2023 bank failures

[Brew 3049]

5 minutes ago, 52-80 said:

I anticipated there would be a lot of populist handwringing against the bailout, as if they’re “sticking it” to Peter Thiel and Vinod Khosla and Marc Andreesen. Against the reality of virtually nobody talking about or advocating for them, but instead the deposits of companies supporting their employees and operations. 
 

There is a potential ripple effect from this, which is mainstream learning that their deposits are “unsafe”, causing a run on all the other banks in the US. Think retirees with decent amount of cash, yanking it from their regional banks. 
 

People are ignorant enough on things (see first paragraph), that they would be equally ignorant about fractional reserves to pull off the second paragraph.

My neighbor is a Region President for a bank. He ran a large local bank (small/medium size town but one of those banks where they know all their large customers well) that was acquired by one of the top 15 banks last year. He said this morning his phone hasn’t stopped ringing since this broke. They are seeing people move around funds that have large concentrations, but not just pull out deposits as of now. Going to be an interesting few days.

[Nivek 16923]

5 hours ago, SL Xpress said:

I will say I think it's unrealistic to expect equal outcomes for richer and poorer members of society. That's not how it works. That's not about America, or late stage capitalism. That's about human hierarchies inherited from the dawn of time. 

What is entirely realistic is that the pendulum swings from the extreme it's at right now for the sake of societal welfare, if nothing else. It's not functional to have this much acrimony between the wealthy and the not so wealthy. Bad things happen. Really bad things. And I'm not referring to raising taxes. 

I guess my position is that I feel like a shareholder has a different level of due diligence in principle than a depositor, while understanding an individual buying stocks in SVB could certainly be in a different financial position than the company Roku with $487 million in deposits. I don't really have any concerns about a ripple effect regarding shareholders losing the value of their stocks, while I have a lot of concerns about depositors being seen losing the uninsured money in their accounts that were used for liquidity purposes. 

I feel like your objections are on moral grounds as much as anything else. In addition, you and I see different levels of danger in depositors being seen to lose their money. You feel like it's a good lesson for the economy, whereas I see it as a bad one. That's my take, in any case. I appreciate your responses nonetheless.

It is absolutely a moral argument.  I get the way the systems function but it is a little depressing seeing the same outcome played out again (where the rich are not held to the same level of responsibility as the poor).   In this case, I agree that large shareholders have a greater responsibility.  The retail shareholder however is less sophisticated and yet they are also going to be the one holding the bag.   I would argue the higher net worth individuals who parked money into an account without securing insurance beyond the FDIC maximum, is the one who should bear greater responsibility for managing their net worth as they are likely to have had better access to education and more resources available to them.     But this is largely an academic discussion of morality.  There is no real way to split the retail shareholder from the large shareholders.   And there is no way for an old lady who sold her home and put the money into her account is also not same as a company with 8 figures locked in a single account that decided to cut corners on financial management.   

Sorry for another disjointed response, it is chaotic here in my house again and the constant interruptions continue to make me sound more than a little crazed. 

I also think it is past time to raise the FDIC coverage.   

I do not think of it as a lesson for larger depositors but rather a risk they took and lost.  The current FDIC value was established in 2008.  That is a fairly long time.  Maybe banks should be required to send a notification that they are exceeding the insurance to clients (if that isn't already happening).  

 

[Dahobbs 17527]

7 minutes ago, Porterhouse said:

2. A few entities?  I’m talking about ALL of them, with the exception of apparently GM, which occurred years after TARP was authorized. 
3. You presume that “one of its backstops” will be the way things happen. That didn’t happen in ‘08-‘11. And it wouldn’t happen here. It’s not a fucking bailout. You won’t answer this question - neither you nor @Sawbonz - what happens as the FDIC realizes it needs to replenish funds?

2. What are you talking about? You asked if TARP was a bailout. It bailed out a lot of entities. I'm going to ask, what is your definition of bailout? You appear to have some specific conception that is not matched with the general use of the term. 

