Silicon Valley Bank shutttered, moved to FDIC receivership

[spurraider21]

small businesses my ass, they're protecting stupid rich people with uninsured deposits.

https://www.nbcnews.com/news/us-news...ates-rcna74642

or preventing a runaway panic that could creep to other banks. bank runs arent good for any bank. its the nature of how they work. borrow money short, lend it long.

granted, SBV was particularly susceptible to a run because a huge amount of their $ came from a (relatively) small amount of account holders, so it didnt take much for an essentially coordinated bank run to topple it. other big banks have a vast vast majority of account holders having small amounts of money in their account, and its pretty tough for a comparable bank run to happen there

its not like SBV is being bailed out. that bank is still being torn apart. their shareholders are out. employees are out. 2008 bailed out banks in a manner where the morons in charge of those banks kept their jobs, positions, bonuses, etc. bailing out depositors =/= bailing out the bank

[spurraider21]

not to say safeguards shouldnt be added to mitigate the risk of this happening going forward. i dont think a de facto unlimited FDIC coverage is the solution going forward. but i also dont think its creating a moral hazard. usually you dont blame the account holders for a bank collapse, you blame the bank.

now in this case there was some going on with Thiel first advising that people start pulling funds from SBV, then apparently a lot of the big wigs had a group message ongoing where they all talked about getting out of SVB basically all at once

[boutons_deux]

The feds don't make those decisions.


Profit center managers and now AI algorithms make those denial of care decisions in Medicare advantage insurers.

[Winehole23]

or preventing a runaway panic that could creep to other banks. bank runs arent good for any bank. its the nature of how they work. borrow money short, lend it long.

granted, SBV was particularly susceptible to a run because a huge amount of their $ came from a (relatively) small amount of account holders, so it didnt take much for an essentially coordinated bank run to topple it. other big banks have a vast vast majority of account holders having small amounts of money in their account, and its pretty tough for a comparable bank run to happen there

its not like SBV is being bailed out. that bank is still being torn apart. their shareholders are out. employees are out. 2008 bailed out banks in a manner where the morons in charge of those banks kept their jobs, positions, bonuses, etc. bailing out depositors =/= bailing out the bank

Moderately agree and disagree.

"It would have been Armageddon if we didn't backstop banks" was a more plausible excuse in 2008, tbh. In effect FDIC has protected unwary depositors and tech startups bound contractually to keep their money at SVB. Implicitly it now backstops all bank deposits, and who knows where that ends. If the total bail in exceeds $100 billion, you can be sure whatever costs imposed by the FDIC on the banks will be passed on to customers. IMHO the rumor of contagion was overhyped, but we'll see what shakes out.

Letting banks borrow against illiquid assets at par value at near zero rates may not cost the taxpayer anything, but it's a bailout. Ridiculous arbitrage and horrible risk management.

[FrostKing]

Silicon Valley Bank, which collapsed on Friday after a classic bank run, donated more than $73 million to groups related to the Black Lives Matter movement, online records show.

A report from August 2020 highlighted the fact that around two-thirds of the bank’s workforce met the "diversity" criteria.

[boutons_deux]

This is getting stupid. At least try reinstating a semblance of Dodd-Frank since we decided smaller banks can destroy the economy.

Pass Glass-Steagal

re-implement Dodd-Frank for all banks

regulate private banks like public banks

[Winehole23]

Moderately agree and disagree.

"It would have been Armageddon if we didn't backstop banks" was a more plausible excuse in 2008, tbh. In effect FDIC has protected unwary depositors and tech startups bound contractually to keep their money at SVB. Implicitly it now backstops all bank deposits, and who knows where that ends. If the total bail in exceeds $100 billion, you can be sure whatever costs imposed by the FDIC on the banks will be passed on to customers. IMHO the rumor of contagion was overhyped, but we'll see what shakes out.

Letting banks borrow against illiquid assets at par value at near zero rates may not cost the taxpayer anything, but it's a bailout. Ridiculous arbitrage and horrible risk management.

perverse incentive for banks to load up on risky assets. the counterparty is the Fed this time, true, so there's much less risk of catastrophic debt unwinding -- so long as rates don't keep rising and money supply doesn't keep contracting. if rates do keep rising and M2 keeps contracting, liquidity and credit crises are live possibilities despite the credit window gimmick. you can't extend and pretend forever. debts that can't be paid won't be paid.

the ethic of protecting banks and mega depositors no matter what while crushing employment isn't technically a bailout either, but the equities are all screwed up. the costs will be borne disproportionately by regular folks and there will be political and social downsides.

[Winehole23]

yes, women, two gays and one black dude on the SVB board caused mismanagement and the run on deposits. banks with all white, all male boards have never failed.

great take

[Winehole23]

And those hands have hats in them, at government's front door.

[Winehole23]

Moderately agree and disagree.

"It would have been Armageddon if we didn't backstop banks" was a more plausible excuse in 2008, tbh. In effect FDIC has protected unwary depositors and tech startups bound contractually to keep their money at SVB. Implicitly it now backstops all bank deposits, and who knows where that ends. If the total bail in exceeds $100 billion, you can be sure whatever costs imposed by the FDIC on the banks will be passed on to customers. IMHO the rumor of contagion was overhyped, but we'll see what shakes out.

