6 ms·

Depositors aren't though, which is the issue. FDIC will cover losses that weren't actually insured (above $250K). The money doesn't come out of the "taxpayer" b

Depositors aren't though, which is the issue. FDIC will cover losses that weren't actually insured (above $250K). The money doesn't come out of the "taxpayer" but instead from the banks, but guess from where the banks get money from?

breck 4y ago
> but guess from where the banks get money from? Oh, I know this one! https://breckyunits.com/the-great-bank-robbery.html https://breckyunits.com/the-great-bank-robbery.html
sdfghswe 4y ago
That's like saying that any time any one makes a loss, it's everyone _else's_ loss, because guess where their money comes from. What do you suggest should happen here?
- doodlesdev 4y ago
  I suggest that the FDIC does what it should do and cover all losses that were insured, and let the uninsured losses be realized, as they should be normally. There's a gigantic moral risk in the FDIC covering uninsured losses, because that's a value judgement, and if next week my bank fails why shouldn't the FDIC cover all of my uninsured losses too? The value judgement that was done here is that if they didn't do it this bank collapse would generate contagion, which I believe is understandable, however if that is the case there should be other ways to prevent this kind of thing such as regulation that prevents banks from putting customer deposits into mortgage-backed securities (what the actual fuck, I still can't believe they've done this, it's like the world has learned nothing from 2008). Specifically I note that around 2018 there was regulation passed that reduced the amount of scrutiny banks such as Sillicon Valley Bank would receive [0], which we all know now how well that worked. Everyone needs to be taken accountable to the same degree, there should be no special cases or "exceptions". And if a need for those appears that should indicate a systemic problem instead of simply a isolated one-time event. [0]: https://www.forbes.com/sites/mayrarodriguezvalladares/2023/03/12/how-trumps-deregulation-sowed-the-seeds-for-silicon-valley-banks-demise/ https://www.forbes.com/sites/mayrarodriguezvalladares/2023/0...
  - sdfghswe 4y ago
    > I suggest that the FDIC does what it should do and cover all losses that were insured, and let the uninsured losses be realized, as they should be normally To which someone like would you say "but who's paying for that? the other banks? and guess where their money comes from?
    - doodlesdev 4y ago
      That is ok as long everyone plays by the same rules. The problem I have specifically is the fact they are making a "special exception" for Silicon Valley bank, but haven't done for other bank collapses. This case of course had the potential to generate contagion, but if that's a thing that happens too often, then there is a systemic issue with how banks are regulated in the United States. I should note this is my point of view as an outsider. Outside the United States issues such as the one we are discussing simply aren't a thing because banks are held to much larger scrutiny, and thus spending depositors money into MBS is not really a thing. Again, regardless of your political stance or economical, I recommend you read the linked Forbes article about the "Reform Act" I linked to previously [0]. [0]: https://www.forbes.com/sites/mayrarodriguezvalladares/2023/03/12/how-trumps-deregulation-sowed-the-seeds-for-silicon-valley-banks-demise/ https://www.forbes.com/sites/mayrarodriguezvalladares/2023/0...
      - tracker1 4y ago
        I'm inside the US and generally agree. Those that had deposits over 250k should be prepared to lose the estimated ~10% or so... as for the shareholders, they should be prepared to lose all... and the executives and board members who drew fat bonuses or sold stock in the past few months should see it clawed back and be held personally liable for the losses, and if that bankrupts them, so be it. That also doesn't count possible insider trading for recent stock sales.
  - senko 4y ago
    > I suggest that the FDIC does what it should do and cover all losses that were insured, and let the uninsured losses be realized, as they should be normally. And then a bunch of small business fail, then everyone else looks at 20 other small and middle-tier banks and realizes they don't want to end up the same way and pull their money out, then they fail, per your suggestion FDIC still does nothing, then another couple dozen banks and couple thousand business fail ...and next week you're back in 2008.
- johnbellone 4y ago
  So, what's the point of having an explicit insurance limit? Any account used for business operating expenses needs to be mandated to have premium insurance on it. That same insurance should be available for all depositors. The next time this happens if you do not have that insurance you receive your receivership certificate and wait for your dividends. Like everyone else.
ummonk 4y ago
The banks get their money from their profits. Same as how they would have taken an even bigger loss to their profits if this contagion had been allowed to spread.
- doodlesdev 4y ago
  That would all be ideal and ok if fractional banking wasn't a thing. Your bank makes money out of investing your money. That's just how it works. But for some reason, some banks are more privileged than others. Citibank can't stop receiving bailouts every 50 microseconds because their management sucks. Silicon Valley Bank depositors receive back money from _uninsured_ deposits. Ultimately, someone has to pay the bill. I'm not saying prevent the contagion is a bad thing. We all know what happens when contagion becomes a systemic problem (2008). What I'm suggesting is that the fact a bank like this can even fail in a way like this is absurd. I'm mostly someone who defends less regulation over more, but if we are going to regulate banks we need to hold everyone to the same standards, and make sure everyone is accountable for their mistakes and risks taken. If that requires the FDIC raising the amount of deposits that are insured, sure, go with it, but creating "exceptions" every time a medium-sized bank fails is sure to create moral problems, corruption and increase inequality systematically. What I'm talking about is thing such as the "Reform Act" from 2018, which was basically what allowed this Silicon Valley Bank disaster to happen [0]. [0]: https://www.forbes.com/sites/mayrarodriguezvalladares/2023/03/12/how-trumps-deregulation-sowed-the-seeds-for-silicon-valley-banks-demise/ https://www.forbes.com/sites/mayrarodriguezvalladares/2023/0...
  - ummonk 4y ago
    Fractional banking has been a driving feature of capitalist growth for several centuries now. As to "exceptions", there isn't any exception here. Standard practice in every bank collapse after IndyMac has been that depositors (including uninsured depositors) are made whole. It's just not something the FDIC will commit to because they don't want to commit to making depositors whole and be on the hook if an obviously risky and disreputable bank collapses and depositors want their money back.
thereddaikon 4y ago
They are getting it from liquidating the assets of the Bank. There are three parties who are "owed" here. The depositors, holders of debt and investors. Depositors are being made whole. Anyone who holds secured debt will get what's left. Owners of unsecured debt and investors are left out. Which is fine by me.
- johnbellone 4y ago
  Those assets may take years to liquidate. Nobody wants to be in the business of holding the bag on an interest free loan for that length of time. Especially when that totals to >$150B.
- doodlesdev 4y ago
  > Owners of unsecured debt and investors are left out. Which is fine by me. Also fine by me. The distinction I attempted to make in my comment was that there are actually something like four parties in this case: Holders of debt, investors, insured deposits and uninsured deposits. I find it absurd the FDIC is going to realize a loss to cover uninsured deposits, because that's simply not what they should do if they followed their own standard. Remember, even though it's state-owned the FDIC is a company, Americans should be worried if the FDIC takes actions that could ultimately put in risk money that _is_ actually insured. If they run dry, they will have to tap into the government's pockets and that's when shit truly hits the fan.

