(03-28-2023 03:04 PM)Hambone10 Wrote: I'm suggesting that if there were an issue of payroll or any other 'need' by a particular company, that such a shortfall could have been addressed through the government and NOT by making blanket coverage for ALL deposits, even those who IGNORED the insurance maximums available.
I noted payroll *and* the elimination of working capital -- the elimination of the business. I dont think *right* now, you want to even hint at the idea of "Bank failure, 80 mid size companies fail, other mid-size, fairly large, *and* small businesses slash their workforces *to* survive.' That news style cause and effect even in the best of times is bad, but in those times that alternative 'make them whole' isnt needed.
If you havent noticed, these *arent* those best of times, and in fact was almost the worst of times to even *hint* that that level of damage can be caused by a bank failure.
This particular firewall did its job. Very well.
Quote:I'm further suggesting that terms like 'high profile' are very nebulous and rife with possibility of abuse.... and that plenty of OTHER businesses make decisions that don't work out and they aren't bailed out, so why these?
Because of the very unique combination of timing, bank structure re: its depositors, and two or three other very uniques situations. Almost a literal perfect storm.
Quote:Quote:Yes, protecting uninsureds is unique. But in terms of payrolls from funds in the bank, SVB was a literal one of a kind institution. Because of its clients.
So why are these clients more important than those of say, WoodForest Bank?
Because of the size and scope of the ramifications across a very large swath of depositors. I dont know if you understand the very unique position SVB held in the tech sector. I cant think of any other back that has as unique a presence and scope of interaction across the whole of an entire sector, and in the end, led to the very unique and somewhat unheard of ratio of uninsureds using that bank. I heard somewhere in the neighborhood of 90% of the deposits were uninsured.
I dont think erasing WoodForest's uninsured pile would be anywhere the sector wide impact, and job loss impact, to SVBs.
Quote:Quote:Zapping those excess funds would literally equate to a large number of very high profile job losses. In a field that is seen as some as the bellwether of the US economy.
Again, I didn't say they had to do that. I said they could have/should have done that through a more transparent means. How about we put those companies on a spreadsheet including whom these clients are and let politicians vote up or down on each one, making their case for or against it? I mean THAT would be transparency, right??
Yep would be better. But that isnt the question here, is it?
Quote:Quote:No 'special program' --- ROKU cuts 80% of its workforce. Wash, rinse, repeat for literally *hundreds* of medium size and small startups.
That high impact, high profile event probably is singularly unique to the failure of SVB.
If this happens at Gallery furniture, I'm betting THEY cur 80% of their workforce as well. What about if it happens with Kroger?? Wash, rinse repeat. I mean, there are LOTS of businnesses with say, 500k in the bank that would go under if they only got 250k of that back.
And no one bank really had, nor ahs, that type of impact straight at the heart of a single economic sector that SVB did. Again, any job loss is bad because of this. The filaure of SVB would have nad-kicked an entire indutry sector.
All in all, this is *not* the time to help with a nad-kick to the guts of any sector. Let alone the background that a bank failure was at the root.
If you think it beneficial to nad-kick an entire economic sector *at this time* in highly uncertain and charged economic time -- you are free to have that opinion.
If you think it beneficial to nad-kick an entire economic sector *at this time* in highly uncertain and charged economic time, and stack on top of it 'because of a bank failure', let alone *another* bank failure -- you are free to have that opinion as well.
Quote:Let me ask you a similar question...
If those 50 investors sold the company tomorrow for $40mm, and got money wired to their banks... let's say they all used the same local bank in a small town... and the bank closed shop the next day.... would they get $1mm each?? Or would they get 250k from the FDIC??
I dont know. I agree that the moral hazard is a strong point. I have agreed to that all along.
What I am asking you to consider, and you keep giving 'what about this and what about that', is do you not understand the very unique and highly singular issues that pervade *this* bank failure?
Your insistence of equating Gallery Furniture to an entire sector doesnt give me faith that you understand how deep SVB is to the SV tech sector.
Your insistence on using WoodForest (which I will assume ahs at or near the national average of 17% uninsured, and I would also assume has a deposit average well south of the 4.1 million that sat at SVB) as a direct comparison also detracts from that faith.
SVB had a highly unusual relationship with the *sector* it was pre-eminent in. Which led to highly unusual uninsured ratios, and corrrespndingly massively high deposit averages.
SVB was *uniquely* positioned to hurt an entire economic sector if it failed. In a normal economic time that alone would be an issue that might cut against the idea in my head of the problem inherent in the moral hazard issue. And Im all for not continuing in support of moral hazard undertaking.
Also, having the unique impact as a direct result of the SVB failure is *not* one I think is beneficial to the *current* economic client -- that is the *right now* and the *right here*.
Quote:If the former then the insurance limits are moot... and lets codify that so that the banking system is secure...
No problem with me there. Maybe 'uninsured ratio' requirements akin to deposit reqts. That is all fine and dandy. It is also, in terms of the right here and right now issue of SVB, a non-point. SVB is dead, and you are wholly unsupportive of *why* the Feds acted as they did *for* the SVB instance. In addressing whether the Feds should have or not, the issue of 'should we put in other items' is somewhat superfluous.
