wit to think "hey, maybe I should be careful with $5 million" and bothered to put it in T-bills or an insured sweep, you're just a nerd who should know the Government will take care of such things. It isn't the end of the world, but it's a sign of how corrupt and complacent we've become.
- modeless 4y agoShareholders are wiped out, so there will still be quite a bit of market scrutiny on banks. Edit: just to point out that I'm not claiming this is "not a bailout because shareholders were wiped out". It's a bailout of course.
- chernevik 4y agoAs we've seen this week, the scrutiny of depositors is far more powerful than that of shareholders.
- modeless 4y agoShareholder scrutiny preceded and caused the depositor scrutiny. Edit: I guess the point is that without the threat of depositor scrutiny, shareholders would have no reason to care about SVB's poor investment decisions, since they were only a problem in a bank run scenario caused by depositors. Failing that, the only risk to shareholders would be regulators, and regulators weren't doing anything about this problem, they were enabling it. I think you're right about that.
- andrewjl 4y agoWe've seen the opposite since it started with a failed capital raise and double digit stock price declines.
- indigodaddy 4y agoAnonymous treasury official alluding that other banks might be in similar situations: https://twitter.com/sonalibasak/status/1635059528546000897/photo/1 https://twitter.com/sonalibasak/status/1635059528546000897/p...
- spaceman_2020 4y agoCan anyone help me understand why would any bank practice proper risk management after this? SVB took on risk by catering to high risk clients (startups). Growth metrics were great as a result. And stock performed spectacularly (up nearly 6x from April 2020 lows at ath). More conservative banks like JPM, however, saw modest growth. If you're a banker and your salary is tied to stock performance, why not just adopt the SVB playbook, take on riskier clients, show strong growth, cash out your stock options, and when it all ends, just walk away without any guilt since the government will bail out your customers anyway?
- chernevik 4y agoIt won't. A bank will have to justify its investments to its regulators. And if those regulators have any helpful suggestions about "under-banked sectors" that could use additional capital, management will be very attentive.
- furyofantares 4y ago> More conservative banks like JPM, however, saw modest growth. Also they continue to exist.
- spaceman_2020 4y agoWhy should that be any concern if you’re not the founder and are just exec #107?
- furyofantares 4y agoIt is probably a concern to the founders or others with the most power, as you imply. Sure, I guess once we get to, let's see you said exec #107? That's pretty far down, they're maybe not too different than any other employee, though they still might not want their stock to vanish and they still might wish to continue their current career path etc.
- tome 4y ago> why would any bank practice proper risk management after this? The incentive for depositholders to exercise oversight has been removed, but the incentive for shareholders seems strong now!
- barelysapient 4y agoGood to see the wealthy elites banding together to lookout for themselves!
- moremetadata 4y ago[dead]
- readthenotes1 4y agoWhat does "These assets will be valued at par" Does that mean they will be valued at the fictional book value of the banks? Or is there some other value that is going to be looked at?
- midnightdiesel 4y agoMeanwhile Peter Thiel is off plotting his next gambit to fleece and destroy this country.
- 0xDEF 4y agoDon't forget his buddy David Sacks and to a lesser degree Elon Musk. The "PayPal mafia" turned out to be just as damaging to society as a real mafia.
- 0xDEF 4y agoThe Feds should not help the crypto startups that are actively betting against the Feds and the US dollar.
- HervalFreire 4y ago[dead]
- cjbgkagh 4y agoIsn’t the creation of a new and easy way for banks to access liquidity a bailout by another name? And what happens to base money supply of tons of people withdraw cash?
- jmull 4y agoLOL. Everyone is going to get their full deposits and taxpayers don’t have to bail anyone out. The sky wasn’t falling. I was unbelievable how quickly people called for the government to whip out the checkbook and sign a blank check. I wonder how many are going to opt to pay for depositors insurance for amounts over $250K? (practically zero?)
- wdb 4y agoPretty disappointing that they again are being lax on their own rules. And cover the full depositions and safe startups bad money management.
- MaxHoppersGhost 4y agoNow what incentive do larger banks have to run their bank appropriately now that SVB is getting bailed out? Ridiculous.
- kamikaz1k 4y agoPeople who want a full picture and like listening to a conversation instead of an article can listen to the recent All-In Podcast episode which discusses root cause and options. https://youtu.be/CEee7dAk25c https://youtu.be/CEee7dAk25c
- 0xDEF 4y agolol The right-libertarian techbros at All-In Podcast are the last people who will tell you the truth about this. They are at the core of the rot. David Sacks will probably do his usual monologue blaming dead Ukrainian children.
