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The useful thing we learned from the 2008 crisis is that the state will actually save big institutions because it is not willing to risk civil unrest. This was
by weinzierl 4y ago
The useful thing we learned from the 2008 crisis is that the state will actually save big institutions because it is not willing to risk civil unrest. This was not sure before 2008, many assumed big banks can go under.
Now with that knowledge there is little incentive for banks to
play it safe and a bailout every couple of years is to the benefit of everyone except the taxpayer and a few unlucky scapegoats.
Of course this is not sustainable either and maybe this time or next time what we learned 2008 will prove untrue...
- JumpCrisscross 4y ago> a few unlucky scapegoats By which you mean the shareholders and lenders. Out of all possible evils, this is probably the best.
- weinzierl 4y agoDid the shareholders really suffer in 2008? Honest question, no snark. Sure, the SVB shareholders will suffer but this is different from the 2008 bailouts.
- JumpCrisscross 4y ago> Did the shareholders really suffer in 2008 Some did, most didn’t. That was the gripe. That’s why we’re doing it differently this time.
- d_burfoot 4y ago> everyone except the taxpayer and a few unlucky scapegoats Something I did not realize until recently, which I think is very important here, is that the FDIC is not funded by taxpayers. It is funded by fees levied against the banks themselves. https://en.wikipedia.org/wiki/Federal_Deposit_Insurance_Corporation https://en.wikipedia.org/wiki/Federal_Deposit_Insurance_Corp...
- hnthrowaway0328 4y agoYou are looking from the perspective of accountants. Now we can also say that everything is created by the taxpayers.
- VLM 4y agoThe group of people who are unbanked (not funding a bank that funds the FDIC) and only interacting with other unbanked people and but are paying taxes must be rather small. Its the same failure mode regardless if played via everyone paying taxes or everyone paying FDIC, privatize the gains and socialize the losses until collapse.
- mlevy 4y agoI think what you're describing is insurance, not taxes. I'm sure almost all auto insurance is paid by taxpayers, too, but I wouldn't call auto insurance a tax
- deleted 4y ago[deleted]
- notdonspaulding 4y ago> Its the same failure mode regardless if played via everyone paying taxes or everyone paying FDIC... But if everyone is paying FDIC via fees levied against private banks, then the POTUS and Yellen and everyone else can release a statement saying "no taxpayer funds will be used to bail out SVB". That way everyone can breathe an ironic sigh of relief: "Oh good, I was worried I was going to have to foot the tax bill for that. It's bad enough I have to pay all these greedy capitalists at my local bank a new fee every other week, at least the government is looking out for the little guy!"
- temp12192021 4y ago> It is funded by fees levied against the banks themselves. I'm sure that's not passed onto the customers at all.
- paganel 4y ago> save big institutions because it is not willing to risk civil unrest On the other hand effective control of the media (including the web) is much tighter now compared to the late 2000s - early 2010s, I personally cannot see a Occupy Wall Street-like movement happening again in the States.
- HDThoreaun 4y ago> there is little incentive for banks to play it safe Except SVB and signature shareholders lost all their money and most of the employees will be fired...
- nerdponx 4y agoThis might not be strong enough negative downside to discourage future gambling.
- hibikir 4y agoThe first few banks to fail did have some consequences on those responsible, but all the actions to make deposits whole are, in practice, making it it far harder for the next layer of unsafe banks from getting wiped out. Imagine that the Fed guarantee for SVB had been put forward two weeks before it was. Would SVB shareholders and managers had received the same level of consequences? Any consequences at all? I am not sure of how big the difference would have been, but I would be surprised if it wasn't significant.
- HDThoreaun 4y ago> Imagine that the Fed guarantee for SVB had been put forward two weeks before it was. The fed guarantee is only for banks that are solvent. Banks that are insolvent have been put in receivership. In fact, the fed didn't guarantee SVB anything, they guaranteed that deposits at National Bank of Santa Clara, the successor to SVB, are safe.
- spaceman_2020 4y agoAll the execs minted fortunes as the market rewarded SVB's risk-taking strategies with spectacular stock growth. The stock 15xd in a decade.