2 ms·

People are angry because bank executives and shareholders ate all the losses, and the depositors were rescued at no net cost to the taxpayer? What would make t

by vkou 4y ago

People are angry because bank executives and shareholders ate all the losses, and the depositors were rescued at no net cost to the taxpayer? What would make those people happy, exactly, and why should anyone care about their happiness? I rather like living in a world where from the perspective of the end user, my money doesn't disappear because some moron five steps removed from me decided to YOLO the bank on 10-year treasuries. I also, for similar reasons, like living in a world where I don't need to personally test all my produce for e.coli contamination, or my food coloring for cadmium.

ghiculescu 4y ago
They are, because the rules changed. Your metaphor isn’t very good but you’d be upset if someone was found to be circumventing food safety rules and poisoning food, and the government changed the rules to avoid them going out of business.
- vkou 4y ago
  The government put them out of business for poisoning my food. That's exactly what happened to SVB and Signature. They are gone. Dead. Wiped out. Seized. All the people responsible for mismanaging those banks are now broke. [1][2] And made me, the depositors, the people impacted by that bad behaviour whole. Again, what exactly is the problem, here? Which bad outcomes have the changes to the rules produced? [1] Well, the C-suite isn't, but they are all going to be sued by the investors that lost money due to their bad management. [2] Once the FDIC finishes picking through their carcass, if there's any value left (Possible for Silvergate), those groups might get pennies on the dollar.
  - ghiculescu 4y ago
    Time will tell. I suspect banks will be more reckless because of this. There’s less incentive to protect deposits if they are all guaranteed, and more incentive to make risky bets. But it’s also a principled point. If you believe that rules don’t matter as long as you like the outcome, that’s a bad way to run a society.
    - vkou 4y ago
      > I suspect banks will be more reckless because of this. Could you outline under what mechanism other banks will look at what happened to Signature and SVB, and conclude that they should engage in behavior that's likely to get them seized, and their equity zeroed out? > If you believe that rules don’t matter as long as you like the outcome, that’s a bad way to run a society. There was no rule that capped recoupable deposits at $250,000. There was simply a rule that guaranteed them up to $250,000. Also, if your rules result in puppies being regularly pushed into the puppy-shredder, and depositors routinely losing their money through no fault of their own, that's also a bad way to run a society. You know what's a good way to run a society? Retail banks being a boring, dumb, stable, reliable service.
    - Rapzid 4y ago
      > If you believe that rules don’t matter as long as you like the outcome, that’s a bad way to run a society. What rules were broken? Tell us, what are the rules the FDIC operate under?

by vkou 4y ago

ghiculescu 4y ago

They are, because the rules changed. Your metaphor isn’t very good but you’d be upset if someone was found to be circumventing food safety rules and poisoning food, and the government changed the rules to avoid them going out of business.

vkou 4y ago
The government put them out of business for poisoning my food. That's exactly what happened to SVB and Signature. They are gone. Dead. Wiped out. Seized. All the people responsible for mismanaging those banks are now broke. [1][2] And made me, the depositors, the people impacted by that bad behaviour whole. Again, what exactly is the problem, here? Which bad outcomes have the changes to the rules produced? [1] Well, the C-suite isn't, but they are all going to be sued by the investors that lost money due to their bad management. [2] Once the FDIC finishes picking through their carcass, if there's any value left (Possible for Silvergate), those groups might get pennies on the dollar.
- ghiculescu 4y ago
  Time will tell. I suspect banks will be more reckless because of this. There’s less incentive to protect deposits if they are all guaranteed, and more incentive to make risky bets. But it’s also a principled point. If you believe that rules don’t matter as long as you like the outcome, that’s a bad way to run a society.
  - vkou 4y ago
    > I suspect banks will be more reckless because of this. Could you outline under what mechanism other banks will look at what happened to Signature and SVB, and conclude that they should engage in behavior that's likely to get them seized, and their equity zeroed out? > If you believe that rules don’t matter as long as you like the outcome, that’s a bad way to run a society. There was no rule that capped recoupable deposits at $250,000. There was simply a rule that guaranteed them up to $250,000. Also, if your rules result in puppies being regularly pushed into the puppy-shredder, and depositors routinely losing their money through no fault of their own, that's also a bad way to run a society. You know what's a good way to run a society? Retail banks being a boring, dumb, stable, reliable service.
  - Rapzid 4y ago
    > If you believe that rules don’t matter as long as you like the outcome, that’s a bad way to run a society. What rules were broken? Tell us, what are the rules the FDIC operate under?