- barelysapient 4y agoSo now SVB is the _safest_ place for your money. Time to open an account.
- whodidntante 4y agoAnd we wonder why people are turning to marxism. If the "people" are being forced to bail out a bunch of rich people who create self serving incestuous relations between their companies to game the system and bend and break laws when it suits them, why not just have the "people" own everything ? As a capitalist, I am appalled by the behavior of the VC industry and the government that enables them. And, yes, it is a bailout. There may not be any taxpayer money front and center, but this will be paid by the average person in some way, and not by the people who created this fiasco, or those who are going to benefit from it.
- shagymoe 4y agoWhile I'm glad that no depositors will lose even a single dollar, can anyone justify how banks and the astonishingly rich continually take large, greedy risks only to be bailed out when they fail? I can't imagine the twists of logic it would take to accomplish that. So, the government presumably creates money to cover, inflates the supply and the tax payer pays for the bailout and also gets punished with inflation. Say what you want about this being good for the depositors but it can't be sustainable. At some point, people and corporations need to be held accountable, monetarily, , suffer the consequences of their actions and be allowed to fail. [edit] It seems that it's not a "full bailout" as shareholders won't be made whole but if the assets don't cover all the deposits, where is that money coming from?
- akulbe 4y agoI’m waiting for the other shoe to drop. There’s no way they do something like this and it have no effect on the taxpayer. Nothing is free.
- tgsovlerkhgsel 4y agoThe load bearing statements seem to be these: > Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law. To me, this one sounds like "we'll cover even the uninsured amounts and make all banks pay for it"? > 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. This one sounds like it may mean "we'll print money so no bank goes bankrupt"?
- MihaiSandor 4y agoNow, back to building!
- ETH_start 4y agoThese bailouts are very good for me in the short run, as I'm exposed to USDC, but they teach the wrong lessons, by redistributing the cost of a lack of depositor due diligence, to the general public. This will only encourage more high-risking banking practices - by both the banks and their customers - in the long run. Regulatory regimentation is a poor substitute for meaningful market consequences.
- kreeben 4y agoHey everyone, banking is a safe endeavour. When you fail. we'll give you money. So keep on building banks. Startup banks. Any type of bank. We love them. You see, our taxpayers are absolutely thrilled about them. - USA
- bcantrill 4y agoI have never seen such cognitive dissonance here at HN -- which I feel is really saying something! As an SVB customer who had to wire payroll on Tuesday, our perspective is naturally sharpened, but I found the lack of empathy here over the weekend galling. On the one hand, this is understandable, and Silicon Valley has done much to earn collective distrust. On the other hand, this is emphatically not all of us: many of us have been outspoken about our disagreements with the techbro culture, and have endeavored to create companies that are exemplars of what we want to see in the world. Speaking personally, I spent a lot of time DM'ing people privately who were saying absolutely outrageous things online, and almost uniformly hearing back: "No no, not you -- I love what you're doing." Well, if you want to see startups solving hard technical problems we need to have some real talk about how that has to be structured financially -- and maybe stop tweeting images of guillotines when our employees are anxious about their next paycheck?
- roflyear 4y agoDid you diversify your banking?
- jacquesm 4y agoThat's answered I think.
- bcantrill 4y agoWe were required by covenant to bank exclusively with SVB as part of the venture debt line we had with them. This is a condition that is (was!) very standard and non-negotiable. This is part of what I mean about the real talk: that venture debt line was clutch for us -- and I would wager than any hard tech company that you revere has used venture debt at one time or another.
- deleted 4y ago[deleted]
- pclmulqdq 4y agoWould you take $100k in free AWS credits if it came with a covenant that forced you to run only in us-east-1? That sounds exactly like what is happening here. If you really need the AWS credits, that's fine and good, but you can expect to take a reputation hit if running only in us-east-1 brings down your servers. I'm sure you got a really good deal on that venture debt, though. Probably much better than everyone else who offered you a line of credit, and for a good reason.
- Dem_Boys 4y agoWith this news, I'm opening a bank. Here is my business plan: 1. Make risky investments and offer better terms than other banks 2. Watch business flock to me 3. Get filthy rich on yearly bonuses 4. 10 years later my risky investments blow up (Make sure to sell stock before) 5. Get taken over by the FDIC 6. Don't return those years of bonuses 7. Let other banks pay for my wrongdoing with a "special assessment" 8. Walk away as a filthy rich failed bank executive
- dpkirchner 4y ago9. Get hired by another bank as CFO (See Lehman Brothers/SVB for a tutorial) 10. Repeat
- BCM43 4y agoIs this any different without steps 5 and 7? I don't understand how the FDIC actions change the incentives here.