Quote: (03-28-2023 12:34 PM)tanqtonic Wrote: What did any one of a random 'Joe Blow' do to make THEM responsible for the hail damage to my roof?
Its root is in the concept of 'supplemental insurance'.
Which would be fine, except your insurance company has decided to cover people who didn't purchase (enough) insurance. That's not exactly the same thing.
The FDIC insurance actually did not, you are correct.
The program that covered was *not* what you mention. You are throwing the action of the FDIC (up to 250k) together in the same pool as the program that is seemingly covering the excess, and trying to tell us it is all the same as the FDIC.
The excess of 250k is not the insurance at play. It is the other program, with other benefits and strictures, that is covering the excess.
Quote:Quote:PURCHASED by First Citizens? What did they pay for the deposits and where did that money go??
I suggest looking that up before a comment. FDIC foreclosed and put SVB into receivership. First paid 500 million in equity appreciation rights -- i.e. long term upside to the FDIC.
I asked a question. OF COURSE they did. Note that the bank has 200byn in deposits and only 75byn in loans. 500mm is what, 0.66% of loans and 0.25% of assets?
That is literally a drop in the bucket. I don't think you'd get that good a deal on credit card receivables with no assets. [/quote]
It is, and its not like First was the only bidder. If it is such a good deal, that price should have reflected that. Not like it is a closed, one party auction going on there.
Quote:Quote:It seems to me that using those purchase funds to reimburse the FDIC in exchange for the new ability to earn a margin on millions of new deposits and loans would have been ANOTHER way to not make 'everyone' pay for the mistakes of the wealthy.
Note the 'to the FDIC' above. Cant do insta cash for such rights. Not really liquid or fungible.
No, but would certainly replace the need for a special assessment, which also isn't liquid or fungible.[/quote]
That doesnt address the issue that *you* brought forth about using the sales to offset the means to address the uninsured account. I mean, you said above -- 'using those purchase funds to reimburse the FDIC'. The 'purchase' price isnt funds -- it is a future right to participate in equity upside. Not something that is readily fungible to use for the purpose that you propose.
Quote:Quote:Again -- the idea behind supplemental insurance -- spreads the risk and adds another firewall in light of the lessons of 2008. Seems to have worked in this instance 'contagion-wise'
My issue is with the lack of disclosure.
A better example would be that people in Wyoming had to pay increased hurricane insurance premiums because insurance comapnies in florida decided to cover people who didn't purchase insurance. If that happened, you would be rightfully upset.
What is your personal knowledge of the disclosure, or lack thereof, to the banks?
Quote: (03-28-2023 12:40 PM)tanqtonic Wrote: Ham -- the FDIC cannot do this via their charter.
Nothing prevented them from implementing an alternative firewall mechanism and program, specifically empowered by Congress in wake of 2008 to set up alternative firewalls (such as being used).
You can disagree with the program and mechanism all you want. But it is a bit much to say 'against the law' and 'against the FDIC charter'.
I didn't say against the law...
You specifically said it was against their charter. To go beyond their charter is illegal. That is against the law. You did not say that verbatim, but saying it is against their charters specifically includes the idea that it is against the law.
My apologies for saying 'you said it was against the law'. You did not use the exact phrase 'against the law'. You used a phrase that when noted means just that.
Quote:and since it is pretty clear that the FDIC insures depositors up to 250k, that to insure anyone above that amount is not what any reasonable person understood them to be doing. It's right there on their brochures.
Again, the FDIC did not insure the affected depositors beyond the limits. Another program stepped in to do just that.
Quote:As I've repeatedly said, had the government funded this through taxes, at least it would ONLY be taxpayers paying it. Had they funded it instead with a 'tax' on the wealthy (many investors in startups who aren't the founders are 'the wealthy') that would have been even better. How about a 'claw back' on excess profits for people who get such seed money and turn it into personal billions?? That would be even better.
How about we let a supplemental insurance-style alternative that works in conjunction to the issue, funded by the banks themselves, and implemented and designed to provide such a stop-gap to address the issues presented by 2008, do the job?
Seems to have worked.
Quote:Instead, we get a 'gift' to one bank... and a tax on depositors who had nothing to do with any of this....
A tax on banks is not a tax on depositors, mind you. The tax comes out of bank profits -- it isnt borne on any depositor.
Quote:Biden promised a transparent administration, and I see this as the polar opposite of that. Biden promised to look out for the poor and middle class, and I see this as the opposite of that. No, I don't personally lay this at Joe Biden's feet... but it is an example of a PERFECT opportunity to put an administrations words into actions, and instead we get 'more of the same'. Progressives AND libertarians should be upset about this. NOT that the companies were bailed out, but that 'the little guy' is paying ONE SINGLE DIME for this.
When you misstate the payment mechanism, your statement on 'the little guy' is paying for it is accurate. Unfortunately the tax or assessment or appropriation isnt on the 'little guy', it is on the bank.