breck 4y ago

> but guess from where the banks get money from? Oh, I know this one! https://breckyunits.com/the-great-bank-robbery.html https://breckyunits.com/the-great-bank-robbery.html

sdfghswe 4y ago

That's like saying that any time any one makes a loss, it's everyone _else's_ loss, because guess where their money comes from. What do you suggest should happen here?

doodlesdev 4y ago
I suggest that the FDIC does what it should do and cover all losses that were insured, and let the uninsured losses be realized, as they should be normally. There's a gigantic moral risk in the FDIC covering uninsured losses, because that's a value judgement, and if next week my bank fails why shouldn't the FDIC cover all of my uninsured losses too? The value judgement that was done here is that if they didn't do it this bank collapse would generate contagion, which I believe is understandable, however if that is the case there should be other ways to prevent this kind of thing such as regulation that prevents banks from putting customer deposits into mortgage-backed securities (what the actual fuck, I still can't believe they've done this, it's like the world has learned nothing from 2008). Specifically I note that around 2018 there was regulation passed that reduced the amount of scrutiny banks such as Sillicon Valley Bank would receive [0], which we all know now how well that worked. Everyone needs to be taken accountable to the same degree, there should be no special cases or "exceptions". And if a need for those appears that should indicate a systemic problem instead of simply a isolated one-time event. [0]: https://www.forbes.com/sites/mayrarodriguezvalladares/2023/03/12/how-trumps-deregulation-sowed-the-seeds-for-silicon-valley-banks-demise/ https://www.forbes.com/sites/mayrarodriguezvalladares/2023/0...
- sdfghswe 4y ago
  > I suggest that the FDIC does what it should do and cover all losses that were insured, and let the uninsured losses be realized, as they should be normally To which someone like would you say "but who's paying for that? the other banks? and guess where their money comes from?
  - doodlesdev 4y ago
    That is ok as long everyone plays by the same rules. The problem I have specifically is the fact they are making a "special exception" for Silicon Valley bank, but haven't done for other bank collapses. This case of course had the potential to generate contagion, but if that's a thing that happens too often, then there is a systemic issue with how banks are regulated in the United States. I should note this is my point of view as an outsider. Outside the United States issues such as the one we are discussing simply aren't a thing because banks are held to much larger scrutiny, and thus spending depositors money into MBS is not really a thing. Again, regardless of your political stance or economical, I recommend you read the linked Forbes article about the "Reform Act" I linked to previously [0]. [0]: https://www.forbes.com/sites/mayrarodriguezvalladares/2023/03/12/how-trumps-deregulation-sowed-the-seeds-for-silicon-valley-banks-demise/ https://www.forbes.com/sites/mayrarodriguezvalladares/2023/0...
    - tracker1 4y ago
      I'm inside the US and generally agree. Those that had deposits over 250k should be prepared to lose the estimated ~10% or so... as for the shareholders, they should be prepared to lose all... and the executives and board members who drew fat bonuses or sold stock in the past few months should see it clawed back and be held personally liable for the losses, and if that bankrupts them, so be it. That also doesn't count possible insider trading for recent stock sales.
- senko 4y ago
  > I suggest that the FDIC does what it should do and cover all losses that were insured, and let the uninsured losses be realized, as they should be normally. And then a bunch of small business fail, then everyone else looks at 20 other small and middle-tier banks and realizes they don't want to end up the same way and pull their money out, then they fail, per your suggestion FDIC still does nothing, then another couple dozen banks and couple thousand business fail ...and next week you're back in 2008.
johnbellone 4y ago
So, what's the point of having an explicit insurance limit? Any account used for business operating expenses needs to be mandated to have premium insurance on it. That same insurance should be available for all depositors. The next time this happens if you do not have that insurance you receive your receivership certificate and wait for your dividends. Like everyone else.