- paulddraper 4y agoPresumably, #2 is only possible with a government guarantee for depositors.
- auntienomen 4y agoCan't do 8 without those!
- rullelito 4y agoA lot of people would lose money and the system would have to change.
- fidgewidge 4y agoWay fewer people hate you at the end, which is a meaningful disincentive otherwise.
- Dem_Boys 4y agoThe FDIC's actions indicate that the insured deposit limit is really unlimited instead of the advertised $250,000. This takes away a huge risk associated with recklessly handling depositors money because now the FDIC will swoop in and make ALL depositors whole.
- college_physics 4y agoIf I interpret the action correctly the Fed just granted all banks a giant put option to place any government securities at par for cash whenever interest rates move against them The only decent thing would be to remove the bank's freedom to (mis)manage interest risk altogether, have sovereign money deposits with the central bank and force private banks actually work for their profits by properly managing risks
- bagels 4y agoIt's the only sensible choice with unlimited backstop. It should have already been happening, really because the only difference from last week is that the guarantee was made explicit and we don't have to wonder.
- MagicMoonlight 4y agoBut don’t they have assets equal to their deposits? So why the fuck do they need bailing out? Tell the bank runners to get stuffed and wait for the assets to be sold.
- s1artibartfast 4y agoSo, it turns out that the taxpayers are footing the bill to make the depositors whole. Good day to be an account holder, bad day to be everyone else. I am sympathetic to the account holders, who are at low fault, but still not happy that the cost gets foisted on the public, who is even less at fault.
- beezle 4y agoHow is this for comedy: CNBC: 2023/03/09 "Wells Fargo says buy Signature bank the last game in crypto-town JPM: 2023/03/09 "JPMorgan predicts customers will migrate to Signature Bank’s Signet payments network. Cryptocurrency firms can incorporate the Signet network into their platforms using application programming interfaces. However, Signature also faces pressure to minimize crypto risks and recently announced that it would cut crypto deposits by $10 billion. Coinbase recently switched to Signature for its Prime customers." Barrons 1/19/23: After Silvergate and Signature Earnings, the Worst Might Be Over for Crypto Banks
- tobias3 4y agoLooking at the bigger picture, I do not know if this was the correct decision. The depositors were bailed out (it wasn’t just a liquidity issue) and the FDIC is paying for it. This means all FDIC members will need to pay less interest on deposits to make up for increased FDIC insurance cost. This will increase the speed with which people take out deposits and put it into e.g., short term treasuries because they get more interest. Enabled by easy-to-use fintec made in Silicon Valley. This will decrease bank profitability. And this is on the “Liability” side of the balance sheet. If the FED is successful in causing a recession surely there will be a lot of insolvencies (people swimming naked etc.) and there will be problems on the “Asset” side as well. How can this end well? We just failed at most easy hurdle here.
- whatever1 4y agoNice thing is we know exactly who caused and participated in the run. Why not charge them for the mess they caused ?
- londons_explore 4y ago> 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. This tells me there were other banks in a similar position, and those other banks are being offered free money... And those banks don't even have to get rid of their shareholders, bondholders, or upper management.
- everybodyknows 4y agoAn analogy: Smart guy is on the freeway when he's passed by someone going 90. Smart guy pushes up to 90 also, but stays 1/4 mile back. A lot of miles later, flashing blue lights pull up behind the leading speeder. SG slows to the limit and congratulates self on the early arrival.
- jonahbenton 4y agoDeposits not covered by asset sales should be covered by a tax on Peter Thiel and Gary Tan.
- Inebas 4y agoI don't understand why a cash only account, where the banks cannot use the money, does not exist.
- vc8f6vVV 4y agoBecause banks have no interest in those? Are you ready to pay high service charge? Bank employees need to eat too.
- sva_ 4y agoIt's interesting to see how this started just before the weekend and how they're seemingly working hard towards a solution before the markets open tomorrow.
- kristjansson 4y agoThe shear volume of misinformed, misleading, or malicious takes produced over the weekend, priced at a buck each, could probably cover whatever losses are eventually realized in this mess. I don’t mean to minimize this severity of the problem - if a bank can follow the rules, and be undone so easily, the rules need to be reevaluated. SVB management was negligent in their risk and deserves to be wiped out. But in a disaster precipitated and fueled by panic, professional and amateur purveyors of opinion and analysis should take more care to be well reasoned and factual.