3. The answer is it depends. It has several mechanisms to shore up funds when necessary. I'm not assuming that the Treasury will be accessed. I'm just saying it is in fact one of the fail-safes for the FDIC. I'm also saying it doesn't fucking matter where the money comes from. The the FDIC risks its own resources to keep an entity or entities from suffering extreme hardship, then that is a bailout. Whether the bailout is good or not depends on a lot of factors. 

[52-80 19147]

4 hours ago, SL Xpress said:

 

This is the danger in my opinion of making the depositors whole. It sends a message to the market that the federal government will bail out any depositor no matter how risky their actions are. I'm not saying that's true. I'm simply saying that's the message that's sent. If the government lets depositors be paid pennies on the dollar - which I'm convinced is not going to happen, but let's say hypothetically speaking - the message is then be careful where you deposit your assets over $250k, and do better diligence or you could lose it all. 

So to me, it then becomes which side of the equation do you stand on? Is it healthier for the economy overall to send the message that depositors need to be extra careful with their money or they could lose it all? Or is it healthier for the economy to send the message that if a bank has significant safe underlying assets but they've faced a run at a time when those assets are not worth much (it could be argued long term T-bill paying somewhere around 1.5% interest were never going to be worth much ever again in the liquid market, but that's a different discussion) the depositors won't suffer long term damage?

To me the most interesting part is that they had so little financial acumen at that bank that the only place they knew to invest their depositors money to earn a return was in long term T-bills. They were obviously amazing at generating huge deposits, but horrific in knowing what to do with that money. That's different from other bank failures I've read about, where a central part of the problem was making risky loans that eventually had to be written off. For SVB, the assets weren't worthless because they invested with too much risk. They were worthless (for the practical purpose of covering a bank run) because they were too safe. 

1. The rate environment was poor when they had all this deposit inflow. Though they could have used it in reverse repo or other shorter term transaction. Management deserves scrutiny and probably litigation. 

2. They were able to accrue lots of deposits by terms of loans requiring deposit exclusivity. (I had a mortgage that needed me to switch over my employment direct deposit…had not heard of it before that) 

3. A far **worse** signal to the public than “you can be careless with >250k” is “your >250k is currently at-risk”. That’s the worst route for the Fed

[FartingMonk 3606]

There is just something scary about a bank failing because they decided to invest in government bonds.

[52-80 19147]

3 hours ago, Neonmoon said:

A T-Bill is not a long term investment. 

Technically correct. 
Long-maturity treasuries are Bonds. Medium- are Notes. Short- are Bills. 

[Neonmoon 38129]

3 minutes ago, FartingMonk said:

There is just something scary about a bank failing because they decided to invest in government bonds.

That’s not what happened at all. 

[Macanudo 12975]

All of this back and forth but the truth is pretty simple...

 The rich stay healthy and the sick stay poor.

[52-80 19147]

18 minutes ago, Brew said:

My neighbor is a Region President for a bank. He ran a large local bank (small/medium size town but one of those banks where they know all their large customers well) that was acquired by one of the top 15 banks last year. He said this morning his phone hasn’t stopped ringing since this broke. They are seeing people move around funds that have large concentrations, but not just pull out deposits as of now. Going to be an interesting few days.

Its international news now. Wife asked me “whats going on with American banks”.
She has Ø interest in finance - just saw scary headlines on her home news network. 

[Neonmoon 38129]

Announcement coming 

Quote

WASHINGTON, March 12 (Reuters) - The U.S. government is expected to make a "material" announcement on Sunday to shore up deposits in Silicon Valley Bank, which collapsed on Friday, and prevent wider fallout, sources familiar with matter said.

Biden administration officials worked through the weekend to assess the fallout of the dramatic bank failure, the biggest since the financial crisis of 2008, with a particular eye on the venture capital sector and regional banks, the sources said early on Sunday. (Reporting by Andrea Shalal Editing by Bill Berkrot)

 

[Sawbonz 27542]

45 minutes ago, Porterhouse said:

Because SVB is limited to $195b of deposits. FDIC has significant resources to fund that many times over. Is this a serious fucking statement. 

