FormerHangie
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It's not always stupidity, sometimes it's arrogance.
SVB: Biggest bank failure since '08
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It's not always stupidity, sometimes it's arrogance.
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Bob Noel
ah. ok
I've actually never watched that movie... I think that gives me a pretty good excuse for not picking up on the parody.
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The Little Arrow That Could
One of the best movies of all time. Worth watching
tspear
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Timothy
One of the best movies of all time. Worth watching
Ugh. no way. That is like the "unbearable lightness of being" movie that won all sorts of awards. I will never get that time back.
Tim
There's no statement that the FDIC (or any part of the government) is covering beyond the FDIC insurance, just that they think the bank does retain sufficient assets to allow the depositors to withdraw all the funds. It appears that through the liquidation there will be enough to cover the depositors (at least those with insurable accounts) to their full amount on deposit. I'm not sure how this applies to things like money market accounts and the like which have principal risk and aren't controlled by the FDIC.
There's no statement that the FDIC (or any part of the government) is covering beyond the FDIC insurance, just that they think the bank does retain sufficient assets to allow the depositors to withdraw all the funds. It appears that through the liquidation there will be enough to cover the depositors (at least those with insurable accounts) to their full amount on deposit. I'm not sure how this applies to things like money market accounts and the like which have principal risk and aren't controlled by the FDIC.
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3G
One of the best movies of all time. Worth watching
Only if you’re into bank runs.
tspear
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Timothy
Nitpick, Janet Yellen and a few others have expressed being potentially open to helping deposit holders but definitely not anybody else; not creditors or equity.... A summary article: https://www.cnbc.com/2023/03/12/tre...rnment-wont-bail-out-silicon-valley-bank.html
Tim
FormerHangie
En-Route
They are covering the depositors :https://www.axios.com/2023/03/12/silicon-valley-bank-regulators-backstop .
Next time any of these mofos gripe about paying taxes, remember this.
Chip Sylverne
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Quit with the negative waves, man.
Wapo is reporting all deposits will be available Monday.
Can't wait for the details on this deal.
Can't wait for the details on this deal.
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Albany Tom
I think it's greed on one side, and naivete on the other. Corporations aren't your friend. Are they not only useful, in general, but pretty much a requirement of a free market? Yes. But that doesn't make them your friends, any more than a circular saw is.
Read again. That's not what the article says.
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The Little Arrow That Could
Every bank is a special snowflake, each with a special situation, each will receive some package to make sure no one ever loses a dollar.
Go long NASDAQ futures -- now that no one is allowed to fail anymore, no matter how incompetent.
Chip Sylverne
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Quit with the negative waves, man.
Sure there is. You get a huge income tax break on your carried interest income!
FormerHangie
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From the New York Times : "Federal regulators announced on Sunday that another bank had been closed and that the government would ensure that all depositors of Silicon Valley Bank — which failed Friday — would be paid back in full as Washington rushed to keep fallout from the collapse of the large institution from sweeping through the financial system."
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Albany Tom
We seem to be a half step away from the idiot trying to make an airplane out of a bunch of leaf-blowers and lithium batteries from becoming an investment banker so he can self-fund his next goofy project. I want off the merry-go-round.
And if you read the article in detail, you'll see that the funds for doing so is not coming from the FDIC or other federal entity. What they did is intevene in the operation and executive grifting from the bank to make sure it remains solvent for the regular depositors.
FormerHangie
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Yes, I get it that the funds will be coming from the FDIC insurance fund, but every one of us who uses bank services is paying for that fund.
So what constitutes a "regular' depositor? Are you saying that some depositors will be made whole and some won't?
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The Little Arrow That Could
"Regulators announced the action in a joint statement from Treasury Secretary Janet Yellen, Fed Chair Jerome Powell and Federal Deposit Insurance Corp. Chair Martin Gruenberg. The group said that depositors at SVB will have access to all of their money on Monday.
The government’s bank-deposit insurance fund will cover all deposits at the two banks, rather than the standard $250,000. Federal regulators said any losses to the government’s fund would be recovered in a special assessment on banks and that the U.S. taxpayers wouldn’t bear any losses."
