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Alright, now what about this: > Finally, the Federal Reserve Board on Sunday announced it will make available additional funding to eligible depository institu

Alright, now what about this: > 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. That sounds a lot like some type of bailout to me. What does "make funding available" mean? Where does that funding come from? It's going directly to banks, not to depositors. How does that work?

tetrahedr0n 4y ago
I believe that would be the FDIC, which is funded by banks (its deposit insurance), right?
azernik 4y ago
It's the Fed. It literally prints money and loans it out. And it's doing this to replace money erased during a bank run, so no inflation implications.
- julienfr112 4y ago
  if the FED prints monney, it creates inflation. If it does not, it does not save SVB depositors.
  - azernik 4y ago
    Inflation occurs when more money is being used to buy things. The SVB depositors are going to turn around and put their money in a new bank.
- jonhohle 4y ago
  Printing money and loaning it out is literally monetary inflation. Money isn’t erased during a bank run. It’s given back to the owners who always had a right to have it. Fractional reserve banking is what erases money.
  - azernik 4y ago
    M3 is usually the money measure we care about for the real economy and price inflation, not M1. M3 is erased during a bank run, because the multiplier from M1 to M3 caused by fractional reserves goes away.
  - hackernewds 4y ago
    where is there any indication that money is being printed for this? if anything trillions have been printed to support the so-called "peasants" (hate that term) that kick-started the avalanche.
    - jonhohle 4y ago
      Read the parent comment: it states printing money is not inflation. The author either is being disingenuous or doesn’t understand how inflation works.
  - mcv 4y ago
    Printing money is not the same thing as inflation. It could cause inflation, but doesn't have to. And other things can cause inflation too. Inflation is merely the fact that stuff gets more expensive, but that can have many different causes. Excessive money printing is certainly the most notorious cause, but not all money printing is excessive. Sometimes printing money is the prudent thing to do because there's a growing need and therefore demand for money.
    - jonhohle 4y ago
      The definition of monetary inflation is increasing the monetary supply. That doesn’t need to happen by starting a printing press. It could be someone typing a bunch of zeros on a keyboard somewhere to create new money out of nothing. I never said inflation was detrimental or harmful (my personal belief is that it is harmful, however), just that adding money to the supply is by definition monetary inflation (the origin of the concept of cost inflation which is what we’re being asked to accept as the true definition). Putting air into a balloon doesn’t mean it will pop; it’s still being inflated. Hey, it’s even more fun for a while ;-) I was responding to a parent who said printing money isn’t inflation, when it’s the literal definition of, and the origin of the term in monetary theory. It’s not very constructive to conversation to attempt to change meaning of words to make one point or another.
- friend_and_foe 4y ago
  It wasn't erased, it's in peoples pockets in the form of cash, a la "bank run."
  - azernik 4y ago
    Only the small percentage that was available in the bank's reserves; the money of all the people who didn't get their money out in time was indeed erased.
kfrzcode 4y ago
I believe the Fed is opening a new program to allow for "systemic risk" loans at typical Govt. interest rates; so there aren't any worries about running out of cash to give to customers having a panic
nthj 4y ago
SVB has a ton of bonds that mature (will be cashable) after ten years, but nobody wants to pay for them today because they can make more money placing their cash in a savings account. For a silly analogy, imagine if you had a bunch of cash locked up in a CD, but also had a surprise medical bill. Our parents could very easily look at your books and say “huh, I can advance you 80% of your CD because there is really no chance the CD won’t pay me back once it matures.” Is this a bailout? I don’t think so. It’s different than paying off our drunk uncle’s gambling debts for the 7th time. And also we probably don’t want to say “haha silly SVB customers, they can wait ten years to get their money back” because none of us want to live in a world where most Americans, most of whom don’t understand all these complexities, start runs on ALL the banks because they think this is the start of a collapse. It becomes self-fulfilling at that point.
- aziaziazi 4y ago
  Your analogy is not only silly but naïve. SVB is way closer to your drunk uncle saving in 30yo whiskeys pricy bottles than child savings.
  - strbean 4y ago
    Treasury bonds are wild and irresponsible investments now? Man, it's probably time to jump ship from the US economy all together.
    - lordfrito 4y ago
      If you're a bank that can't differentiate/navigate long term vs short term debts while experiencing ballooning deposits, then yes I agree it's time to jump ship and find a new profession. I don't see how the US economy is to blame for the actions of a greedy monoculture based on "tech line go up". They made a long term bet on bonds with historically low interest rates, doubling down that the party would continue indefinitely. They didn't have a chief risk officer for 9 months! How is that the US economy's fault? There's a reason they lobbied congress to weaken risk regulations. I'm hoping people go to jail over this.
    - 4y ago

tetrahedr0n 4y ago

I believe that would be the FDIC, which is funded by banks (its deposit insurance), right?

