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$13B of the Silicon Valley Bank bailout went to 10 accounts
- oriettaxx 4y ago"Gruenberg also revealed that $13.3 billion of the $18 billion allocated to protect Silicon Valley Bank, or nearly 74% of the funds used to assist the customers, were used to back deposits for a mere 10 accounts. " 74% !?!? to 10 accounts? holy cow! such a large proportion of the funds used to protect such a small number of accounts? some are really more equal then others :(
- yieldcrv 4y agoWhat do you mean? They insured all deposits, equally. Yes, the amount of money in the hands of a few is that extreme
- oriettaxx 4y agoyes, equally but some are more equal :) take is as a joke
- yieldcrv 4y agocan you explain the joke? Is it funny because it is a reference at all, or is there comedy on its own merit with some associated insight
- lsllc 4y agoParaphrasing George Orwell (from Animal Farm): All Men are Created Equal, But Some are More Equal Than Others From this article [0]: ... by the end of Orwell’s book, the Seven Commandments had disappeared from the wall, replaced by one lone Commandment: All Animals are Equal But Some Animals are More Equal Than Others In Animal Farm, the animals who, in the end, defined themselves as “more equal than others” were the pigs — the same animals who had instigated and led the revolution. [0] https://pagosadailypost.com/2021/08/18/ready-fire-aim-all-men-are-created-equal-but-some-are-more-equal-than-others/ https://pagosadailypost.com/2021/08/18/ready-fire-aim-all-me...
- yieldcrv 4y agoSo its the former, its funny because it’s a reference at all? I’m quite aware it is a reference from Animal Farm, I didn't see how it was related and was wondering if there was more, or if the joke was funny aside from “unexpected orwell” Is there a special privilege conveyed to the 10 large accounts over every other depositor that had more than $250k on account?
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- lsllc 4y agoI think the implication is that anyone with an account so large it takes up the lions share of $13B probably has enough influence to make this sort of bailout happen: "Gee [senator|congressperson|etc], my donation to your re-election campaign was in that SVB account, would be a shame if I lost it".
- mrguyorama 4y agoOr maybe american politicians have a long history of being buddy buddy with big money Capitalists, which most of SVB's clientele was, and had no qualms with throwing a few billions towards fixing a very local problem with the side benefit of helping their friends and another background benefit of reassuring whales to not pull out of other smaller banks. Letting the whales die would have meant every other whale in every other bank would suddenly feel the need to inspect balance sheets or be whiny or just run. The entire reason SVB failed was poor management on their part, and poor risk hedging, but that's not a systemic problem. However, making every big cash holder suddenly worried they aren't as safe as they expected could be a mild systemic problem.
- vineyardmike 4y ago> Is there a special privilege conveyed to the 10 large accounts over every other depositor that had more than $250k on account? Yes the special privilege was a lot of money. Everyone was not treated equally by being bade whole, even though they were treated equitably.
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- TigerTeamX 4y agoSome animals are more equal than others
- op00to 4y agoIn this case, all animals were made whole.
- deleted 4y ago[deleted]
- rcme 4y agoThe math here seems disingenuous. There were 10 accounts with 13B in uninsured deposits. The FDIC used 18B to back the entire deposits of the bank. That doesn't mean 13B / 18B went to those 10 accounts. A better way of thinking about it would be something like: SVB had 170B (random estimate) in uninsured deposits. 13B of the uninsured deposits were from 10 accounts. So (13B / 170B) * 18B = 1.3B went to those 10 accounts.
- JumpCrisscross 4y ago> SVB had 170B (random estimate) in uninsured deposits $56bn [1]. So about 23% of the emergency insured deposits were held by 10 accounts. If we stuck to the law, that would have been $2.5mm (0.005%). So 10 accounts got a 5,200x courtesy boost in their backing by the full faith and credit by the United States. [1] https://www.bloomberg.com/news/articles/2023-03-27/first-citizens-to-buy-silicon-valley-bank-after-run-on-lender https://www.bloomberg.com/news/articles/2023-03-27/first-cit...
- rcme 4y agoHmm this lists SVB's total assets at 209B: https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/svb-signature-racked-up-some-high-rates-of-uninsured-deposits-74747639 https://www.spglobal.com/marketintelligence/en/news-insights...
- JumpCrisscross 4y agoAs of 31 December 2022. The FDIC didn't bail out deposits that fled before receivership.
- rcme 4y agoGood point, although this is also included in your link: > This leaves about $90 billion in securities and other SVB assets in the hands of the FDIC, and an estimated cost of the failure to the Deposit Insurance Fund of about $20 billion. So the real number is 50 + 90 = 140.
- WhereIsTheTruth 4y agoWell, spring started 10 days ago, time for a good cleanup!
- boringuser2 4y agoI'm not sure why this was necessary. If you bet big and lose, of course you should hold the bag.
- mindslight 4y agoThat the bureaucracy can't avoid bailing out large connected depositors is precisely why the scope of FDIC coverage should be increased to all bank accounts, with a graduated rate of assessment due to the increased variance caused by large sums. "Just say no" is as impractical here as it is elsewhere.
- tinglymintyfrsh 4y agoFDIC thresholds are de facto meaningless and expose litigation risks for selective non-coverage. Is there any downside to FDIC expanding policy to state "All deposits are covered, regardless of amount"? This is effectively already happening AND would contribute value-add safety and security to US banks. It would also create a level playing field for them, regardless of size, to have an opportunity to service customers they may not be backstopped to handle without outside investment or additional customers. Perhaps the only downsides would be stress tests and audits would need to ensure proper investments and diversification of products to avoid the risks of becoming a dangerously-narrow boutique bank.
- dragonwriter 4y ago> FDIC thresholds are de facto meaningless and expose litigation risks for selective non-coverage. The first of these claims is false, the second is true only in the trivial sense that anyone can sue for any reason however baseless and even a completely baseless claim has some cost, and the existence of the limit may make people upset enough to file a baseless suit. > Is there any downside to changing the policy to state “All deposits are covered, regardless of amount”. Presumably Congress felt there was both when introducing the FDIC Act and again when revising it in 1991 to restrict the conditions in which the FDIC could cover deposits beyond the insured amount. > This is effectively already happening No, its not. The invocation of the systemic risk exception in limited cases is not the same thing, "effectively", as a general extension of FDIC insurance to all balances without limits. > AND would contribute value-add safety and security to US bank. It would also create a level playing field for US banks, regardless of size, to have the opportunity to service customers of any size. This contradicts what precedes it; if it was effectively already happening, doing it officially would change nothing of substance.