The VCs who started the bank run were made whole by the FDIC.
No moral hazard.
https://www.nytimes.com/2023/03/16/o...e-capital.htmlThe biggest supposed geniuses of Silicon Valley could have chosen to remain calm and used their influence to work with the bank and help maintain stability in the market. When S.V.B. disclosed its losses last week, it was in the process of restructuring its portfolio to include treasuries with shorter-term maturities, which would have helped. It had a commitment from General Atlantic — a top tier firm itself — to help shore up its balance sheet. The bank was doing exactly what it should have done under the cir stances, and had the depositors kept their money there, it could have stabilized as the restructured portfolio became more profitable.
Instead, people panicked. The venture capitalists chose a path that would be disastrous for their industry, freezing up capital, spooking investors and reducing the favored financial ins ution to rubble.
Events are overdetermined in many directions, but possible political motives deserve to be mentioned..
are you not familiar with our tiered banking system?
preferential treatment for SIBs is 15 years old; an exception was made in this case because some rich people wet their pants.
Janet Yellen asked First Republic's compe ors to deposit $30B in First Republic and they obliged.
First Republic is a private bank catering to high net worth individuals.
dont care for the sinophobia at the end, but raises a good point that you could see an exodus of large account holders pulling the plug from smaller banks that they do not believe will receive special FDIC treatment
stimulus is when you put money in a bank and you are able to withdraw that money
a weak gloss, I agree. terrible optics, though.
a lot of real and political capital flowing to unwary rich folks directly affected. InfraFi could have spared them the jitters, wonder why they didn't use it.
theyre placing deposits, not gifting them bailout money. no taxpayer expense. no government funds. really dont get the concernJanet Yellen asked First Republic's compe ors to deposit $30B in First Republic and they obliged.
First Republic is a private bank catering to high net worth individuals.
im all for tax and redistribute, and have never indicated that the wealthy dont have it easy or pay enough taxes.
but im just getting a lot of "eat the rich" sentiment here, and im not about that
Because you're more or less blind to the moral hazard of treating certain banks preferentially, no surprise there. I agree it's not a bank bailout.
the rich have been eating our lunch for the past 40-50 years, by political choice. that trend has accelerated during the last 15 years. the sentiment makes perfect sense to me.
yeah then thats probably where we're not seeing eye to eye. you just want to watch them burn even if it doesnt benefit others... as would be the case if deposits were just lost because there was a bank run. i have no interest in that. systemic change would involve taxation/legislation, thats what im after
if its nationalize by the govt, they need to split the banks operations into 2 seperate en ies...1 for deposits, 1 for investments...now how they going to find money for investments is upto them, leave the deposits alone
16 Dems who voted with Repugs to remove D-F from small/medium banks express no regret for the storm their vote produced
no, I'd like them to play by the same rules everyone else plays by, instead of being supercitizens who buy the pols to write the rules and change them midstream when they the bed. that creates systemic problems that get socialized when financial ins utions break down due to greed and mismanagement. just because there's no immediate cost to taxpayers doesn't mean there's no moral hazard and it certainly doesn't mean society doesn't eventually pay for the fraud, greed and incompetence.
it took the Great Depression for Glass-Stegall to happen the first time, it might take something similar for it to happen again, sadly.
Last edited by Winehole23; 03-19-2023 at 03:33 AM.
Banks unable to manage their long term vs short term obligations probably shouldn't exist. Propping up insolvent banks like Wells Fargo and Citibank in 2008-9 normalized the financial chicanery that caused the bust and continues to deprive the economy of productive investment. huge lost opportunity costs borne collectively, as declining quality of life. what's happening now is more of the same.
Last edited by Winehole23; 03-18-2023 at 12:35 AM.
To take one example, consider the cost of housing. It's now completely unaffordable for the most educated cohort in US history. In large part due to financial speculation incentivized by the gov't solutions of 2008-9. Propping up certain asset classes has real costs for people who can't afford them and hence, for society at large. US life expectancy started declining a few years before COVID.
Last edited by Winehole23; 03-18-2023 at 12:54 AM.
To take another example, as recently as the year 2000, the system rewarded plain vanilla savers who put their money in a bank. Now they're pushed to take loans or make risky investments to create a nest egg. Financialization plus financial repression has put a hurting on people without dry powder.
By, of and for the 1%.
No moral hazard there.
08 was followed by dodd Frank. Wasn’t business as usual. Not to mention the government got repaid on the bank bailouts with interest. Iirc made more than 10 billion profit off the chase bailout alone
not sure what your point is, are you suggesting preferential treatment of banks is a robust moneymaker, a net plus for society?
Germane to sr21's recent emphasis. I'm not a lawyer, so perhaps sr21 or vy65 can speak to Adam Levitin's gloss of bankruptcy law.
https://www.creditslips.org/creditsl...ial-group.html
And just lol at the idea that Dodd Frank was a paradigm shift that dominated the banks (never mind newly dubbed nonbanks, i.e., the shadow banking system, hedge funds, erstwhile broker-dealers and so forth) and solved the problems exposed in 2008. Not only was it business as usual, it was business as usual on steroids, with the Fed shoving trillions at the banks and nonbanks through the various forms of QE and exotic bespoke lending facilities. And arbitrage opportunities presented by 15 years of zero bound interest rates.
And while it's true none of that money had to be appropriated by Congress and represents a nominal zero cost to taxpayers, the inflation of various asset classes and economic sectors was real, and imposed real costs, for example in housing. Not having to write down bad debt to market value in 2008 kept prices high, financial speculation subsequently put it out of reach for the middle class.
Last edited by Winehole23; 03-19-2023 at 03:35 AM.
There are currently 1 users browsing this thread. (0 members and 1 guests)
Posting Permissions
Reply With Quote
