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A 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 eit
by astrange 4y ago
A 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.
- pishpash 4y agoIt wipes out losses accrued up to March 12, 2023 on eligible securities, for one year. It's taxpayer funded. Terms are super generous: only a 10bp premium. It's at least a bailout for one year. It may or may not get extended.
- slv77 4y agoIt also works against the Federal Reserves stated policy of shrinking their balance sheet due to inflation.
- pishpash 4y agoI do think it's somewhat clever. It basically lets the private banking sector control the pace of QT. If liquidity dries up somewhere in the system it does a one-year targeted QE.
- astrange 4y agoI'd say it's bailout-y to value collateral above market value, but isn't totally free money and we haven't seen all the terms for it. At least the Fed is safer holding long term bonds than anyone else.
- twblalock 4y ago> If a lending facility, only available to banks, at par for assets that are under par is not a bailout… > What would you call it? Obviously I'd call it a loan.
- anon291 4y agoDepositors are just shareholders with higher priority and an apparently unlimited (previously capped at 250k) insurance policy
- rvnx 4y agoUnlimited insurance AND still keeping the profits from the juicy interests.
- xeromal 4y ago> Planes wouldn't have stopped to exist, cars wouldn't have stopped to exist. > The entities would have disappeared and new ones would get created. That seems unnecessary considering how many jobs were at stake.
- astrange 4y agoThe airlines got bailouts specifically because they had union contracts that wouldn't have survived otherwise. It was for the workers. Though, planes probably would've ceased to exist eventually, they need continual maintenance.
- anon291 4y agoHow about, the government simply take an equity position in these companies. That way, when the inevitable unicorns come along, they can make the VC profit. Instead, the government is simply taking a pure loss... for what? Literally, an equity position is a net win. The loss is capped out at the equity position (which they're already losing now), while the gain is unlimited. Sure, there is every interest in protecting workers. But we're also protecting shareholders in these companies, and eliminating their risk, while not taking any of the reward. When these shareholders make money on the startups, they will be first in line to demand low taxes and lauding the 'free' market. How silly