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Quick take : No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer. Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law. Federal Reserve Board on Sunday announced it will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors. My TAKE : If you're dumb enough to put more than $250 K into one account , you need to have your hand slapped !!
Who broke what? At the risk of a gross oversimplification the folks at SVB stashed too much of their assets in long dated assets. When rates went up the value of their assets were marked to market and went down. Thus their ratio of assets to liabilities declined. In even simpler terms they chased yields and did not ladder their stash or do liability matching. Then the whole house of card’s collapsed. I was a Marxist leaning history grad student who ridiculed business students and I could have managed that situation better than SVB. WHO BROKE WHAT?
Hi @catch22- I believe that he's referring to a "special assessment" that the FDIC will make on the FDIC covered banks, in addition to the normal ongoing assessments. And he's probably right- the banks will somehow make sure that we depositors pay for it... lower interest, who knows... but something, for sure.
So much for the $250,000 FDIC insurance. Everyone gets their money back.
We live in a world where profit is shared by the few (in private) and risks are shared by the many (in public). Another example of "disbursed costs (many taking on the risk) and concentrated benefit (while few take in the profit)".
So much for the $250,000 FDIC insurance. Everyone gets their money back.
We live in a world where profit is shared by the few (in private) and risks are shared by the many (in public). Another example of "disbursed costs (many taking on the risk) and concentrated benefit (while few take in the profit)".
I say let SVB fail &stick to the $250k cap..Sickens me that these bank execs take huge risks & suffer none of the consequences. And love that they paid bonuses out just hours before the collapse. Gov't should clawback all that & all the bonuses & compensation from those in charge for the past 5 years at least. Only way they're gonna learn is if you hit them in their pockets instead of us little guys.
If the bank execs owned SVB stock, they are reaping the consequences of their actions. Depositors are being made whole; stock and bond holders are out of luck, getting hit hard unless they sold early, in which case clawbacks are in order, as well as prosecutions.
If companies hold over 250K cash in banks to meet payroll, and other expenses, what is to be gained by evaporating that money, beyond the temporary pleasure of sticking it to the big boys?
If companies can't make payroll, or pay the other companies they do business with, we won't be talking about Fed rates. We will be talking about business failures, and unemployment.
@WABAC- exactly. Many commentators are failing to distinguish between rescuing banks (let 'em fail!!) and preventing a complete financial meltdown by not punishing bank depositors for, evidently, having too much money.
Well, the remedy is simple: it's an ounce of prevention: It doesn't matter WHO you are. Just be smart enough to spread your money around and not deposit more than $250k in one place. Duh. Utter stupidity. Total carelessness. Negligence. Scandalous.
Easy to say when you don't have to worry about spreading many millions of dollars of operating capital around, and yet also need to have that money quickly available when required. That's the way that a significant part of the national business community operates.
Example: A company needs to safely deposit $20 million, and yet have it easily available, perhaps within a tight timeframe. So they're supposed to break that into eighty separate 250k deposits and find eighty separate banks to use, and yet have all of that quickly and easily available?
Right.
Given that reality maybe the federal financial administration ought to put in place a suitable mechanism for that type of business instead of playing games and taking the entire financial system right to the brink of disaster.
Not all that hard for the fed money masters to do, either.
Elizabeth Warren's NYT oped is a reminder that the 2018 Dodd-Frank rollback set the stage for this mess, and that the SVB CEO was one of the exec gang who lobbied for it.
Comments
Interesting FDIC has 125billions. On the hook 25billions now .
Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law.
Federal Reserve Board on Sunday announced it will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors.
My TAKE : If you're dumb enough to put more than $250 K into one account , you need to have your hand slapped !!
The Fed/Treasury/FDIC announcement mentions only the SVB Bank and Signature Bank.
How Silvergate’s Crypto Collapse Differed From Silicon Valley Bank’s: No Bailout
and this:
Silvergate Capital Corporation announced the immediate winding down of the bank’s operations along with voluntary liquidation of the bank.
and now signature bank. "Crypto-focused." When will the idiots in charge of everything finally wake up and PROHIBIT crypto??? Shit.
If companies can't make payroll, or pay the other companies they do business with, we won't be talking about Fed rates. We will be talking about business failures, and unemployment.
Example: A company needs to safely deposit $20 million, and yet have it easily available, perhaps within a tight timeframe. So they're supposed to break that into eighty separate 250k deposits and find eighty separate banks to use, and yet have all of that quickly and easily available?
Right.
Given that reality maybe the federal financial administration ought to put in place a suitable mechanism for that type of business instead of playing games and taking the entire financial system right to the brink of disaster.
Not all that hard for the fed money masters to do, either.