This last point about US taxpayers not bearing any losses is a bogus claim. It's just 1 level removed from us. When levies are placed on banks, banks increase costs to customers. They're not in the business of taking lower profits voluntarily.
The practical interpretation of today's events is that the FDIC deposit limit of $250k is now a meaningless number. You are insured for however much you put in at any FDIC-approved institution. So go find the shadiest bank in your area that's handing out 38473894785% interest for a savings account, don't ask any questions about how they generate that level of interest, and when it goes bust you'll be made full by the American tax payer... err.. I mean by "special assessments on banks".
tspear
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Timothy
Yes and no. If the bank assessment is a one time deal (last one I recall was in early 2000s), which had been the more common method from what I have read previously, then banks tend to take a hit on short term profits and do not attempt to upset the existing business model. If it is a general raise of the insurance rate (which occurred after the 2008 implosion), then banks spend a few years figuring out how to recover the reduced profit margin by capturing the revenue somewhere else; in the past thirty-forty years this was often account related fees until the CFPB put an end to the practice. Now, based on what I see in filings, banks make up a lot of the costs now in loan origination.
Tim
Chip Sylverne
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Quit with the negative waves, man.
Market likes the plan. Dow, S&P and NASDAQ Sunday night futures are way up.
dmspilot
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It's too late for that, FDIC is already on the hook, that's why it exists. As far as covering beyond the normal limit, well, there is a reason for that. Allowing panic to spread and risking runs on more banks would likely cost FDIC a lot more than covering just SVB's depositors.
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Albany Tom
We should have mandated that all TV news people wear red safety noses 30 years ago, so that people would know they're clueless, to reduce this risk.
jesse
Touchdown! Greaser!
Understand the reasons folks may not be happy about this, but I am glad they sorted this out. I would have been unemployed tomorrow had this not been resolved. Worse yet, I'd have had to tell a bunch of other people they were out of their job too.
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The Little Arrow That Could
I am pleased to hear that you will not be unemployed on account of bad bank management that you likely had little to do with.
... I would add that I hope the CFO learned their lesson and will now be prudent about not keeping vital cash in poorly run institutions, but if the CFO did just learn a lesson this weekend it's that they can keep that money in the worst institutions forever without risk. That's where the anger stems from, not at the people on payroll far divorced from the financial decision making.
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3G
I wonder how much depositor money is really in NDIPs that will get covered, too.
I am pleased to hear that you will not be unemployed on account of bad bank management that you likely had little to do with.
... I would add that I hope the CFO learned their lesson and will now be prudent about not keeping vital cash in poorly run institutions, but if the CFO did just learn a lesson this weekend it's that they can keep that money in the worst institutions forever without risk. That's where the anger stems from, not at the people on payroll far divorced from the financial decision making.
There are times when insisting on punishing those we deem to be guilty can amount to cutting off our nose to spite our face.
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Albany Tom
I don't want to see anyone lose their jobs, and to me this isn't about either anger or punishment. Having the government shore up poor businesses isn't sustainable, as I see it.
We're rewarding the incompetent with this one. It's going to encourage the greedy to push harder and faster. Then more will fail. Then we might nationalize the banks. This isn't a good direction.
We're rewarding the incompetent with this one. It's going to encourage the greedy to push harder and faster. Then more will fail. Then we might nationalize the banks. This isn't a good direction.
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3G
Counterpoint: Gross incompetence should be grossly inconsequential.
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The Little Arrow That Could
Ehh... Unlike Silvergate, SVB execs didn't do anything illegal, life will go on for them. If they did do something illegal it's not obvious. They just made terrible risk management and investing decisions.
Incompetence isn't a crime, it's just a disaster when it is allowed to grow to this scale and when people who support it end up facing no (financial) consequences for their participation.
