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FDIC Establishes Signature Bridge Bank, N.A., As Successor to Signature Bank
- tgsovlerkhgsel 4y agoThis sounds like it's basically the opposite of a bailout: It's the FDIC stepping in, removing management, likely wiping out shareholders, but otherwise letting the bank operate normally with customers fully protected - instead of letting management continue to run the bank in ways that may lead to losses.
- simple-thoughts 4y agoOne part of the bailout is depositors over $250k getting a new FDIC guarantee. The other part is the fed reserve promising to accept collateral at par instead of market value via the new BTFP. https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20230312a1.pdf https://www.federalreserve.gov/newsevents/pressreleases/file...
- deleted 4y ago[deleted]
- oraphalous 4y agoAbsolutely this... how is this not a bailout? Insofar as the amatuer hour banks that didn't buy swaps on the interest rate risk of their unmarked treasuries and mbs will now be saved from going under - for a year at least.
- astrange 4y agoA bailout is when you rescue equity or bond holders. There aren't any specific people being rescued here. And there aren't any other large banks doing that either. That was a SVB problem.
- simple-thoughts 4y agoIf a lending facility, only available to banks, at par for assets that are under par is not a bailout… What would you call it?
- lmm 4y agoIt's not allowing the bank to continue to operate under its current owners. Equity holders are likely getting zeroed and debt holders are likely taking a haircut. It's deposit insurance, not a bailout (at least in the sense of how the term is normally used), and where the money is coming from is irrelevant to that.
- pishpash 4y agoThose are not the terms of the BTFP. Nowhere does it say that to access this facility you must go under FDIC receivership and wipe out shareholders and bondholders.
- ejdyksen 4y agoIt’s not available to banks, only to used-to-be-banks.
- simple-thoughts 4y agoFalse. Check the linked press release in my parent comment - the BTFP is available to all banks and allows them to use their under par assets as collateral for loans at par from the Federal Reserve. “ Borrower Eligibility: Any U.S. federally insured depository institution (including a bank, savings association, or credit union) or U.S. branch or agency of a foreign bank that is eligible for primary credit (see 12 CFR 201.4(a)) is eligible to borrow under the Program. “
- ejdyksen 4y agoFair. Thought you were talking about making SVB depositors whole. I’d call the BTFP a mechanism to stabilize the banking system in the US, given rising interest rates. I guess I don’t care as much about the semantics, though.
- deleted 4y ago[deleted]
- basch 4y agoHow is the bank “saved”? All it’s assets seized, all shareholders removed, all leadership let go. The banks customers are saved, the bank is dissolved.
- politician 4y agoThe problem arises when you look past one bank and consider the banking system as a whole. When the next bank fails and its depositors are backstopped by the FDIC at 100%, then again and again, eventually the “fund” should run out. In theory. In practice, of course, that will never be allowed to happen. FDIC insurance is now effectively infinite.
- hypothesis 4y ago>FDIC insurance is now effectively infinite. That clearly being the case, what does it mean for insurance premiums?
- hn_throwaway_99 4y agoThis is from the top HN post: > Shareholders and certain unsecured debtholders will not be protected. Senior management has also been removed. Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law.
- hypothesis 4y agoSo, going forward, are they planning to do a “special assessment” for every failure? Because before banks were paying premiums into the system, just like an insurance.
- junofan 4y agoYes, the premiums are called assessments.
- Lazare 4y ago> Insofar as the amatuer hour banks [...] will now be saved from going under [...] That's the exact opposite of what's happening. Signature has, in fact, gone under.
- colechristensen 4y agoThe bank isn’t saved, it’s gone. Shareholders wiped out, anybody like executives paid in stock will have lost millions and soon many will be unemployed. A new bank will be found to buy all of the assets. It is somewhat of a bailout of depositors, but only in so far as the fed is going to print a little money to buy some securities (er, use them as collateral for loans) somewhat above a firesale market rate. Banks are still going to lose money but are being protected from a panic collapse at no real cost to taxpayers.