- dools 4y agoThey should tell everyone that the government issues USD and therefore doesn’t need to first obtain the reserves from tax payers before making them available to protect bank depositors. If they were honest about this and everyone realised it, they could go one step further and eliminate involuntary unemployment overnight with a job guarantee.
- justinzollars 4y agohttps://twitter.com/AutismCapital/status/1635075450467926016 https://twitter.com/AutismCapital/status/1635075450467926016
- comment_ran 4y agoWhat's the impact of this, from a "normal" personal point of view, in US, Canada, or China?
- bengamin56_ 4y ago[flagged]
- IAmGraydon 4y agoBan this scammer.
- trashface 4y agoPrivatize the gains, socialize the risks. This is the way the US works. Take note, "voters".
- insane_dreamer 4y agoIt's the right move. If they didn't do it, every regional bank, especially those that primarily deal with businesses (which are likely to have more than $250K in deposits), would be at risk, since the expectation is that your "money is safe in the bank" is what allows the banking system as it is to exist.
- adharmad 4y agoNone of the other regional banks had the investment risk profile or the depositor distribution (number of individual investors, SMBs, startups) of SVB.
- insane_dreamer 4y agoIt doesn't matter. The goal is to contain fear, and fear does not act rationally, nor do depositors try to understand all of the intricacies of their bank's risk profile--they'll figure that BoA or WellsFargo will be better because they are "too big to fail". The fact is that if depositors hadn't run on SVB it also would have been ok.
- adharmad 4y agoBut in today's economy, any rumor or random event can cause a run on any bank. In fact, there are stories as we speak of the current run on SVB being caused by Peter Thiel and his buddies. If the banking system is so fragile that it is prone to bank runs on slight rumors, which can be contagious and spread to other banks, what is the solution? To just continue bailing out banks as they fail?
- insane_dreamer 4y agoIn today's economy, banking -- and by that I mean the basic function of a secure place to put your cash other than having it in dollar bills in a safety deposit box or under a mattress -- may be considered an "essential service", particularly for businesses. The fact is, you cannot operate a business without it. So putting your money somewhere safe (I'm talking cash here, not investments) should be something that is guaranteed. The $250K limit does that for individuals but not for businesses who may need millions in readily-available zero-risk (other than inflation) cash. This line of thinking leads towards basic banking services being fully guaranteed, and perhaps owned, by the government (like the postal bank in some countries). Banks make money by providing other services on top of that. Something along the lines of how power utilities work might be a model for the future.
- deleted 4y ago[deleted]
- IAmGraydon 4y agoThe market is buying this up, failing to realize that things will continue to break as interest rates are increased further. The Fed isn't interested in saving banks. They're there to quell inflation.
- dragonwriter 4y ago> The market is buying this up, failing to realize that things will continue to break as interest rates are increased further. Expectations of Fed action haven’t changed, expectations of FDIC/Treasury action to protect banks have. The information not already priced in is positive.
- IAmGraydon 4y agoThat's incorrect. Last week, the market was expecting a 50BPS increase. Now it has suddenly decided there is a 0% chance of 50BPS, an 81% chance of 25 BPS and a 19% chance of no hike. https://www.investing.com/central-banks/fed-rate-monitor https://www.investing.com/central-banks/fed-rate-monitor
- dragonwriter 4y agoWhat I meant was that expectation of continuing increases wasn't new, but thank you for pointing out that, in fact, expectation of such increases is actually declining.
- meltyness 4y agoThis may be in support of the 50bp hike the media was stuffing into Powell's mouth all last week after his statements before the Senate, find out where else powerful people have built crab traps.
- GreedClarifies 4y agoThis is unbelievable. SVB had services that others did not provide (in particular taking risky assets to secure loads or lines of credit). Those who partook in those services had to know that they made the bank more risky. Who comes up with these kinds of policies? My god. The moral hazard is unreal.
- hardstartuper 4y ago$42B was withdrawn from SVB on Thursday. That's a lot of $$$ in one day. No wonder this collapsed. CRO/CEO should be held accountable, including their poor messaging that started this. So should anyone who was spreading the panic including some VCs and startups.
- smoovb 4y agoPoor messaging amplified by speed of light communications (twitter) and fast online redemptions. We're in a new era of flash mob bank runs. Likely time for a rethink on regulations - like moving to daily mark-to-market of bank security holdings.
- hardstartuper 4y agoWell said
- MrMan 4y agothis is so fucked I hate these evil SV libertarian crooks. this is wrong
- twp 4y agotl;dr coin toss: heads SVB wins, tails you lose
- Nifty3929 4y agoIf they had wanted to avoid a contagion, they could have just given a 6-month 100% deposit backstop to all the other banks, and let SVB play out naturally. But then the VCs might have lost a little money.