Why are you assuming this will be limited to SVB? They would be setting a dangerous precedent by covering losses above the policy limit. 
 

can you give some examples of insurance companies paying above policy limits?

[Dahobbs 17527]

37 minutes ago, Porterhouse said:

2. A few entities?  I’m talking about ALL of them, with the exception of apparently GM, which occurred years after TARP was authorized. 

Wait, I just caught this. When do you think TARP was passed? When do you think new GM went into bankruptcy? When do you think old GM and new GM received TARP funds? These things did not occur "years" apart. They didn't even occur a year apart. They all occurred in 2008-2009.  

[Sawbonz 27542]

43 minutes ago, Porterhouse said:

z - what happens as the FDIC realizes it needs to replenish funds?

I assume they increase premiums. 
 

do you know what %of total liabilities fdic is supposedly required to keep in reserve? Do you know what % is currently in reserve?

[Neonmoon 38129]

 

[SL Xpress 7513]

32 minutes ago, Nivek said:

It is absolutely a moral argument.  I get the way the systems function but it is a little depressing seeing the same outcome played out again (where the rich are not held to the same level of responsibility as the poor).   In this case, I agree that large shareholders have a greater responsibility.  The retail shareholder however is less sophisticated and yet they are also going to be the one holding the bag.   I would argue the higher net worth individuals who parked money into an account without securing insurance beyond the FDIC maximum, is the one who should bear greater responsibility for managing their net worth as they are likely to have had better access to education and more resources available to them.     But this is largely an academic discussion of morality.  There is no real way to split the retail shareholder from the large shareholders.   And there is no way for an old lady who sold her home and put the money into her account is also not same as a company with 8 figures locked in a single account that decided to cut corners on financial management.   

Sorry for another disjointed response, it is chaotic here in my house again and the constant interruptions continue to make me sound more than a little crazed. 

I also think it is past time to raise the FDIC coverage.   

I do not think of it as a lesson for larger depositors but rather a risk they took and lost.  The current FDIC value was established in 2008.  That is a fairly long time.  Maybe banks should be required to send a notification that they are exceeding the insurance to clients (if that isn't already happening).  

 

Again, I just appreciate the civil discussion. 

I think the difference here is I'm not focused on the moral argument the way you are. And that's a difference I find that comes up often. It doesn't mean you're wrong and I'm right. My priority is that the financial system as a whole faces minimum disruption, whereas in your mind I get the feeling (and I'm projecting here, so my apologies if I'm getting it wrong) that you believe the financial system could use a gigantic kick in its collective balls the way it's set up right now, and if depositors at SVB lose their uninsured money that's a small step towards making it happen. 

[Sawbonz 27542]

Just to clarify there are posters here who think a company receiving funds from sources not available to everyone via conventional avenues in order to stave off collapse is *not* a bailout?

[Dahobbs 17527]

4 minutes ago, SL Xpress said:

Again, I just appreciate the civil discussion. 

I think the difference here is I'm not focused on the moral argument the way you are. And that's a difference I find that comes up often. It doesn't mean you're wrong and I'm right. My priority is that the financial system as a whole faces minimum disruption, whereas in your mind I get the feeling (and I'm projecting here, so my apologies if I'm getting it wrong) that you believe the financial system could use a gigantic kick in its collective balls the way it's set up right now, and if depositors at SVB lose their uninsured money that's a small step towards making it happen. 

Here is the thing. The depositors money isn't really substantially at risk. Just when they'll be able to get it. I absolutely believe some lessons need to be learned the hard way in order to create the right market incentives. 

[wackawacka 177]

2 minutes ago, Dahobbs said:

Here is the thing. The depositors money isn't really substantially at risk. Just when they'll be able to get it. I absolutely believe some lessons need to be learned the hard way in order to create the right market incentives. 

1234

[SL Xpress 7513]

1 hour ago, Jackson P. Neighbors said:

I didn't know this separate thread existed until this morning so I'm copying/pasting my post from last night on Markets are Falling thread here, apologies. I'd enjoy discussion on the talking points. Smart folks abound here. There are so many nuances to this situation. A real shame...

