Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Oversight and regulation matters. The 2018 change in the regulatory scheme (as detailed on Marketplace Morning Report today) was to move the bank exemption from oversight up from $5 billion or less valuation to $450 billion or less. No stress tests, no risk assessment, nothing.
What do most midsized businesses do? Spread their money around in quarter-mil chunks and still meet operating expenses and payroll? Honest question --- maybe someone here who has had to business-bank $30M can answer. Don't know that we have many such.
NYT: 'Silicon Valley Bank “did what most of its rivals do: It kept a small chunk of its deposits in cash and it used the rest to buy long-term debt like Treasury bonds.” As long as interest rates stayed low, those bonds promised safe returns.
@AndyJ said: Oversight and regulation matters. The 2018 change in the regulatory scheme (as detailed on Marketplace Morning Report today) was to move the bank exemption from oversight up from $5 billion or less valuation to $450 billion or less. No stress tests, no risk assessment, nothing.
Exactly! The banking regulatory rules were relaxed in 2018 during T administration that led to this debacle.
The Fed certainly can claw back those bonuses as the executives richly awarding themselves.
krugman, smartly argued piece, is not much in alignment w my fussy thinking:
... there are good reasons to feel uncomfortable about this bailout. And yes, it was a bailout. The fact that the funds will come from the Federal Deposit Insurance Corporation — which will make up any losses with increased fees on banks — rather than directly from the Treasury doesn’t change the reality that the government came in to rescue depositors who had no legal right to demand such a rescue. Furthermore, having to rescue this particular bank and this particular group of depositors is infuriating: Just a few years ago, S.V.B. was one of the midsize banks that lobbied successfully for the removal of regulations that might have prevented this disaster, and the tech sector is famously full of libertarians who like to denounce big government right up to the minute they themselves needed government aid.
... Adam Smith ... called for bank regulation, which he compared to the requirement that urban buildings have walls that limit the spread of fire.
Seems the appetite for schadenfreude will not be satisfied until more people in Silicon Valley lose their jobs, and firms go under because founderss of startups deposited their money where the VC angels told them to.
Are they all libertarians? Who cares? They're Gen-Xers. They eat avocado toast. Let them eat Food Stamps.
And you know, what could go wrong with a string of business failures in Santa Clara County, or Boston, or wherever else SVB is active?
Seems the appetite for schadenfreude will not be satisfied until more people in Silicon Valley lose their jobs, and firms go under because founderss of startups deposited their money where the VC angels told them to.
Are they all libertarians? Who cares? They're Gen-Xers. They eat avocado toast. Let them eat Food Stamps.
And you know, what could go wrong with a string of business failures in Santa Clara County, or Boston, or wherever else SVB is active?
Ummm I am GenX, hate avocados, and am a fairly prudent manager of my investments.
I think the proposal to increase the FDIC limit (to say $1,000,000) and prorate the expense to the size of insurance you want makes the most sense
The costs of the insurance should all be borne by the beneficiaries with a reasonable surplus every year to allow for future payouts. The program could run with a 3 to 5 year look back provision, so very large payouts occasionally could be replaced by future payments into the fund
Most people and small businesses would only need one bank account but banks like SVB could continue to force some customers to keep larger accounts with them but pay for insurance. If you don't want to buy insurance, you are on your own.
The FDIC told First Citizens on Tuesday it was claiming a $500 million profit linked to the increase in that company’s stock, which soared after the acquisition was sealed. The FDIC was entitled to the payment within five business days, the Raleigh, North Carolina-based bank said in a regulatory filing
Comments
What do most midsized businesses do? Spread their money around in quarter-mil chunks and still meet operating expenses and payroll? Honest question --- maybe someone here who has had to business-bank $30M can answer. Don't know that we have many such.
NYT: 'Silicon Valley Bank “did what most of its rivals do: It kept a small chunk of its deposits in cash and it used the rest to buy long-term debt like Treasury bonds.” As long as interest rates stayed low, those bonds promised safe returns.
'Interest rates did not stay low.'
What @WABAC said.
Seems to me that several of you above are misunderstanding / mischaracterizing this. Maybe I'm wrong. Hindsight is always good, obvs.
The Fed certainly can claw back those bonuses as the executives richly awarding themselves.
... there are good reasons to feel uncomfortable about this bailout. And yes, it was a bailout. The fact that the funds will come from the Federal Deposit Insurance Corporation — which will make up any losses with increased fees on banks — rather than directly from the Treasury doesn’t change the reality that the government came in to rescue depositors who had no legal right to demand such a rescue.
Furthermore, having to rescue this particular bank and this particular group of depositors is infuriating: Just a few years ago, S.V.B. was one of the midsize banks that lobbied successfully for the removal of regulations that might have prevented this disaster, and the tech sector is famously full of libertarians who like to denounce big government right up to the minute they themselves needed government aid.
... Adam Smith ... called for bank regulation, which he compared to the requirement that urban buildings have walls that limit the spread of fire.
https://messaging-custom-newsletters.nytimes.com/template/oakv2?campaign_id=116&emc=edit_pk_20230314&instance_id=87696&nl=paul-krugman&productCode=PK&regi_id=22268089&segment_id=127769&te=1&uri=nyt://newsletter/d34a70ea-8e6e-5785-a915-260c60335e86&user_id=83d45440ead1d14c2a89a1e7221337d1
Well, hard to dispute that part.
Are they all libertarians? Who cares? They're Gen-Xers. They eat avocado toast. Let them eat Food Stamps.
And you know, what could go wrong with a string of business failures in Santa Clara County, or Boston, or wherever else SVB is active?
https://news.yahoo.com/silicon-valley-bank-collapse-2018-dodd-frank-rollback-warren-warner-212435471.html
The costs of the insurance should all be borne by the beneficiaries with a reasonable surplus every year to allow for future payouts. The program could run with a 3 to 5 year look back provision, so very large payouts occasionally could be replaced by future payments into the fund
Most people and small businesses would only need one bank account but banks like SVB could continue to force some customers to keep larger accounts with them but pay for insurance. If you don't want to buy insurance, you are on your own.
The FDIC told First Citizens on Tuesday it was claiming a $500 million profit linked to the increase in that company’s stock, which soared after the acquisition was sealed. The FDIC was entitled to the payment within five business days, the Raleigh, North Carolina-based bank said in a regulatory filing