azernik 4y ago

It's the Fed. It literally prints money and loans it out. And it's doing this to replace money erased during a bank run, so no inflation implications.

julienfr112 4y ago
if the FED prints monney, it creates inflation. If it does not, it does not save SVB depositors.
- azernik 4y ago
  Inflation occurs when more money is being used to buy things. The SVB depositors are going to turn around and put their money in a new bank.
jonhohle 4y ago
Printing money and loaning it out is literally monetary inflation. Money isn’t erased during a bank run. It’s given back to the owners who always had a right to have it. Fractional reserve banking is what erases money.
- azernik 4y ago
  M3 is usually the money measure we care about for the real economy and price inflation, not M1. M3 is erased during a bank run, because the multiplier from M1 to M3 caused by fractional reserves goes away.
- hackernewds 4y ago
  where is there any indication that money is being printed for this? if anything trillions have been printed to support the so-called "peasants" (hate that term) that kick-started the avalanche.
  - jonhohle 4y ago
    Read the parent comment: it states printing money is not inflation. The author either is being disingenuous or doesn’t understand how inflation works.
- mcv 4y ago
  Printing money is not the same thing as inflation. It could cause inflation, but doesn't have to. And other things can cause inflation too. Inflation is merely the fact that stuff gets more expensive, but that can have many different causes. Excessive money printing is certainly the most notorious cause, but not all money printing is excessive. Sometimes printing money is the prudent thing to do because there's a growing need and therefore demand for money.
  - jonhohle 4y ago
    The definition of monetary inflation is increasing the monetary supply. That doesn’t need to happen by starting a printing press. It could be someone typing a bunch of zeros on a keyboard somewhere to create new money out of nothing. I never said inflation was detrimental or harmful (my personal belief is that it is harmful, however), just that adding money to the supply is by definition monetary inflation (the origin of the concept of cost inflation which is what we’re being asked to accept as the true definition). Putting air into a balloon doesn’t mean it will pop; it’s still being inflated. Hey, it’s even more fun for a while ;-) I was responding to a parent who said printing money isn’t inflation, when it’s the literal definition of, and the origin of the term in monetary theory. It’s not very constructive to conversation to attempt to change meaning of words to make one point or another.
friend_and_foe 4y ago
It wasn't erased, it's in peoples pockets in the form of cash, a la "bank run."
- azernik 4y ago
  Only the small percentage that was available in the bank's reserves; the money of all the people who didn't get their money out in time was indeed erased.

kfrzcode 4y ago

I believe the Fed is opening a new program to allow for "systemic risk" loans at typical Govt. interest rates; so there aren't any worries about running out of cash to give to customers having a panic

nthj 4y ago

SVB has a ton of bonds that mature (will be cashable) after ten years, but nobody wants to pay for them today because they can make more money placing their cash in a savings account. For a silly analogy, imagine if you had a bunch of cash locked up in a CD, but also had a surprise medical bill. Our parents could very easily look at your books and say “huh, I can advance you 80% of your CD because there is really no chance the CD won’t pay me back once it matures.” Is this a bailout? I don’t think so. It’s different than paying off our drunk uncle’s gambling debts for the 7th time. And also we probably don’t want to say “haha silly SVB customers, they can wait ten years to get their money back” because none of us want to live in a world where most Americans, most of whom don’t understand all these complexities, start runs on ALL the banks because they think this is the start of a collapse. It becomes self-fulfilling at that point.

aziaziazi 4y ago
Your analogy is not only silly but naïve. SVB is way closer to your drunk uncle saving in 30yo whiskeys pricy bottles than child savings.
- strbean 4y ago
  Treasury bonds are wild and irresponsible investments now? Man, it's probably time to jump ship from the US economy all together.
  - lordfrito 4y ago
    If you're a bank that can't differentiate/navigate long term vs short term debts while experiencing ballooning deposits, then yes I agree it's time to jump ship and find a new profession. I don't see how the US economy is to blame for the actions of a greedy monoculture based on "tech line go up". They made a long term bet on bonds with historically low interest rates, doubling down that the party would continue indefinitely. They didn't have a chief risk officer for 9 months! How is that the US economy's fault? There's a reason they lobbied congress to weaken risk regulations. I'm hoping people go to jail over this.
  - 4y ago