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Frustrating. Depositor insurance is not socialism, and it's a somewhat shockingly stupid thing to suggest that it is. And even the suggestion that depositor ins

Frustrating. Depositor insurance is not socialism, and it's a somewhat shockingly stupid thing to suggest that it is. And even the suggestion that depositor insurance is what's at play here is a stretch; the word from the fed is "No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer".

Workaccount2 4y ago
The truth is "No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer who doesn't use a bank." Strictly speaking, the loss of the depositors money is being socialized across bank customers.
- credit_guy 4y ago
  That is not what the word "taxpayers" means. Let's say that somehow the Fed managed to do what they are doing now not by sourcing their funds from banks, but from the top 10 billionaires in this country. Since these 10 guys are also taxpayers, would you decry this as a "taxpayer funded bailout"?
  - rhaway84773 4y ago
    It would exactly be a tax funded bailout. Most people would indeed decry it because the people complaining about tax payer funded bailouts would be wondering why we were willing to tax 10 billionaires more money to make whole people with more than $250k, instead of using that money to prevent the discontinuation of a program that say, reduced child poverty by 46% in the US. For the record, I don’t consider this a bailout. Making whole people’s deposits isn’t what I would consider a bailout because I look at a bailout as protecting entities from the negative consequences of bad decisions, whereas I don’t see depositing money in a bank as a bad decision. This is the equivalent of the govt using its vast assets and reputations to make while the victims of Madoff, for example, which without govt intervention would have meant that the fund’s assets were disposed in a fire sale, so the victims get less money than they would have if the govt intervened and provides short term liquidity allowing those assets to be disposed off at a higher market value. But it’s still socialistic, and it strongly indicates the need for government regulation and intervention, because no private entity could do this, and basically undermines strong economic libertarianism.
    - credit_guy 4y ago
      But then why stop there? Let's say that only the equity shareholders lost money. Would you say that the loss was borne by the taxpayers because the shareholders are taxpayers?
- favorited 4y ago
  > the loss of the depositors money What loss? Their assets were higher than their liabilities.
DubiousPusher 4y ago
The special assessment on banks will be cash-flowed through charging regular people for more financial services. They have their ways, remember "8 is great"? https://www.forbes.com/pictures/fkmm45eegei/eight-is-great/amp/ https://www.forbes.com/pictures/fkmm45eegei/eight-is-great/a...
acchow 4y ago
> "No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer" Technically, this is of course correct. If there are $100 of deposits backed by $100 of bonds which will mature in 5 years, the treasury can of course satisfy all withdrawal demands on that $100 because it has infinite money, and the treasury will with 99% certainty get back all $100 because these are AAA bonds which will almost never default. Unless they do. But regardless, even if they DON'T default, the treasury will be made full and the taxpayer will bear no cost, technically. But this par $100 bond is actually worth $87 today, so the treasury could have actually bought it up on the open markets instead for $87 and pocketed the $13 difference as profit for the taxpayer. That that are foregoing this possible profit is omitted in the quote above... I'm not saying they should do this, I just think that the fed is being a bit abusive with terms here. In any case, buying up distressed assets to provide liquidity is just Quantitative Easing. Which we all know doesn't have any weird secondary or tertiary effects, right?
- DubiousPusher 4y ago
  The joint statement has made it clear they are not paying for this through FED/Treasury muckery. It will be paid for by a "special assessment" of the FDIC on banks "which is required by law".
  - acchow 4y ago
    And what of this BTFP facility? The fed is willing to lend out full par value against high quality assets. Because AAA high quality assets never default and always return full par value, right? How is this not kicking the can down the road? This is like a new almost-QE product. For now, it’s just a collateralized loan. But if there is some system shock and a lot of these high quality bonds start defaulting, you bet your ass the fed will buy up these distressed assets and then we’ll have QE again. I do hope we don’t have such a shock. But they’re like a once in a lifetime event, and we already got one in 2008, so we’re probably fine.
    - DubiousPusher 4y ago
      I didn't dive into this part. Looks like this is their real game for preventing spill-over. My understanding is that the government actually made a lot of money off the toxic assets it bought post 2008. Maybe they can pull off the same trick? I was sceptical that this was indeed systemic before but I'm reassessing that opinion.
rhaway84773 4y ago
Except depositors above $250k did not have depositors insurance. How is the government stepping in to provide insurance for people who didn’t have insurance not socialism? Or put it another way, there was absolutely no capitalistic private market solution to this. VCs weren’t on Twitter demanding Chase to come in and save the SVB depositors. They were asking the government. If this was a simple non socialist, capitalist intervention, how was it that only the government was willing to do it?
- DubiousPusher 4y ago
  The funny part is that there are free market solutions. Many in fact. These people were simply neglecting to avail themselves of those solutions and now want bailed out.
- erulabs 4y ago
  You're missing the important fact that SVB did not have zero assets. The difference between the value of assets on their books and the amount they owed depositors is, AFAIK, not a public number outside of speculation. It might be as small as a 5% split, which they've said will not fall on the taxpayers. The government acting as a backstop and regulator to the banking system is one of the fundamental features of the United States, and was one of the most important decisions the framers made. I'm not trying to defend the fed here, but these words have meaning. Socialism is not just the government taking any action whatsoever. Also, I'm not sure who was begging for the government to save SVB, and I'm loath to defend a straw-crowd, but that doesn't seem a fair characterization of what happened.