 

Correct, this was a liquidity failure due to a deposit run, plain and simple. If the deposit volume on Tuesday would have remained stable, this is a perfectly solvent bank, albeit certainly needing a relatively manageable capital raise for regulatory compliance purposes. Many of the posts above accurately identify issues that contributed to the failure, but none of them individually caused it.

TL/DR me if I'm getting a little/really wonky here but after taking a few minutes to peek at their call report, this is how I view a few of these issues:

 

- Outsized Treasuries position and long portfolio duration / funding mismatch:

Just to be precise, "Treasuries" were not a large part of the portfolio (14% of assets vs comparable peer banks 23%). They had a greater proportion of Agency MBS (55% vs 36%). Overall though you could call it more of a bond bank, loans 33% of assets, securities 58%. However, the size of the security position doesn't particularly matter here. Most of the position was HTM which doesn't flow to AOCI and although the AFS portion does, it only affects the stated total equity position rather than the regulatory capital position that must be maintained. There is a big difference between equity and regulatory capital. This is why you hear that most banks are in the same boat when it comes to unrealized AOCI losses. It is absolutely true, and there are a bunch with a worse AOCI position than SVB had. Right now there are dozens of banks nationwide which report a negative equity position and, while they are probably getting a stern taking-to from regulators during an exam, they are most likely perfectly solvent.

The reportedly long duration of the portfolio (I have not looked at the IRR/sensitivity financial data, just going off what is in media) simply impacts the size of the unrealized loss in AOCI. Longer duration = greater downside risk when rates rise, finance 101. So yes, the $1.8B loss on the sale of securities -may- have been larger than with a shorter tenor portfolio, but again, this was not a major contributor to failure at all.

- Failure to raise capital

CNN had an article out yesterday headlined: Silicon Valley Bank collapses after failing to raise capital. This is misleading at best or flat out wrong. SVB attempted to raise $2.2B to plug the $1.8B from the loss on securities. The bank's capital position was generally fine prior to the loss, leverage capital 8% vs peer 8.76%, and risk-based capital ratios were higher than peer because of the higher proportion of securities vs loans on balance sheet. They had almost $17.5B capital prior to the $1.8B loss, so yeah, the loss certainly made an impact but they would still be considered "Adequately Capitalized" (versus "Well Capitalized") by regulators without raising additional capital. Adequately Capitalized banks absent other major issues are not getting closed, period.

- Customer base is niche

This did not cause it but I think when it's all said and done, this will be seen as a major contributor to what historians 50 years from now will deem the most efficient bank run in the history of western civilization. I'm being a little facetious there but also not really. What we saw yesterday should not happen. $42B deposit outflow and resultant -$958M cash position in one day is worthy of Congressional investigation in my opinion, and I have zero axes to grind. Previous posters showed the data on deposit size % which is spot on. Prudential regulators are going to have to reassess the entire playbook on liquidity management after this. Bank failures occur mostly due to liquidity, but it happens over weeks and months and quarters which gives the bank and regulators time to find buyers for assets, etc. Technology, an astute and influential client base, and a huge average relationship balance meant that this could happen with unprecedented speed.

 

I really dislike the "perfect storm" label when describing root causes of major disasters but here I have no other choice to label this as such. What a mess, and the ashes sifting will last for years to come. So many bad decisions - why announce capital raise right after the security sale filing? Why do it on the day of SG announcement, why were so many tech titans calling for withdrawals? I'm a simple outside observer with no answers but I hope they start coming.

Thank you for typing that out.

One thing I read about in today's Wall Street Journal that I haven't seen referenced here except perhaps in your post "There is a big difference between equity and regulatory capital..." is that some of the incentives for SVB's investment strategy was to lower their regulatory capital requirements, even if it meant taking less than optimal investment positions. 

I especially appreciate you pointing out the distinction with the clientele and the speed and size with which they withdrew their funds. This may be a perfect storm, but it also seems to me to be something of a harbinger. 