EDIT: My guess is the SVB execs get dragged in front of congress where senators will light them up with questions and accusations and try to play the role of the shocked, appalled moral conscience of the country. After the cameras are off they'll leave DC and go back to their life of private jet travel and hob-nobbing with VC billionaires. Give it a few year and all their well connected managers will be on the boards of name brand companies or high profile startups.
dmspilot
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You are saying that anyone who deposited money at SVB is an incompetent person running a poor business? Were they supposed to keep their money under their mattresses?
Who is being rewarded? Who is being greedy? I am pretty confused about what point you're trying to make. Seems like you are just looking for excuses to get upset.
Read an article this morning. Basically saying the sucking sound tomorrow morning will be all the depositors with more then $250,000.00 with drawing funds from banks every where.
This in turn will cause a bank run all across the country.
My question is where are they going to stash the money ?
Would seem some banks may benefit by being a receptor of funds with drawn from other banks.
Perhaps just a redistribution of funds all across the country ?
This in turn will cause a bank run all across the country.
My question is where are they going to stash the money ?
Would seem some banks may benefit by being a receptor of funds with drawn from other banks.
Perhaps just a redistribution of funds all across the country ?
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Albany Tom
I'm not upset. And nope, not anyone that deposited money at SVB is incompetent. But anyone that deposited money in excess of the FDIC limits did so either miscalculating the risk, ignoring it, or figuring that the feds would bail them out. Most likely one of the first two.
The reward is to the bank, and to the depositors that extended beyond the stated protections, that should be pretty clear.
The mission of FDIC isn't to protect all the banks, or at least is wasn't before.
What I don't understand is how anyone can think this is either sustainable or safe to do. You can't keep an economy propped up by defending bad business practices, that's kind of a cornerstone of a free market.
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Albany Tom
I'm not sure how that would work. Along the lines of, there's not an ability to drive up in an armored car and ask for big stacks of bills or bars of precious metals. They have to move it to somewhere. Now, could it mean that some investors are going to re-prioritize investments from somewhat shaky to less shaky? Sure...but I don't see that as a bad thing. If this whole thing leads to a better grasp on risk in the financial community, it's probably a good thing. I don't see it as a sky is falling event, either way, but one that has the potential to set a lousy precedent.
dmspilot
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The bank is going to cease to exist. How is it being rewarded? You're not being clear at all.
Nope, the goal of the FDIC is to maintain trust in the banking system and prevent bank runs. And not taking action with respect to SVB will do exactly the opposite. You could say the FDIC already failed to fulfill its purpose by virtue of the fact that a run on the bank already happened. Perhaps it needs to be re-tuned.
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The Little Arrow That Could
This is exactly the problem I see.
I couldn't resist the urge to whip together a crappy graphic in paintshop. Here's my depiction of what just happened with today's announcement... These 2 banks just became 100% equal in the eyes of the customer. Because why wouldn't they? Now when you're considering financial or counterparty risk you can just shrug it off and say "no probs breh, JPOW and Yellen have got us covered". It's insanity.
jesse
Touchdown! Greaser!
I am pleased to hear that you will not be unemployed on account of bad bank management that you likely had little to do with.
... I would add that I hope the CFO learned their lesson and will now be prudent about not keeping vital cash in poorly run institutions, but if the CFO did just learn a lesson this weekend it's that they can keep that money in the worst institutions forever without risk. That's where the anger stems from, not at the people on payroll far divorced from the financial decision making.
This had nothing to do with SVB interest rates, interest above 250K is 1.5%-ish with them. This had nothing to do with SVB writing poor loans. Instead, this had everything to do with SVB trying to manage wall street. They went to wall street consultants to get a plan that they thought would land with wall street investors.
For some reason, nobody thought about how that plan would land with their depositors. Turns out, it scared them, and they moved faster than the bank could.
dmspilot
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Well, you are right, they are equal because they are both fractional reserve banks, and both members of the Federal Reserve System. A run could happen on literally any bank, even the top one in your infographic. It doesn't matter how well managed it is. And I'm assuming you're trying to characterize SVB as a risky poorly run bank but it was not, at least not to that extent. They needed a couple billion in capital and partly thanks to social media a mass panic ensued resulting in almost every depositor trying to pull their collective hundreds of billions simultaneously.
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