Workaccount2 4y ago

The truth is "No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer who doesn't use a bank." Strictly speaking, the loss of the depositors money is being socialized across bank customers.

credit_guy 4y ago
That is not what the word "taxpayers" means. Let's say that somehow the Fed managed to do what they are doing now not by sourcing their funds from banks, but from the top 10 billionaires in this country. Since these 10 guys are also taxpayers, would you decry this as a "taxpayer funded bailout"?
- rhaway84773 4y ago
  It would exactly be a tax funded bailout. Most people would indeed decry it because the people complaining about tax payer funded bailouts would be wondering why we were willing to tax 10 billionaires more money to make whole people with more than $250k, instead of using that money to prevent the discontinuation of a program that say, reduced child poverty by 46% in the US. For the record, I don’t consider this a bailout. Making whole people’s deposits isn’t what I would consider a bailout because I look at a bailout as protecting entities from the negative consequences of bad decisions, whereas I don’t see depositing money in a bank as a bad decision. This is the equivalent of the govt using its vast assets and reputations to make while the victims of Madoff, for example, which without govt intervention would have meant that the fund’s assets were disposed in a fire sale, so the victims get less money than they would have if the govt intervened and provides short term liquidity allowing those assets to be disposed off at a higher market value. But it’s still socialistic, and it strongly indicates the need for government regulation and intervention, because no private entity could do this, and basically undermines strong economic libertarianism.
  - credit_guy 4y ago
    But then why stop there? Let's say that only the equity shareholders lost money. Would you say that the loss was borne by the taxpayers because the shareholders are taxpayers?
favorited 4y ago
> the loss of the depositors money What loss? Their assets were higher than their liabilities.

DubiousPusher 4y ago

The special assessment on banks will be cash-flowed through charging regular people for more financial services. They have their ways, remember "8 is great"? https://www.forbes.com/pictures/fkmm45eegei/eight-is-great/amp/ https://www.forbes.com/pictures/fkmm45eegei/eight-is-great/a...

acchow 4y ago

> "No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer" Technically, this is of course correct. If there are $100 of deposits backed by $100 of bonds which will mature in 5 years, the treasury can of course satisfy all withdrawal demands on that $100 because it has infinite money, and the treasury will with 99% certainty get back all $100 because these are AAA bonds which will almost never default. Unless they do. But regardless, even if they DON'T default, the treasury will be made full and the taxpayer will bear no cost, technically. But this par $100 bond is actually worth $87 today, so the treasury could have actually bought it up on the open markets instead for $87 and pocketed the $13 difference as profit for the taxpayer. That that are foregoing this possible profit is omitted in the quote above... I'm not saying they should do this, I just think that the fed is being a bit abusive with terms here. In any case, buying up distressed assets to provide liquidity is just Quantitative Easing. Which we all know doesn't have any weird secondary or tertiary effects, right?

DubiousPusher 4y ago
The joint statement has made it clear they are not paying for this through FED/Treasury muckery. It will be paid for by a "special assessment" of the FDIC on banks "which is required by law".
- acchow 4y ago
  And what of this BTFP facility? The fed is willing to lend out full par value against high quality assets. Because AAA high quality assets never default and always return full par value, right? How is this not kicking the can down the road? This is like a new almost-QE product. For now, it’s just a collateralized loan. But if there is some system shock and a lot of these high quality bonds start defaulting, you bet your ass the fed will buy up these distressed assets and then we’ll have QE again. I do hope we don’t have such a shock. But they’re like a once in a lifetime event, and we already got one in 2008, so we’re probably fine.
  - DubiousPusher 4y ago
    I didn't dive into this part. Looks like this is their real game for preventing spill-over. My understanding is that the government actually made a lot of money off the toxic assets it bought post 2008. Maybe they can pull off the same trick? I was sceptical that this was indeed systemic before but I'm reassessing that opinion.

rhaway84773 4y ago

Except depositors above $250k did not have depositors insurance. How is the government stepping in to provide insurance for people who didn’t have insurance not socialism? Or put it another way, there was absolutely no capitalistic private market solution to this. VCs weren’t on Twitter demanding Chase to come in and save the SVB depositors. They were asking the government. If this was a simple non socialist, capitalist intervention, how was it that only the government was willing to do it?

DubiousPusher 4y ago
The funny part is that there are free market solutions. Many in fact. These people were simply neglecting to avail themselves of those solutions and now want bailed out.
erulabs 4y ago
You're missing the important fact that SVB did not have zero assets. The difference between the value of assets on their books and the amount they owed depositors is, AFAIK, not a public number outside of speculation. It might be as small as a 5% split, which they've said will not fall on the taxpayers. The government acting as a backstop and regulator to the banking system is one of the fundamental features of the United States, and was one of the most important decisions the framers made. I'm not trying to defend the fed here, but these words have meaning. Socialism is not just the government taking any action whatsoever. Also, I'm not sure who was begging for the government to save SVB, and I'm loath to defend a straw-crowd, but that doesn't seem a fair characterization of what happened.