I also feel quite certain there was a regulatory failure here that needs to be addressed, but I dread the finger pointing that goes with it. Ah well. At the very least this bank should have been under a lot more scrutiny after doubling its deposits in one year, but as you're pointing out, on paper it was quite solvent until it wasn't. Excepting the lack of liquidity that caused the downfall. 

Again, thanks for the post.

[Sawbonz 27542]

9 minutes ago, SL Xpress said:

Again, I just appreciate the civil discussion. 

I think the difference here is I'm not focused on the moral argument the way you are. And that's a difference I find that comes up often. It doesn't mean you're wrong and I'm right. My priority is that the financial system as a whole faces minimum disruption, whereas in your mind I get the feeling (and I'm projecting here, so my apologies if I'm getting it wrong) that you believe the financial system could use a gigantic kick in its collective balls the way it's set up right now, and if depositors at SVB lose their uninsured money that's a small step towards making it happen. 

Hey wouldn’t it be something if the laws and regulations took morality into account? I know I know that’s crazy talk

[SL Xpress 7513]

3 minutes ago, Dahobbs said:

Here is the thing. The depositors money isn't really substantially at risk. Just when they'll be able to get it. I absolutely believe some lessons need to be learned the hard way in order to create the right market incentives. 

Yes, I'm aware of that. It's what I've been saying consistently after wondering about it after the initial story broke.

The analogy I made was the cop phrase, "You can beat the time, but you can't beat the ride." There's going to be some pain involved simply in having a delay, and that's going to at least generate some market correction. I can't say whether it will be enough, though.

I honestly don't know how to achieve the right market incentives, though, other than more regulators coming down harder on banks that fit SVB's profile to one degree or another. 

[Sawbonz 27542]

6 minutes ago, SL Xpress said:

honestly don't know how to achieve the right market incentives, though,

Rich people actually believing they will lose everything if they aren’t prudent would be a pretty good incentive IMO

[SL Xpress 7513]

2 minutes ago, Sawbonz said:

Hey wouldn’t it be something if the laws and regulations took morality into account? I know I know that’s crazy talk

I assume you're aware that there's not a unified vision for what's moral and what's not. I know moral relativity is a slippery slope, and frankly government rules and regulations by definition have some kind of moral imperative to them, since they're a reflection of what we value as an overall civilization. But my chief concern is any government's tendency towards overreach. As much as anything I want a society that's functional, and that's going to look very different at one point than it does another. I do not believe making sure depositors lose their uninsured funds is the kind of moral imperative that others might. My hope is that there's room to agree to disagree but continue the conversation. 

[Dahobbs 17527]

4 minutes ago, SL Xpress said:

Yes, I'm aware of that. It's what I've been saying consistently after wondering about it after the initial story broke.

The analogy I made was the cop phrase, "You can beat the time, but you can't beat the ride." There's going to be some pain involved simply in having a delay, and that's going to at least generate some market correction. I can't say whether it will be enough, though.

I honestly don't know how to achieve the right market incentives, though, other than more regulators coming down harder on banks that fit SVB's profile to one degree or another. 

Well, for starters, we shouldn't rescue mismanaged entities by risking government funds. Failure needs to be allowed to happen sometimes. There are a ton of market mechanisms that can handle failure of entities like SVB. But, by having government jump in, we prevent those mechanisms from being allowed to develop and strengthen. The goal of regulation should be minimization of market distortions. It shouldn't be used to amplify them. 

[Chopper 17230]

55 minutes ago, 52-80 said:

I anticipated there would be a lot of populist handwringing against the bailout, as if they’re “sticking it” to Peter Thiel and Vinod Khosla and Marc Andreesen. Against the reality of virtually nobody talking about or advocating for them, but instead the deposits of companies supporting their employees and operations. 

You've misstated Peter Thiel's role. He took his money out and then sent an email around that caused a panicked run on the bank.

Is it "populist" to believe that insurance limits are there for multiple reasons, all of which are meant to limit risk in the system, and that you ignore the FDIC incentives at your own potential peril? If so, then I guess I'm a populist.