- jacquesm 4y agoNot just the VCs though and therein lies the rub. You'd have to start differentiating between various kinds of account holders and that doesn't really work beyond the 'private individual/business' classification.
- divbzero 4y agoTo put things in perspective, the US government guaranteed $2.4 trillion in money market funds after the Reserve Primary Fund broke the buck in 2009 [1] and that guarantee came directly from the Treasury. [1]: https://www.cnbc.com/id/48578949 https://www.cnbc.com/id/48578949
- HPMOR 4y agoThe discourse on this thread and Twitter is astoundingly inept. If the FDIC had permitted uninsured depositors to not be made whole, there would’ve been a systemic risk to American banking. Confidence in the banking system is critical to its well functioning. Quite literally banks are built by confidence that their depositors will get their money back. Discussing whether SVBs depositors should’ve taken a haircut misses the point entirely.
- Willson50 4y agoWhen the future cannot be predicted accurately, it may be wiser to prioritize making prudent decisions that benefit everyone, rather than seeking retribution against wrongdoers. It's important to consider that both bank shareholders and senior management could face significant losses and lose their positions.
- eloff 4y agoThat’s pretty extreme. There’s plenty of blame for SVB, but the depositors? That’s victim blaming.
- HPMOR 4y agoNo, they don’t know about the risks and they’re shouldn’t be any to the depositors. Banks are highly regulated institutions and the creation of the FDIC was intended to prevent a systemic bank run, with people shoving cash into their mattress. This is precisely what would’ve happened had SVBs depositors taken any form of haircut.
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- bagels 4y agoWhy? It's completely unnecessary that bank deposits should face this much risk.
- spicyramen_ 4y ago[dead]
- awak3ning 4y agoTell me you're doing a bailout without telling me you're doing a bailout
- ChatGTP 4y agoUnregulated capitalism is good when you’re making money, socialism is good when you’ve lost your money… God bless America!
- dcow 4y agoWhat does it mean "Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer."? How is the taxpayer not bearing the losses? Did the gov't just make a special exception to release the treasury bonds SVB has in order to provide the missing liquidity? What exactly is happening?
- campbel 4y agoYeah this all stinks. I think they are playing games with words. The US taxpayer was the beneficiary of those cheap bonds, so releasing them early IS the taxpayer footing the bill.
- dcow 4y agoWell, not if the FDIC holds the bonds and floats the cash. I just wish the statement had more details.
- mactitan 4y agoAt no cost to the tax payer? I keep on reading bail out but I’m inclined to think it’s going to more like a bail in. Depositors transformed into shareholders. I read about these possible type of changes after the last banking crisis.
- deleted 4y ago[deleted]
- rubidium 4y agoI just gotta say, banking has changed a ton since 1870. Then banks going bust was normal. Now everyone freaks out. It must be nice having a banking system where “bank loses my money” is not the major systemic risk.
- jijji 4y agoits always fun when the cops show up to the bank and won't let you withdraw your own money.... I guess no one wants to address that issue.
- deleted 4y ago[deleted]
- akrymski 4y ago"Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks" - a "special" money printer? "U.S. banking system remains resilient ... due to reforms that were made after the financial crisis " - more lies. Majority of US banks are not required to follow the NSFR or LCR standards at all. Fed took advantage of the fact that the Basel Accords are only internationally agreed to apply to “large, internationally active” banks. While most jurisdictions apply the Basel rules to their entire banking system anyway, the US has a strong and powerful community bank lobby, so only the largest international banks were subject to the full Basel NSFR requirements.
- deleted 4y ago[deleted]
- codeddesign 4y ago97% of accounts are not insured. The whole point of the $250k rule is so you don’t wake up and are homeless. This is a corporate bail-out. 1. FDIC revoked the limit and is ensuring unlimited funds. 2. Providing funds to other banks that may be in distress. 3. This guarantees banks have no accountability & the govt will cover all losses.
- mtillman 4y ago“ no losses will be borne by the taxpayer” seems to have gotten lost in the media cycle.
- timcavel 4y ago[dead]
- blobbers 4y agoFutures markets up 1.7%. The one lesson they want you to remember is to buy the dip.
- No1 4y ago“no losses will be borne by the taxpayer” “Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks” So you as a taxpayer will not have to fund this bailout, unless you’re the kind of taxpayer with a bank account, in which case you’re going to be paying for it.
