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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. The

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.
- eep_social 4y ago
  You are echoing bullshit driven by the VC freak out over the weekend. There are literally hundreds of ways that actual small businesses could have bridged this disruption. Those that failed this basic risk-management exercise would have richly deserved what they got. How else are they going to learn?
- Gwypaas 4y ago
  > 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. That is already in motion. Every company that had yet to do it is now looking into its liquidity management.
- doodlesdev 4y ago
  > 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 Why the hell should a bank fail if people take their money out of it? THAT's the problem. It's just not a thing in other parts of the world _even with fractional banking_. The fact a "bank run" can generate losses for depositors is simply a consequence of a lack of regulation. The further fact this can generate a "contagion" is a consequence of the banking system simply not hedging their investments correctly and not applying simple risk-management mechanisms, and they do it for the same reason: lack of regulation that keeps the accountable. Again, this kind of problem simply doesn't exist elsewhere. Just look outside the United States and the solution is simple: either you deregulate or you regulate, you can't have your cake and eat it too.

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.

eep_social 4y ago
You are echoing bullshit driven by the VC freak out over the weekend. There are literally hundreds of ways that actual small businesses could have bridged this disruption. Those that failed this basic risk-management exercise would have richly deserved what they got. How else are they going to learn?
Gwypaas 4y ago
> 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. That is already in motion. Every company that had yet to do it is now looking into its liquidity management.
doodlesdev 4y ago
> 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 Why the hell should a bank fail if people take their money out of it? THAT's the problem. It's just not a thing in other parts of the world _even with fractional banking_. The fact a "bank run" can generate losses for depositors is simply a consequence of a lack of regulation. The further fact this can generate a "contagion" is a consequence of the banking system simply not hedging their investments correctly and not applying simple risk-management mechanisms, and they do it for the same reason: lack of regulation that keeps the accountable. Again, this kind of problem simply doesn't exist elsewhere. Just look outside the United States and the solution is simple: either you deregulate or you regulate, you can't have your cake and eat it too.