[SL Xpress 7513]

2 minutes ago, Sawbonz said:

Rich people actually believing they will lose everything if they aren’t prudent would be a pretty good incentive IMO

And I believe in this case that creates market incentives that have negative consequences by centralizing capital in fewer "too big to fail" hands. 

[Sawbonz 27542]

1 minute ago, SL Xpress said:

another. I do not believe making sure depositors lose their uninsured funds is the kind of moral imperative that others might

You would agree though that (currently) it is a legal imperative though?

[Sawbonz 27542]

1 minute ago, SL Xpress said:

And I believe in this case that creates market incentives that have negative consequences by centralizing capital in fewer "too big to fail" hands. 

Why do you make the assumption any of them should be “too big to fail?”

[Dahobbs 17527]

1 minute ago, SL Xpress said:

And I believe in this case that creates market incentives that have negative consequences by centralizing capital in fewer "too big to fail" hands. 

Wait, so your solution to this is to just make every bank "too big to fail?" 

Again, none of that really matters here. The depositors' money isn't really at risk. SVB equity is going to take a blood bath, as it should. And more than a few in SVB management probably should face significant personal liability. 

[Trey3216 15345]

3 minutes ago, Dahobbs said:

Well, for starters, we shouldn't rescue mismanaged entities by risking government funds. Failure needs to be allowed to happen sometimes. There are a ton of market mechanisms that can handle failure of entities like SVB. But, by having government jump in, we prevent those mechanisms from being allowed to develop and strengthen. The goal of regulation should be minimization of market distortions. It shouldn't be used to amplify them. 

Well, one of the mechanisms is absolutely in play.  The equity shareholders of SVB are going to lose their shirts.  The depositors are not as they are basically first in line creditors of the bank.  The govt backstopping the depositors isn’t going to prevent the market  mechanisms from working correctly.  
 

failure is still being allowed to happen.  
 

I guess we’ll see this afternoon 

[Chopper 17230]

2 minutes ago, Sawbonz said:

You would agree though that (currently) it is a legal imperative though?

"Making sure depositors lose their uninsured funds"...I am reasonably certain nobody has argued the Pro-side of that debate but SLX is certainly up for arguing the Con side.

[Firemans4Horn 18036]

23 hours ago, Royalfan5 said:

Seems to me that the VC folk should figure out a way to bounce back from their industry being disrupted. Maybe put your heads together and get a recapitalization plan going. 

learn to bank is the new learn to code

[Samson's Wig 3191]

VC and tech have been digging their own grave for a long time now, propping up fake businesses and silly ideas just to funnel money into the hands of investors.   It's contributed to the large wealth disparity in this country as much as anything else, and they can all go die in a fire as far as I'm concerned.  Maybe everyone will grow up and actually start real businesses with a longer-term view than just getting to acquisition.  It's complete bullshit on its face and has to come crashing down at some point.

[SL Xpress 7513]

2 minutes ago, Dahobbs said:

Well, for starters, we shouldn't rescue mismanaged entities by risking government funds. Failure needs to be allowed to happen sometimes. There are a ton of market mechanisms that can handle failure of entities like SVB. But, by having government jump in, we prevent those mechanisms from being allowed to develop and strengthen. The goal of regulation should be minimization of market distortions. It shouldn't be used to amplify them. 

But that's exactly the mentality that led to Lehman Brothers shutting down. Do you feel like that was the right call?

I'm not sure I've ever seen a government entity issuing regulations that didn't lead to market distortions. I'd argue it's one of the chief - and most dangerous - creators of market distortions. 

My argument would be market distortions are going to occur regardless. It's pretty much inherent in having a market economy. It's the government's job to ensure those market distortions do not bring down the whole system. There's also some kind of imperative in my mind to shift resources to create opportunities for upward mobility, because that is not inherent in the system, but that in itself is also a market distortion. Then there's the imperative to ensure certain goods and services are available for national security, but what those might be and at what level is open to debate. 