- deevolution 4y agoThe problem here is a fundamental flaw in the design of bonds.. They're non fungible by design. Why not make their yields fixed to the current fed funds rate regardless of when they were issued? That would eliminate market dislocations like what was experienced by SVB where their 1% yeilding bonds lost tremendous value.
- deleted 4y ago[deleted]
- graderjs 4y agoThis is a fricking miracle! Wonderful! Thank you US government for saving the depositors!
- morbidious 4y agoPrinting money has always been the solution to all of America's problems. Not for long. Enjoy while you still can :)
- fsckboy 4y agoif this is the way we're going to behave, then cap the maximum size of accounts at the FDIC coverage limit (implement account software in Rust, not C, no overruns :) If you go over this amount, the bank should automatically create a new account for you and put the excess in there. done, you're 100% insured, we don't have to do anything special to protect you. . Probably that means (I don't know the regs) that the bank will have to hold more of your money as reserves in cash on their books and not put it at risk, possibly pay more in insurance premiums if that's how FDIC insurance works. Probably it would make things really inconvenient for Roku to keep $500million in their bank account. But at least we would then deal with it at the time it occurs, and not in an emergency.
- auntienomen 4y agoIt would have to be a new account at a different bank. FDIC coverage is per bank, per depositor, and per ownership category (e.g. single vs joint account).
- fsckboy 4y agoi'm pretty sure you're wrong about that, but not invested enough to check. but if you're right, it seems a little silly, why impose that "diversification" on bank customers? if 100 millionaires live in a city, why should they all have accounts at all the different banks, as if that's somehow safer for the FDIC than have the same funds spread around in the same quantities across the same banks, just under different names.
- jijji 4y agothe more you read into this story of SVB, the more it seems like it (and other banks?) are nothing more than a ponzi scheme where they take customer's money, reinvest it in risky business, and then use the new customers money to back the people requesting withdrawals from the bank. Is this true?
- deleted 4y ago[deleted]
- refurb 4y agoLooking forward to the Econtalk podcast on this. Russ Roberts usually has some pretty knowledgeable people on who know behind the scenes stuff. Should be fascinating what comes out over the next few months.
- georgeplusplus 4y agoWhat does backstopping this bank mean for inflation? Where are we getting the money from to secure the deposits of the bank? Where does it end? If this small bank was vulnerable, how many other small banks will we need to do this for?
- FollowingTheDao 4y agoThis is how fascism starts; governments prioritizing the heath of corporations over its people.
- sirina_dany 4y ago[dead]
- jimnotgym 4y agoHow about a special levy on VC funds to pay for the special risk that they create in the banking sector? I asked on another thread why everyone was banking with the same bank. The answer was that SVB was willing to do things for the VCs clients that other banks were not.
- VoodooJuJu 4y agoWe deserve to see more useful top comments on this matter. The top ones in this and the main announcement thread [1] are just ad hominem complaining against some ostensibly "salty" or "cognitively dissonant" majority. Let's talk about skin in the game and bailouts. Explain to a peasant why he should have to share the risk you took with your money. Explain to him this game being played where he gains nothing when you win but loses when you lose. And please inform him the recourse he has should he disagree with sharing your loss. No moral appeals about making payroll, no ad hominems about non-positivism or cognitive dissonance, no complaints about "saltiness". I speak for many when I say I'd like to hear a proper explanation on this matter, in terms of skin in the game. EDIT: The above comment takes the following to be bullshit (from the article): "Yellen approved actions enabling the FDIC to complete its resolution...in a manner that fully protects all depositors... No losses...will be borne by the taxpayer." If these statements are true, can someone explain how it's possible that despositors are fully protected, far beyond what FDIC insures, without the taxpayer bearing any of the burden? --- [1] https://news.ycombinator.com/item?id=35096877 https://news.ycombinator.com/item?id=35096877
- deleted 4y ago[deleted]
- boxed 4y ago> Explain to a peasant why he should have to share the risk you took with your money Well.. in this specific case I don't think tax payers (I assume this is what you mean by "peasant") actually do share any of the risk/cost. The bank failed due to a liquidity problem. It actually has a pretty solid financial situation except for that! This isn't a "bail out" per se.
- dragontamer 4y ago> It actually has a pretty solid financial situation except for that! Then why couldn't they find a buyer in the auction today? If Silicon Valley Bank had positive equity, someone would have bought them out for an easy profit.