- fshbbdssbbgdd 4y agoDo most banks hedge that risk? I could imagine that being pretty expensive. Who takes the other side of a bet like that?
- twblalock 4y ago> One part of the bailout is depositors over $250k getting a new FDIC guarantee. Not really. It's not like the FDIC would normally give everyone $250k and then light the bank's remaining money on fire. If there is money left over after depositors all get their $250k, the depositors have a claim on that money too. Thought experiment: Consider a bank with only one customer. Let's say that customer had a million dollars in an account. The bank fails. That customer gets $250k. The FDIC finds out that another half a million is left over. The customer gets that too. The shareholders get shafted because they don't get anything because the depositors have precedence over the shareholders. Shareholders are the last ones to get paid, if there is anything left. This is not a bailout. It's the way things normally work.
- FormerBandmate 4y ago100% of deposits will be covered now tho, instead of 95%
- dmix 4y agoIt always works that way in practice, but I still think announcing the guarantee so early may have been a thing to calm the market. It is likely they just looked at the assets and figured out how to cover it all without dipping into some other gov $$, as part of the sale of the business. And something to do with finding a buyer for the mortgage security that they had (just speculating).
- ZachPruckowski 4y agoLooking at your thought experiment, the difference is whether that customer gets $500K (all of the bank's assets are sold to make him whole[1]) or $1M - all the banks assets are sold, and also he gets another $500K from the FDIC. [1] - the $250K insurance is normally only supposed to apply if there are insufficient assets to cover it. Unless I'm misunderstanding your wording and the bank in the thought experiment has $750K in assets.
- hypothesis 4y agoYour claim appears contradictory to what being reported in financial news though. [0] https://twitter.com/colbyLsmith/status/1635061613920395264 https://twitter.com/colbyLsmith/status/1635061613920395264
- Thorrez 4y agoThe second part you mention doesn't apply to Signature Bank, or SVB, but it applies to other banks that haven't failed yet. So it might be accurate to say SVB and Signature Bank weren't bailed out, but other banks are getting bailed out.
- pishpash 4y ago"The Department of the Treasury, using the Exchange Stabilization Fund, would provide $25 billion as credit protection to the Federal Reserve Banks in connection with the Program." Where did the Treasury find this $25 billion?
- perryizgr8 4y ago> Where did the Treasury find this $25 billion? They used this obscure keyboard shortcut: Ctrl + P
- nixgeek 4y agoThe ESF is nothing new. https://en.wikipedia.org/wiki/Exchange_Stabilization_Fund https://en.wikipedia.org/wiki/Exchange_Stabilization_Fund https://home.treasury.gov/policy-issues/international/exchange-stabilization-fund https://home.treasury.gov/policy-issues/international/exchan...
- pishpash 4y agoThat wasn't what I was asking. I wanted to know how the ESF is funded. It looks like it is taxpayer money, insofar as it comes from budget appropriations.
- sajacy 4y agoI don't think you have a realistic understanding of "taxpayer money". You know the budget hasn't been balanced in years, right? Let's guesstimate that over the last 20 years, for each dollar taxed, the government has been spending 5 more. Those 5 dollars came from private investors and commercial banks. They gave USD money to Treasury, and received an IOU note from the Treasury. So: 1) The money is national debt, not taxpayer dollars. 2) The QE and other "unusual" things done by the Fed in the last decade means many of the Treasury notes are now held directly by the Federal Reserve. Treasury can and will magically convert the notes to USD currency over time, which the Fed disposes of by sending USD back to ... the Treasury. 3) The debt and Fed actions don't necessarily cause inflation. Also, inflation is a form of a "sales tax", which isn't what people consider "taxpayer money" (in the US, there is no general sales tax, only federal income tax) [1]: https://fred.stlouisfed.org/series/TREAST https://fred.stlouisfed.org/series/TREAST [2]: https://www.brookings.edu/blog/up-front/2022/06/01/what-if-the-federal-reserve-books-losses-because-of-its-quantitative-easing/ https://www.brookings.edu/blog/up-front/2022/06/01/what-if-t... [3]: https://stephaniekelton.substack.com/p/how-do-you-solve-a-problem-like-inflation https://stephaniekelton.substack.com/p/how-do-you-solve-a-pr...