[Dahobbs 17527]

1 minute ago, Trey3216 said:

Well, one of the mechanisms is absolutely in play.  The equity shareholders of SVB are going to lose their shirts.  The depositors are not as they are basically first in line creditors of the bank.  The govt backstopping the depositors isn’t going to prevent the market  mechanisms from working correctly.  
 

failure is still being allowed to happen.  
 

I guess we’ll see this afternoon 

Yeah, but a government backstop for the depositors prevents other private mechanisms from being adequately developed to address depositor concerns. We're preventing the market from becoming more resilient and self-reliant. I don't disagree with the government stepping in where broader economic impact is implicated. But I just don't see that here. 

[Sawbonz 27542]

1 minute ago, Chopper said:

"Making sure depositors lose their uninsured funds"...I am reasonably certain nobody has argued the Pro-side of that debate but SLX is certainly up for arguing the Con side.

Is that not another way to say “FDIC will only reimburse the depositor up to the limit of the policy?”

 

I have had money spread over multiple banks since 2008 precisely to avoid the above. It can be a pain the ass moving things around to be sure. So many clicks…

[SL Xpress 7513]

6 minutes ago, Sawbonz said:

Why do you make the assumption any of them should be “too big to fail?”

Because it's reality? Whether they should be or not. 

If you want to argue about whether any private enterprise should be too big to fail or not, that's a different discussion I don't have a lot of interest in, because that argument has already been made with a clear consensus reached after 2008. I'm not saying it's unimportant, or shouldn't be discussed. I'm saying I don't have any interest in it because an alternative outcome is not realistic. 

[Sawbonz 27542]

3 minutes ago, SL Xpress said:

down. Do you feel like that was the right call?

Yes?

[Chopper 17230]

1 minute ago, Sawbonz said:

Is that not another way to say “FDIC will only reimburse the depositor up to the limit of the policy?”

Plus whatever is left after dissolution. I have no qualms about that.

[Sawbonz 27542]

Just now, SL Xpress said:

Because it's reality? Whether they should be or not. 

If you want to argue about whether any private enterprise should be too big to fail or not, that's a different discussion I don't have a lot of interest in, because that argument has already been made with a clear consensus reached after 2008. I'm not saying it's unimportant, or shouldn't be discussed. I'm saying I don't have any interest in it because an alternative outcome is not realistic. 

There no doubt would have been much more pain. Esp among the investment bankers whose bonuses were made whole with the bailout money. But we would have come out the other side likely without the second wave housing bubble, stock bubble and (now apparently) VC bubble to deal with. Oh well maybe actual individuals will be able to buy a house in metro areas now

[Dahobbs 17527]

1 minute ago, SL Xpress said:

I'm not sure I've ever seen a government entity issuing regulations that didn't lead to market distortions. I'd argue it's one of the chief - and most dangerous - creators of market distortions. 

Obviously any government intervention will have an effect on the market. But I don't believe every effect is properly termed a distortion. To me, a market distortion is when some issue like physical or informational limitations prevents the market from working as efficiently as it theoretically should. 

[SL Xpress 7513]

12 minutes ago, Dahobbs said:

Wait, so your solution to this is to just make every bank "too big to fail?" 

Again, none of that really matters here. The depositors' money isn't really at risk. SVB equity is going to take a blood bath, as it should. And more than a few in SVB management probably should face significant personal liability. 

I don't believe SVB will exist any more. It's obviously not too big to fail. I feel quite confident the deposits left in SVB along with other assets will be sold to another banking entity relatively soon, and the depositors will be made whole based on that. I don't think the torches and pitchforks regarding how the depositors should lose all their uninsured deposits as represented in this thread are either correct, nor warranted. Nor do I feel like it will actually happen. 

I'm not sure exactly how we're disagreeing here. 

[SL Xpress 7513]

13 minutes ago, Sawbonz said:

Yes?

Okay. There's a fundamental difference between us, then. I do not believe putting the global financial system on the precipice of a potential civilization ending disaster was worth the lesson learned there. But we can agree to disagree. I do not believe the regulators would have allowed it to happen if they had understood all the consequences of their actions. 

