7 ms·

It isn't really the same bank nor the same CEO

Alupis 4y ago
The result is the same. SVB has infinity insurance on all deposits, provided courtesy of the tax payer. This is a naked attempt to pump the value of SVB assets, and seek a less-than-fire-sale to another institution.
- sroussey 4y ago
  Don’t all banks have that right now?
  - Alupis 4y ago
    No, only SVB and Signature enjoy infinity insurance. Everyone else that played by the rules gets a measly $250k max...
    - fisherjeff 4y ago
      https://www.federalreserve.gov/monetarypolicy/bank-term-funding-program.htm https://www.federalreserve.gov/monetarypolicy/bank-term-fund...
      - Alupis 4y ago
        That's a loan, not insurance. Not the same thing, and a bank in SVB's situation last week would not be able to pay back a loan anyway.
    - easton 4y ago
      In writing yes, but the FDIC always makes depositors whole somehow. Otherwise the banking system would collapse. If some bizarre scenario were to happen (a failure of two of the big four) which the FDIC couldn’t recover, in the words of Dwight Schrute, “you’ve all been dead for weeks”.
      - Alupis 4y ago
        > the FDIC always makes depositors whole somehow. Otherwise the banking system would collapse. When was the last time any of this happened?
      - dragonwriter 4y ago
        > but the FDIC always makes depositors whole somehow. This lie keeps getting repeated, but while it usually manages to do that (by facilitating a buyout, often before or over a business day – sometimes longer in calendar time because of a weekend – when the bank is closed), it doesn’t always, even when it facilitates a buyout rather than being forced to create a takeover bank. When it does takeover without facilitating a buyout, it never protects uninsured deposits without invoking the systemic risk exemption. > Otherwise the banking system would collapse. Well it does where the banking system would collapse, that’s literally the point of the systemic risk exception.
    - dragonwriter 4y ago
      > No, only SVB and Signature enjoy infinity insurance. No, only the balances of SVB and Signature at the time of the failure of the former banks have that. There’s no prospective guarantee inheritable by an acquirer. (Admittedly, any bank that could reasonably bid for them, especially for SVB, would probably independently qualify for the systemic risk exception itself if it suddenly failed, but also any bank that could reasonably bid wouldn’t be in any near term risk of that, either.)
      - Alupis 4y ago
        SVB may be called something different today, and probably something different in the near future, but we all know what we're talking about here. Like I said downstream - if my bank fails next year (or 10 years from now) and I do not get infinite deposit insurance - then where are we? Just the well connected get special treatment? Seems so...
        dragonwriter 4y ago
        > Like I said downstream - if my bank fails next year (or 10 years from now) and I do not get infinite deposit insurance - then where are we? In the exact same place we’ve been for the last 15 years (much longer, really, because the last crisis wasn’t the start of this, either), between the time the systemic risk exception was announced for three large banks, and all the bank failures in between where it was not invoked. A place where the FDIC guarantees $250K per depositor per ownership category per bank but tries to facilitate takeovers that protect uninsured balances and where, with the Treasury and President, might protect something more, if the conditions for the systemic risk exception are determined to apply. The systemic risk exception has existed since at least 1950, was invoked as far back as 1980, and was easier to invoke (the FDIC could do it on its own) prior to 1991. It was also less necessary prior to 1991, since the FDIC could facilitate a sale even when doing so was more expensive than a payout of only the insured accounts until the least cost rule was put into the law in 1991, and in fact, since the 1960s, the general policy was to, where possible, facilitate a buyout by another bank to protect all depositors even when the cost to the Deposit Insurance Fund was greater than a payout of insured balances. The arguments about the use of full-protection via the systemic risk exception for SVB fundamentally changing things is just, completely, historically ignorant.
  - tenpies 4y ago
    On paper, only SVB. In practice, we just saw that the US government will gladly retroactively change the rules to insure any amount of money. For all practical purposes, trillions of dollars in deposits became insured by US tax payers this week. And that's on top of the totally-not-QE BTFP facility they conjured up. That is available to all insured banks who have any underwater asset that they wish to move to the Fed's balance sheet at par for a mere ~5% per year.
    - jacooper 4y ago
      > For all practical purposes, trillions of dollars in deposits became insured by US tax payers this week. By the FDIC, not the tax payer.