- fspeech 4y agoThis seems okay. Even at par value the Fed is not at risk for losses. Their Operation Twist is largely responsible for creating the mess in the first place. This is almost like a closet Operation Twist bailout.
- stefan_ 4y agoThere is a persistent misunderstanding here. The equity of the bank itself is not particularly interesting, given its usually a small fraction of deposits managed. No, the bailout part is them covering deposits over $250k, the limit plain to see for anyone that has ever entered a bank.
- khuey 4y agoIt's worth remembering that not every "bailout" wipes out equity holders. Citigroup and AIG were both bailed out during the financial crisis and their equity survived (although with heavy losses).
- colechristensen 4y agoThat is why those were bailouts and this is not. Shareholders are not being protected.
- stefan_ 4y agoMany things can be a bailout. I'm just calling it how I see it: this bank has assets that are likely less than the sum of its deposits. To make them whole despite this is a bailout, and particularly so when it's above the previously agreed on limit. Maybe you just have an unnatural aversion to the word or something.
- colechristensen 4y agoThe bank is gone, it’s not being bailed out it no longer exists. It has in entirely been taken by the fdic and will be parted up and sold for the benefit of those the former bank owed money to (to wit, those who deposited money with it)
- deleted 4y ago[deleted]
- the_optimist 4y agoNo. The banks are charged for that insurance. They provide the funds. There is no bailout. Using the equity buffer for coverage is _the whole point_.
- 3np 4y agoThe word "bailout" is a distraction and red herring. For example, FT and Yellen use it as a weasel word here[0]. I notice several articles and threads derailing into conflations of semantic arguments around what a bailout is with specifics of the topic. This is a trend (and, I suspect, tactic) on other topics and it only serves polarization. Try to not fall into this trap. It can be possible to call it out in a way which does not further derail the conversation. (Saying it's a trend does not mean it's merely a recent thing BTW) https://en.wikipedia.org/wiki/Weasel_word https://en.wikipedia.org/wiki/Weasel_word https://en.wikipedia.org/wiki/Equivocation https://en.wikipedia.org/wiki/Equivocation https://en.wikipedia.org/wiki/Essentially_contested_concept https://en.wikipedia.org/wiki/Essentially_contested_concept https://en.wikipedia.org/wiki/Persuasive_definition https://en.wikipedia.org/wiki/Persuasive_definition Whether the statement "this is a bailout" is true or not is actually irrelevant. [0]: https://archive.is/Yyu4S https://archive.is/Yyu4S
- hypothesis 4y agoHere’s POTUS being okay with it called a “bailout”. Can we move on to discuss substance? [0] https://mobile.twitter.com/POTUS/status/1635080376572956672 https://mobile.twitter.com/POTUS/status/1635080376572956672
- fspeech 4y agoOne could think of it as the FDIC stepping in to solve the prisoners’ dilemma. While depositors may only face theoretically tiny losses, the ones exiting first get paid in full, while the ones staying are left holding the bag. It’s a small cost to the other banks to backstop the bank run through FDIC, compared to potentially costly capital raises they may have to go through if there is a systemic loss of confidence. The downside is the moral hazard: will depositors think they have implicit unlimited insurance from now on?
- greatpostman 4y agoThis is why we have inflation. The government won’t let wealth destruction occur. Everything is backstopped, even the poor financial decisions. The taxpayers will pay for this through dollar devaluation and inflation.