I also question how many lessons were actually learned in its failure, to be quite honest. 

[Sawbonz 27542]

3 minutes ago, SL Xpress said:

I do not believe putting the global financial system on the precipice of a potential civilization ending disaster was worth the lesson learned there

If you really believe that was the most likely outcome had we allowed things to play out without bailing out the “ most favored nations “ yes we should just agree to disagree 

 

and lessons were definitely learned. Make sure you are among the most favored

Edited March 12, 2023 by Sawbonz

[Dahobbs 17527]

7 minutes ago, SL Xpress said:

I don't believe SVB will exist any more. It's obviously not too big to fail. I feel quite confident the deposits left in SVB along with other assets will be sold to another banking entity relatively soon, and the depositors will be made whole based on that. I don't think the torches and pitchforks regarding how the depositors should lose all their uninsured deposits as represented in this thread are either correct, nor warranted. Nor do I feel like it will actually happen. 

I'm not sure exactly how we're disagreeing here. 

We aren't I guess, other than you keep talking about pitch forks and asserting that someone wants the depositors to lose all their money. I haven't seen that argument made. I'm really not clear what your position is other than you don't like the idea of the depositors losing money. 

[Chopper 17230]

2 minutes ago, Dahobbs said:

We aren't I guess, other than you keep talking about pitch forks and asserting that someone wants the depositors to lose all their money. I haven't seen that argument made. I'm really not clear what your position is other than you don't like the idea of the depositors losing money. 

Dead on. It's very trite and tiresome propaganda.

 

[chainsaw 9859]

31 minutes ago, Sawbonz said:

Is that not another way to say “FDIC will only reimburse the depositor up to the limit of the policy?”

 

I have had money spread over multiple banks since 2008 precisely to avoid the above. It can be a pain the ass moving things around to be sure. So many clicks…

or worse you'd have to hire a money manager to do all that clicking for you!

[Samson's Wig 3191]

I don't want to see depositors lose money, but I don't have a deep well of sympathy for a company that doesn't understand how to manage and mitigate that risk.  It's not difficult, and any company sitting on a significant chunk of cash in a single bank (absent recently transferred funds to cover payroll or a larger purchase that just had terrible timing) is not being operated properly - which is par for the course in the tech industry where any moron with an idea can get stacks of cash so long as they're charming, and said charming morons often ensure no CFO worth their salt gets anywhere near the operation to gum up the grift. 

[52-80 19147]

46 minutes ago, Sawbonz said:

Just to clarify there are posters here who think a company receiving funds from sources not available to everyone via conventional avenues in order to stave off collapse is *not* a bailout?

The tenor of this question is exactly like the political point scoring battle of “are we technically in a recession”

Earnestly…what the fuck does it matter?

Its a cashflow issue. Not solvency. Bank is under govt administration to help short term business continuity, facilitate better-than-predatory asset recovery, and stave off contagion….in the end with little or no cost to taxpayer. 

So whether this govt action is called a bailout or not matters how? 

The billions in shareholder equity is already gone.

[SL Xpress 7513]

16 minutes ago, Dahobbs said:

Obviously any government intervention will have an effect on the market. But I don't believe every effect is properly termed a distortion. To me, a market distortion is when some issue like physical or informational limitations prevents the market from working as efficiently as it theoretically should. 

Okay.

I would argue distortions occur through greed, through speculative behavior, through the natural inefficiencies in meeting supply and demand, through emotional decisions that aren't properly valued by the market, through the natural tendency towards monopolistic enterprises, through the limitations in the mobility of labor, among many others.

With government, rules and regulations by their definition create distortions in the market. Safety regulations create inefficiencies. Tax incentives create HUGE market distortions. Any rules preserving individual rights over private enterprises create market distortions. Any laws protecting the organization of labor introduces inefficiencies. Government subsidies create distortions. Implied government support creates distortions. The time and effort required to abide by government rules and regulations creates distortions. Torts create distortions. 

But I have a feeling we're defining the term differently.