ummonk 4y ago

The banks get their money from their profits. Same as how they would have taken an even bigger loss to their profits if this contagion had been allowed to spread.

doodlesdev 4y ago
That would all be ideal and ok if fractional banking wasn't a thing. Your bank makes money out of investing your money. That's just how it works. But for some reason, some banks are more privileged than others. Citibank can't stop receiving bailouts every 50 microseconds because their management sucks. Silicon Valley Bank depositors receive back money from _uninsured_ deposits. Ultimately, someone has to pay the bill. I'm not saying prevent the contagion is a bad thing. We all know what happens when contagion becomes a systemic problem (2008). What I'm suggesting is that the fact a bank like this can even fail in a way like this is absurd. I'm mostly someone who defends less regulation over more, but if we are going to regulate banks we need to hold everyone to the same standards, and make sure everyone is accountable for their mistakes and risks taken. If that requires the FDIC raising the amount of deposits that are insured, sure, go with it, but creating "exceptions" every time a medium-sized bank fails is sure to create moral problems, corruption and increase inequality systematically. What I'm talking about is thing such as the "Reform Act" from 2018, which was basically what allowed this Silicon Valley Bank disaster to happen [0]. [0]: https://www.forbes.com/sites/mayrarodriguezvalladares/2023/03/12/how-trumps-deregulation-sowed-the-seeds-for-silicon-valley-banks-demise/ https://www.forbes.com/sites/mayrarodriguezvalladares/2023/0...
- ummonk 4y ago
  Fractional banking has been a driving feature of capitalist growth for several centuries now. As to "exceptions", there isn't any exception here. Standard practice in every bank collapse after IndyMac has been that depositors (including uninsured depositors) are made whole. It's just not something the FDIC will commit to because they don't want to commit to making depositors whole and be on the hook if an obviously risky and disreputable bank collapses and depositors want their money back.

thereddaikon 4y ago

They are getting it from liquidating the assets of the Bank. There are three parties who are "owed" here. The depositors, holders of debt and investors. Depositors are being made whole. Anyone who holds secured debt will get what's left. Owners of unsecured debt and investors are left out. Which is fine by me.

johnbellone 4y ago
Those assets may take years to liquidate. Nobody wants to be in the business of holding the bag on an interest free loan for that length of time. Especially when that totals to >$150B.
doodlesdev 4y ago
> Owners of unsecured debt and investors are left out. Which is fine by me. Also fine by me. The distinction I attempted to make in my comment was that there are actually something like four parties in this case: Holders of debt, investors, insured deposits and uninsured deposits. I find it absurd the FDIC is going to realize a loss to cover uninsured deposits, because that's simply not what they should do if they followed their own standard. Remember, even though it's state-owned the FDIC is a company, Americans should be worried if the FDIC takes actions that could ultimately put in risk money that _is_ actually insured. If they run dry, they will have to tap into the government's pockets and that's when shit truly hits the fan.