- throwaway12245 4y agoIsn't inflation destroying the value of money?
- greatpostman 4y agoOver levered risk built on cheap money was a huge driver of inflation. They need to let those bets fail to let the money drain out of the system. But they won’t. This would have been a deflationary event.
- junofan 4y agoThe Fed has better tools. Financial instability isn’t really a great way to solve this.
- greatpostman 4y agoThere’s no way to solve it without pain. That’s like saying you can go to the gym and get big muscles without getting sore.
- alxmng 4y agoFractional reserve is inherently financially unstable. Investing deposits while simultaneously promising to pay them on demand is inherently financially unstable. There’s over 100 years repeatedly demonstrating this. Like clockwork, this exact scenario gets repeatedly demonstrated.
- nerdponx 4y agoThe bets were allowed to fail. Bank shareholders got nothing.
- woeirua 4y agoThe good news is that the failure of SBNY is probably what convinced them to pull out the stops and make the FDIC guarantee unlimited. The bad news, is that if your bank fails this week you would get full coverage. If your bank fails next month the FDIC may choose to let you hang out to dry. At this point, anyone who keeps their money at a small bank is a fool. Only store your cash at a large bank. The US govt only cares about systemically important banks.
- brianwawok 4y agoOne upside of being big is you get a bailout. Some random regional bank in Kentucky that fails next year won’t get this treatment.
- kasey_junk 4y agoThey won’t need to. They’ll be taken over in orderly course and all depositors will be made whole by the normal acquiring institution. Like the 500 or so banks they’ve done that for in the last 20 years. Depositors don’t typically lose money in FDIC receivership situations no matter what their balance is.
- wskinner 4y agoNot true if you have less than $250k at your bank. There is no reason to think FDIC will not honor the $250k insurance limit.
- paulddraper 4y agoYeah, unless you're megarich, you as an individual you probably shouldn't have more than that in a bank.
- denimnerd42 4y agosure you might. like when you buy a home. you could easily have a lot of equity you need to move into a different, also inflated price home. Lets say you bought a 300k house in 2010 and now it's sold for 650k. well now you have at least 400k in cash you need to transfer to your new home somehow. Maybe you stick it in your primary savings account for a few months while you shop. You might not realize you won't have FDIC insurance for those few days or weeks so you get unlucky and lose most of your wealth when your bank fails.
- everybodyknows 4y ago> The transfer of all the deposits was completed under the systemic risk exception approved earlier today. All depositors of the institution will be made whole. Signature was #32 by total assets. By other Treasury pronouncements, only #1-#4 were "systemically important". One's head spins ... https://banks.data.fdic.gov/bankfind-suite/financialreporting?establishedEndRange=3%2F12%2F2023&establishedStartRange=01%2F01%2F1792&inactiveEndRange=3%2F12%2F2023&inactiveStartRange=01%2F01%2F1970&incomeBasis=YTD&institutionType=banks&limitEstablishedDate=false&limitInactiveDate=false&pageNumber=2&reportPeriod=20221231&resultLimit=25&sortField=ASSET&sortOrder=DESC&unitType=%24 https://banks.data.fdic.gov/bankfind-suite/financialreportin... > No losses will be borne by the taxpayers. None except those with bank accounts, who can expect higher fees as the balance sheet losses are recovered by what is effectively a systemwide tax on all banks. > Any losses to the Deposit Insurance Fund (DIF) to support uninsured depositors will be recovered by a special assessment on banks, as required by law.
- hnarn 4y ago> No losses will be borne by the taxpayers. > None except those with bank accounts So not because they are taxpayers, and not with taxes.
- ummonk 4y agoThey can move their accounts to credit unions (which won't get taxed by the FDIC) if they're so upset by these higher fees.
- kibwen 4y ago> None except those with bank accounts, who can expect higher fees I'm not sure what these "fees" are, I've had a bank account my whole life and never paid a cent of fees.