      - TMWNN 4y ago
        Said insurance is paid for by bank customers. The union of bank customers and taxpayers is 1.
  - dragonwriter 4y ago
    No, though all banks now have protection against the HTM assets fire-sale conditions which caused SVB to fail, which, from the perspective of stockholders, executives, and non-depositor creditors is a lot better than infinite deposit insurance, because its a lot stronger protection against failure (which wipes out those three groups), even if its not a stronger protection for depositors if failure happens anyway.
- tedajax 4y ago
  All of the funds are provided from a fund the banks pay into. There is no taxpayer money supporting the depositors.
  - Alupis 4y ago
    This is the biggest lie you will ever read (not you specifically, but this pitch). The funds will be recovered from special bank assessments, which means you and I will pay to bail out SVB and Signature via increased bank fees and more over the next decade. Not to mention the FDIC is guaranteeing depositors will be made 100% whole, which means again, you and I are guaranteeing the deposits if this special bank assessment comes up short or falls through. So no, taxpayer money is not directly used - that part is true. But it is patently false that taxpayers will not be paying to bail these banks out. It's a giant political game being played... avoid the look of a recession no matter what. Don't even speak the dreaded "B" word...
    - rhaway84773 4y ago
      The depositors will be paid back by their own money. The money hasn’t disappeared anywhere. It still exists, and the bank will still make a profit as the MBSes it paid into will continue returning money to the bank. It will simply make a profit that’s less than what it could have made with the same shareholder equity with way less risk in other investments. Which is why shareholders got wiped out. This was a classic bank run. A combination of the concentration of depositors from a single industry, massive swings in the monetary flow of that industry, poor investment decision making, and having regulations loosened on it meant that SVB saw far too many short term depositors call for their money and had too much of that money tied up in long term investments. The government has the liquidity and the reputation that is needed to prevent this from becoming a problem. The cost that is being borne by the taxpayers is the cost of people depositing money in smaller industry focused banks, which have greater risk, and lower efficiency. If you really wanted to eliminate the cost, the solution would be to have everyone deposit their money in a handful of Too big to fail banks, which would almost certainly be cheaper and more efficient, but is also a bad economic system because of the political power those entities gain.

The result is the same. SVB has infinity insurance on all deposits, provided courtesy of the tax payer. This is a naked attempt to pump the value of SVB assets, and seek a less-than-fire-sale to another institution.

sroussey 4y ago
Don’t all banks have that right now?
- Alupis 4y ago
  No, only SVB and Signature enjoy infinity insurance. Everyone else that played by the rules gets a measly $250k max...
  - fisherjeff 4y ago
    https://www.federalreserve.gov/monetarypolicy/bank-term-funding-program.htm https://www.federalreserve.gov/monetarypolicy/bank-term-fund...
    - Alupis 4y ago
      That's a loan, not insurance. Not the same thing, and a bank in SVB's situation last week would not be able to pay back a loan anyway.
  - easton 4y ago
    In writing yes, but the FDIC always makes depositors whole somehow. Otherwise the banking system would collapse. If some bizarre scenario were to happen (a failure of two of the big four) which the FDIC couldn’t recover, in the words of Dwight Schrute, “you’ve all been dead for weeks”.
    - Alupis 4y ago
      > the FDIC always makes depositors whole somehow. Otherwise the banking system would collapse. When was the last time any of this happened?
    - dragonwriter 4y ago
      > but the FDIC always makes depositors whole somehow. This lie keeps getting repeated, but while it usually manages to do that (by facilitating a buyout, often before or over a business day – sometimes longer in calendar time because of a weekend – when the bank is closed), it doesn’t always, even when it facilitates a buyout rather than being forced to create a takeover bank. When it does takeover without facilitating a buyout, it never protects uninsured deposits without invoking the systemic risk exemption. > Otherwise the banking system would collapse. Well it does where the banking system would collapse, that’s literally the point of the systemic risk exception.
  - dragonwriter 4y ago
    > No, only SVB and Signature enjoy infinity insurance. No, only the balances of SVB and Signature at the time of the failure of the former banks have that. There’s no prospective guarantee inheritable by an acquirer. (Admittedly, any bank that could reasonably bid for them, especially for SVB, would probably independently qualify for the systemic risk exception itself if it suddenly failed, but also any bank that could reasonably bid wouldn’t be in any near term risk of that, either.)