- qwertyuiop_ 4y agoBringing back too big to fail
- pc2g4d 4y agoWhy involve the Fed? Doesn't FDIC have existing funding mechanisms since 1933 or so? Not an expert; just my personal model of history is being violated a little here. I just don't understand why invoking the Fed's infinite line of credit is necessary. It comes across as a vote of no confidence in existing precedent and process, which somehow got us this far. There's nothing unprecedented happening, so why is an unprecedented response needed?
- tlonny 4y agoThis was the only rational course of action. It's slightly disheartening to see so many people on HN willing to invite a wider collapse of the US banking system in order to punish/hurt a group of people they deem to be "elite". Talk about cutting off your nose to spite your face!
- cced 4y ago> It's slightly disheartening to see so many people on HN willing to invite a wider collapse of the US banking system in order to punish/hurt a group of people they deem to be "elite". People are tired of being around rhetoric that students are undeserving of a bailout because they decided to take loans from banks that were more than willing to lend them money for degrees with no prospects of recouping, however, when banks make their own poor decisions the banks plead with the regulators they've been deregulating, defanging, and lobbying, there are calls for yet __another__ round of socialism. Only now we have no choice because the options are a) bailouts or b) systemic collapse of life as we know it. Tone-deaf. We are now changing definitions as to what a 'systemically important bank' is, apparently it is no longer 1 of the big-5, but any bank that has 200,000 depositors. Why and how is a bank with 200,000 depositors in a position to bring the entire financial system to a halt? In his Twitter spaces, Jason C. said that he is now a newly minted 'single-issue voter' looking at candidates that call for limiting of spending. Mind you, after he went on his all caps tirade on Twitter in an attempt to stoke fear. What's disheartening is seeing the complete disconnect in comments like yours with the optics of the situation. People aren't inviting the collapse of the system; they are criticizing the complete hypocrisy of those that call for financial prudence when it's other people's problems or needs but blame the government when they are now in a precarious situation. Utterly self-serving and shameless. We're slowly chipping away at the social contract, seemingly all while forgetting the previous times when bank bailouts were given. Rationalize this however you want, at the end of the day a bank mismanaged risk, it's C-suites cashed out before news hit, those in the know using means such as Podcast at their disposal, used their privileged position in order to get themselves out of harm’s way before others could, and now want losses to get socialized. These guys will never learn, this will happen again, and in 10 years we'll be right back here, only eggs will cost 30$ a dozen and you'll be financing your microwave.
- dustedcodes 4y agoOne rule for you another for them. It’s literally capitalism for the poor (students, diabetics, people being priced out of their homes) and socialism for the rich.
- concordDance 4y agoA lot of the comments here are reddit tier. Emotive simplistic statements by people who see an opportunity to fight the good fight.
- andersentobias 4y agoYesterday, high-profile investor types declared that the govt should definitely bailout SVB. Now the govt are "refunding" the depositors, but not the shareholders. In what way is this a bad thing, if someone is willing to play the devil's advocate for a second? Either these high-profile investors only want to save their own asses OR they ostensibly have a bigger plan to rescue the banking system in some unbeknownst way. I'm interested in hearing the rationale for the latter.
- al_be_back 4y agoWhat happened to Failing Gracefully or is that not necessary, just throw and let it bubble-up to the Treasury/BoE, they'll catch and handle it?? so many startups, in tech of all industries, seemed to have Banked most if not all their funds just with SVB: all eggs in one basket strategy. talk about everything everywhere and all at once! This situation is ridiculously unsafe, and avoidable.
- JakeAl 4y agoThe US debt to GDP ratio has been over 120% since 2020. By IMF definition the US is in an economic death spiral. Unless drastic measures are taken (balanced budget amendment, massive cuts in spending for starters) by 2028 the death spiral will be irreversible and the US will be insolvent by 2042. This is because by 2028 all of the payments we make on the loans for all that printed money will only be going to the interest, not the principal, and the spiral will be inescapable. (unless they change all the rules/trow them away which is where things like war and The Great Reset come in. What does this have to do with the banks failing? There will be no more stimulus or bailouts, that's what. FDIC will be lucky if they can cover insured funds. Social Security it has already been reported will be bankrupt by 2033. The money supply has already contracted 2% and historically I think only once when that happened we didn't go into a deep recession or depression. Depression because of what I stated above is on the menu. Cling to your jobs, folks, save all the money you can, cut all unnecessary spending. The next decade if we're lucky will not turned out like last century, but I'm not holding my breath. All that free money given to cronies by politicians leads to this. This is why you have a god standard and don't use fiat currency. So you can' spend money you don't have politicians buying votes with bailouts and handouts.