- hypothesis 4y agoIt could be lower interest rate on CDs and/or savings accounts, or a higher rate on loans…
- di456 4y agoJust want to call out that these bank related threads related to SVB fallout are full of disinformation and some scammers. Be careful and check/ask for sources.
- Madmallard 4y agoName and shame? Rather than make a blanket statement on a site like this where there's really not many comments.
- SkyPuncher 4y agoI have to admit that I am not fully informed on these topic. BUT, even then, the SVB have an extremely weird feel to them. Far too many blatantly wrong, but good sounding comments. Something that I do not expect on this forum.
- kristjansson 4y agoI think it’s a mix of smart people talking urgently about things well outside their areas of expertise, folks hoping for a bigger disaster for ideological/personal reasons, and the mean-reversion in quality typical of high-visibility threads. Nonetheless surprising and disappointing to me too.
- nerdponx 4y agoThe moralizing libertarian FAANG employees always come out of the woodwork for these threads.
- ikiris 4y agoMost of them just seem wildly uninformed, and a lot of really strange libertarian takes that make little sense.
- hartator 4y agoJust renaming the company doesn’t qualify as bail out now?
- samename 4y agoThe previous management was fired and it’s under new management. It wasn’t simply “renamed”.
- c-smile 4y agoSo they switched economy to manual driving mode. Brakes did not work anymore? Or rather brakes were so hard that front passengers were thrown away...
- ummonk 4y agoNaturally aspirated.
- paxys 4y agoRemember, it's not a bailout, it's a "backstop".
- nemo44x 4y agoAs a fan of the TV show “Silicon Valley”, if I was the person that got to name these FDIC takeovers I’d just put the word “New” in front. “New Silicon Valley Bank” “New Signature Bank”
- exabrial 4y ago> The FDIC named Greg D. Carmichael as CEO of Signature Bridge Bank, N.A. Mr. Carmichael recently served as president and CEO of Fifth Third Bancorp. Thanks for not picking me; I am relieved. I have a terribly busy schedule and couldn’t possibly deal with the inconveniences of such a massive salary and accountability to the American taxpayer.
- kccqzy 4y agoIn case anyone else is also wondering what the letters "N.A." stand for, it actually stands for "National Association" which means it is a bank chartered by the Office of the Comptroller of the Currency ("OCC"), rather than a State.
- 1vuio0pswjnm7 4y agoWSJ Editorial Board asserts this is a bailout. It claims Yellen is indulging in semantics. https://www.wsj.com/articles/the-silicon-valley-bank-bailout-chorus-yellen-treasury-fed-fdic-deposit-limit-dodd-frank-run-cc80761e https://www.wsj.com/articles/the-silicon-valley-bank-bailout... Why are uninsured depositors being rescued.
- 3np 4y agohttps://archive.is/9zBUq https://archive.is/9zBUq See my comment here. They do the same "mistake". https://news.ycombinator.com/item?id=35130119 https://news.ycombinator.com/item?id=35130119
- tjohns 4y agoBecause the alternative is further spread of the contagion, leading to systemic bank failures. Not to mention the possibility of mass layoffs this week when payroll can't be processed. Nobody wants any of this. It's a small price to pay for keeping the economy from imploding.
- mimikatz 4y agoSure, maybe it is prudent to do. We are bailing out people with extra insurance on money that was not guaranteed to be insured. We are given them free money to make them whole and we are going to let banks sell 75 cents for a dollar to the fed if they really need the cash. If this is the right thing to do lets' talk openly and plainly about it.
- ck2 4y agoI thought we were done with "too big to fail". Let them fail. Otherwise this will keep happening. Safety-nets in society are to make sure poor don't stave to death or have to sleep in the woods. They aren't so executives can take massive risks without repercussions and never have to worry about living out of their car or even just selling the vacation house to get by.
- slenk 4y agoSo, all the customers should be punished by the execs decisions?