Letting banks borrow against illiquid assets at par value at near zero rates may not cost the taxpayer anything, but it's a bailout. Ridiculous arbitrage and horrible risk management.

the perverse incentive to rely on financial chicanery has already had a real economic cost over the last 15 years: lost opportunities for productive investment and stagnant/declining quality of life. and it probably will again.

[ChumpDumper]

you get your news from Fox.

[spurraider21]

Moderately agree and disagree.

"It would have been Armageddon if we didn't backstop banks" was a more plausible excuse in 2008, tbh. In effect FDIC has protected unwary depositors and tech startups bound contractually to keep their money at SVB. Implicitly it now backstops all bank deposits, and who knows where that ends. If the total bail in exceeds $100 billion, you can be sure whatever costs imposed by the FDIC on the banks will be passed on to customers. IMHO the rumor of contagion was overhyped, but we'll see what shakes out.

Letting banks borrow against illiquid assets at par value at near zero rates may not cost the taxpayer anything, but it's a bailout. Ridiculous arbitrage and horrible risk management.

SVB is not being bailed out though

if you are at chase bank, chase bank goes under, but the FDIC makes you whole, that’s not chase getting bailed out. They still went under

[Winehole23]

SVB is not being bailed out though

if you are at chase bank, chase bank goes under, but the FDIC makes you whole, that’s not chase getting bailed out. They still went under

you're tilting at the wind, I didn't say SVB was bailed out.

"shuttered, moved to FDIC receivership" is in the thread le. it's a bank failure.

[spurraider21]

you're tilting at the wind, I didn't say SVB was bailed out.

"shuttered, moved to FDIC receivership" is in the thread le. it's a bank failure.

Was responding to the bolded

Moderately agree and disagree.

"It would have been Armageddon if we didn't backstop banks" was a more plausible excuse in 2008, tbh. In effect FDIC has protected unwary depositors and tech startups bound contractually to keep their money at SVB. Implicitly it now backstops all bank deposits, and who knows where that ends. If the total bail in exceeds $100 billion, you can be sure whatever costs imposed by the FDIC on the banks will be passed on to customers. IMHO the rumor of contagion was overhyped, but we'll see what shakes out.

Letting banks borrow against illiquid assets at par value at near zero rates may not cost the taxpayer anything, but it's a bailout. Ridiculous arbitrage and horrible risk management.

[Winehole23]

Was responding to the bolded

ok.

looks like the Fed throwing money at banks preemptively to spare them the pain of rising interest rates. I guess that's not technically a bailout, but it is very preferential and will be very lucrative for banks with the right assets. the Fed will be lending good money at near zero interest against relative crap..

[Winehole23]

(God forbid the banks should ever be forced to mark their bad investments to market and write down losses. IT WOULD BE THE END OF THE WORLD!)

[spurraider21]

ok.

looks like the Fed throwing money at banks preemptively to spare them the pain of rising interest rates. I guess that's not technically a bailout, but it is very preferential and will be very lucrative for banks with the right assets. the Fed will be lending good money at near zero interest against relative crap..

They’re not throwing money at the banks here though. It’s depositors getting reimbursed. SVB is still going under. Their stockholders are out, etc

[ElNono]

SVB is not being bailed out though

if you are at chase bank, chase bank goes under, but the FDIC makes you whole, that’s not chase getting bailed out. They still went under

JPMorgan is too big to fail tho

[spurraider21]

JPMorgan is too big to fail tho

2008 bailouts =/= SVB situation

[baseline bum]

2008 bailouts =/= SVB situation

Still need to bring Glass-Steagall back if we're now guaranteeing all deposits of rich people.

[spurraider21]

Still need to bring Glass-Steagall back if we're now guaranteeing all deposits of rich people.

dont disagree there

[Winehole23]

They’re not throwing money at the banks here though. It’s depositors getting reimbursed. SVB is still going under. Their stockholders are out, etc

you're looking at this through a soda straw. do you think the costs of operating the Fed's bespoke lending facility will be zero? seems naive to presume banks won't use it and that it doesn't involve shoveling cash out the window to banks at near zero interest so they don't have to realize losses.

"your not a bailout" scenario looks very much like one to me, though it's prospective. it involves turning bad investments into good loans at nearly zero cost to banks.

[spurraider21]

you're looking at this through a soda straw. do you think the costs of operating the Fed's bespoke lending facility will be zero? seems naive to presume BBC banks won't use it and that it doesn't involve shoveling cash out the window to banks at near zero interest so they don't have to realize losses.

"your not a bailout" scenario looks very much like one to me, though it's prospective. it involves turning bad investments into good loans at nearly zero cost to banks.

so SVB going under, all their shareholders wiped out, etc, amounts to SVB getting bailed out because their customers arent losing their money?

[Winehole23]

so SVB going under, all their shareholders wiped out, etc, amounts to SVB getting bailed out because their customers arent losing their money?

Nope, haven't been talking about SVB, but the aftermath. The whole thread started with saying SVB failed and went into receivership.

The "not a bailout" involves throwing money out the discount window so banks don't have to realize losses to raise liquidity, and implicitly backstopping 100% of deposits so depositors don't lose confidence and banks stocks don't crater. The Silverlake and SVB failures have already depleted over half of the deposit insurance fund, I think. If that gets tapped out this year, Treasury backstops it.

[Winehole23]

I'm cool with calling the drastic change to deposit insurance and the bespoke discount window alchemy "not a bailout." Might stick with that.