- jbaber 4y agoI have a naive question. When I was a little kid and the FDIC only insured the first $100,000, I thought, "If I were rich, I'd have to have multiple bank accounts." Do big companies not do this with their liquid assets as a matter of course? Are there just not enough banks? Or would per-account fees unknown to me as a little guy eat into savings? I get that big companies directly hold a bunch of bonds, too. But if they use a bank so they can actually write checks, why not many banks?
- rybosworld 4y agoI think some folks are rightfully curious how the depositors are being fully protected here, given that FDIC only insures up to $250,000. But really there should be no limit on FDIC insurance. Depositors should not be categorized as risk takers. Joe Schmoe should never have to concern himself with where he banks, or where his company payroll banks, for that matter. Telling depositors to take responsibility and disperse their funds across as many banks as possible is...silly. These aren't investors in bonds or stocks. These are cash accounts. Yellen is 100% doing the correct thing here. And the precedent being set makes logical sense.
- chaosbolt 4y ago>No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer. Mmmmm, so did the money fall down from the sky?
- jacobgorm 4y agohttps://www.youtube.com/watch?v=QM5tLcik_Pw https://www.youtube.com/watch?v=QM5tLcik_Pw
- winstonprivacy 4y agoTIL that most of HN has no clue how banking or finance works.
- headsoup 4y agoThis seems like that thing with power companies offering varying rates based on demand, then when power failed people's bills went sky high and someone just has to resume them. What I mean is, all this risk was baked in by design, with some stupid assumption of "well that won't happen." Now it's happened and the response is "well that's not supposed to happen, please rescue." Rules for me and not for thee.
- mberning 4y agoNothing is going to change in this country until people start questioning how we have seemingly limitless money for foreign aid, wars, bank bailouts, etc. but we can’t seem to get shit done for working class people. It’s not a left vs right issue. It’s a class and power issue.
- eatsyourtacos 4y agoInfinite money to "save the system" but no money to guarantee basic healthcare to everyone. Gotta love it.
- wheelerof4te 4y agoSo, a long-winded way to say: "We will bail you out."
- clevedotoner 4y agoIt is not clear to me why only these depositors of SVB deserve special treatment of full reimbursement of their funds. Is this not unfair towards those that held > $ 250 K in other bank failures where the rule of law was applied of not insuring such deposits?
- sriram97 4y agoAs pointed out a totally avoidable problem. Glad Fed backstopped. Also dont like calling this a bailout - it's not.
- cultureswitch 4y agoThe more things like this happen, the more I get the sense that the medieval Muslim world did this right: your market can only be free if the state does not intervene whatsoever in matters of debt or interest. Someone doesn't pay, that should be the creditor's problem, they shouldn't get to use the government as a recollection agency.
- xyst 4y agoCrazy. I wonder how this will play out in the market. First Republic continues to drop. Trading at ~$28/share (previously ~$80/share on 3/10). Schwab is also feeling the pain. I guess their investments are tied up mostly in the tech sector? Either we will see a dead cat bounce in the next few months or continued hemorrhaging. I can’t say for sure.
- JackAndJack 4y agoAfter 2008 collapse and now this, what has government done to prevent this? Bailing out needs to be done to protect the depositors everyone sympathizes with small businesses. However, what safe guards were put in place or are being put in place for this to not happen again? I guess none.
- ElevenLathe 4y agoI have a somewhat basic question that nonetheless seems to be difficult for a non-specialist to answer with just internet research. I am hoping someone here can answer it: I have my liquid savings in a local credit union (which therefore isn't insured by FDIC, but by NCUA). Will the bank fees mentioned in this letter ("Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law.") apply to my credit union?
- O__________O 4y agoFitting file name for the press release: “jy1337” “JY” for Secretary of the Treasury Janet L. Yellen; and “1337” means tech elite: - https://wikipedia.org/wiki/Leet https://wikipedia.org/wiki/Leet
- logifail 4y agoFT Alphaville hits the nail on the head: The fault, dear VCs, is not in your stars. It's in you. "As the news of the Silicon Valley Bank collapse reverberates through the technology ecosystem — and investors and founders alike furiously Google terms such as “available-for-sale” and “held-to-maturity” — even some of our most prominent financiers, like ‘PayPal Mafia’ member David Sacks, are learning once again how banks work, the hard way." https://www.ft.com/content/6ba95c9b-9be6-4d62-b4ac-b12e1e7ed68e https://www.ft.com/content/6ba95c9b-9be6-4d62-b4ac-b12e1e7ed... ( https://archive.is/4cnog https://archive.is/4cnog )
- ezekg 4y ago> No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer. Then how are they paying for this? Are they printing more money?