    - Alupis 4y ago
      SVB may be called something different today, and probably something different in the near future, but we all know what we're talking about here. Like I said downstream - if my bank fails next year (or 10 years from now) and I do not get infinite deposit insurance - then where are we? Just the well connected get special treatment? Seems so...
      - dragonwriter 4y ago
        > Like I said downstream - if my bank fails next year (or 10 years from now) and I do not get infinite deposit insurance - then where are we? In the exact same place we’ve been for the last 15 years (much longer, really, because the last crisis wasn’t the start of this, either), between the time the systemic risk exception was announced for three large banks, and all the bank failures in between where it was not invoked. A place where the FDIC guarantees $250K per depositor per ownership category per bank but tries to facilitate takeovers that protect uninsured balances and where, with the Treasury and President, might protect something more, if the conditions for the systemic risk exception are determined to apply. The systemic risk exception has existed since at least 1950, was invoked as far back as 1980, and was easier to invoke (the FDIC could do it on its own) prior to 1991. It was also less necessary prior to 1991, since the FDIC could facilitate a sale even when doing so was more expensive than a payout of only the insured accounts until the least cost rule was put into the law in 1991, and in fact, since the 1960s, the general policy was to, where possible, facilitate a buyout by another bank to protect all depositors even when the cost to the Deposit Insurance Fund was greater than a payout of insured balances. The arguments about the use of full-protection via the systemic risk exception for SVB fundamentally changing things is just, completely, historically ignorant.
- tenpies 4y ago
  On paper, only SVB. In practice, we just saw that the US government will gladly retroactively change the rules to insure any amount of money. For all practical purposes, trillions of dollars in deposits became insured by US tax payers this week. And that's on top of the totally-not-QE BTFP facility they conjured up. That is available to all insured banks who have any underwater asset that they wish to move to the Fed's balance sheet at par for a mere ~5% per year.
  - jacooper 4y ago
    > For all practical purposes, trillions of dollars in deposits became insured by US tax payers this week. By the FDIC, not the tax payer.
    - TMWNN 4y ago
      Said insurance is paid for by bank customers. The union of bank customers and taxpayers is 1.
- dragonwriter 4y ago
  No, though all banks now have protection against the HTM assets fire-sale conditions which caused SVB to fail, which, from the perspective of stockholders, executives, and non-depositor creditors is a lot better than infinite deposit insurance, because its a lot stronger protection against failure (which wipes out those three groups), even if its not a stronger protection for depositors if failure happens anyway.
tedajax 4y ago
All of the funds are provided from a fund the banks pay into. There is no taxpayer money supporting the depositors.
- Alupis 4y ago
  This is the biggest lie you will ever read (not you specifically, but this pitch). The funds will be recovered from special bank assessments, which means you and I will pay to bail out SVB and Signature via increased bank fees and more over the next decade. Not to mention the FDIC is guaranteeing depositors will be made 100% whole, which means again, you and I are guaranteeing the deposits if this special bank assessment comes up short or falls through. So no, taxpayer money is not directly used - that part is true. But it is patently false that taxpayers will not be paying to bail these banks out. It's a giant political game being played... avoid the look of a recession no matter what. Don't even speak the dreaded "B" word...
  - rhaway84773 4y ago
    The depositors will be paid back by their own money. The money hasn’t disappeared anywhere. It still exists, and the bank will still make a profit as the MBSes it paid into will continue returning money to the bank. It will simply make a profit that’s less than what it could have made with the same shareholder equity with way less risk in other investments. Which is why shareholders got wiped out. This was a classic bank run. A combination of the concentration of depositors from a single industry, massive swings in the monetary flow of that industry, poor investment decision making, and having regulations loosened on it meant that SVB saw far too many short term depositors call for their money and had too much of that money tied up in long term investments. The government has the liquidity and the reputation that is needed to prevent this from becoming a problem. The cost that is being borne by the taxpayers is the cost of people depositing money in smaller industry focused banks, which have greater risk, and lower efficiency. If you really wanted to eliminate the cost, the solution would be to have everyone deposit their money in a handful of Too big to fail banks, which would almost certainly be cheaper and more efficient, but is also a bad economic system because of the political power those entities gain.