Comment by cced | Hacker News Reader

Comment by cced | Hacker News Reader

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Okay? I’m trying to buy my first home, who’s going to give me a home? Another bank is getting a bailout and they have the gaul to call it not-a-bailout bailout?

This is all so silly.

You’ve got the 4 musketeers on twitter sewing fear, begging for the not a bailout bailout all while the rhetoric for student relief is summarized by “ bootstraps, you have em? Personal responsibility, you got it? “

Now they break a bank because they mismatched their maturity dates and risk and they get their bailout not one week later?

Pretty clear who this system serves.

edit:

They are "backstopping" 25B, get this, so far. Jcal is on Twitter spaces right now going over it and there's tons of subtext that people are glossing over.

This is a bailout. Now they're calling it a regulatory failure[1][2].

BTFP, the new TARP. Was TARP a bailout?

Twitter spaces had a bunch of softball questions, not a serious discussion if not to pat himself on the shoulder.

This 25B will be expanded, and we will kick the can down the road like nothing happened. Only this time, inflation is raging and we're adding more of it to the pot.

---

[1]: https://www.theguardian.com/business/2023/mar/11/silicon-val...

[2]: https://theintercept.com/2023/03/11/silicon-valley-bank-used...

It's the customers of the bank that are benefiting from the government action, not the bank. The bank has now ceased to exist.

If you want to rant against the customers of a bad bank getting bailed out, that's fine, but the bank wasn't bailed out, it was wiped out. The new bank is the owner of the old banks assets and responsible for the old banks debts. The owners of the old bank have nothing to do with the operations of the new bank.

No the customers of the bank will also have to deal with the clown-world implications of continued bailouts for poor allocation of resources.

Banks will continue to be able to make horrendous decisions and not have any fractional reserve requirements. Executives will continue to get absurd performance benefits until losses are realized. Depositors won’t have to care that the institution where they dump millions of dollars is run by someone doing their best financial John Wayne Gacy impersonation. And we’ll all suffer because institutionally these horrendous investments are backstopped.

Please just let one of these banks fail. A few more will. Lots more should. And then maybe we’ll see them act with any sort of prudence.

Three banks failed in the last week. But it's not good for depositors to take a haircut because of that. We can work it out without anyone having to pay for it except the banks' executives and shareholders.

The bank did fail?

What the hell else are they supposed to do with the assets that are left in the bank? Giving them to the people the bank owed money makes a lot more sense than lighting them on fire or whatever. Do people think that the FDIC/government funds end up being a significant portion of the money that goes to the depositors or something?

I'm not sure what you imagine FDIC does with the bank's seized assets. But let's say you think they should be vanished some reason, and good for nothing.

Hundreds of thousands of employees from tens of thousands of small businesses aren't getting paid salaries for the last 1-3 weeks. And aren't getting paid this week. And very likely are out of a job. Same for those businesses vendors and subcontractors. Hundreds of thousands left without a health care plan with two weeks notice because premiums will go unpaid and afterall the employer is the true contractor of the plan, if they go out of business because most of their cash deposits were just destroyed. That seems bad.

What sort of influence levers do these depositors have over their bank's investment policies either before of after the fact? It seems pointless.

How about we expect FDIC to sell the assets at market value and then expect companies to take the 30 % cut in assets over 250k.

No one is suggesting anyone burn svbs assets. Only that we do not print more money to make up the difference between the face value and the market value

>How about we expect FDIC to sell the assets at market value and then expect companies to take the 30 % cut in assets over 250k.

Why should a bank's depositors take haircuts before its bondholders and shareholders?

>Only that we do not print more money to make up the difference between the face value and the market value

The difference is made up by FDIC special assessment on banks.

> Pretty clear who this system serves.

A bailout is when they save the bank owners. The SVB owners lost the bank. There's no happy result for them.

If you had your deposit for the home in Silicon Valley Bank, it would be serving you. It would probably suck if you saved that up for retirement or a mortgage, and lost it. In that scenario would you be saying how great it is because it showed the government really served you?

Bank runs are a real thing that could ruin you wherever you're banking. If the large accounts realize that that smart move is to pull their money every time Peter Thiel yells fire, because they are unprotected, other banks can go under too--maybe yours, or maybe the bank where your company's payroll funds are!

> The SVB owners lost the bank. There's no happy result for them.

Some of them did get bonuses that day - of course then they lost their jobs. I'm not sure if there's a mechanism to claw back excess bonuses, but if SVB goes through bankruptcy after this it should be possible.

To many of us, a bailout is whenever the consequences of one's decisions/actions are set aside to avoid the logical negative outcome they would have otherwise experienced. What makes this more galling[1] is the fact that this new platinum FDIC coverage plan doesn't cover everyone at every bank, merely those who are anointed as 'systemic risks' (way to put a new label on 'too big to fail') Then to make it sound like this is all being paid for by all the other benevolent banks is just insulting.[2]

[1] Beyond the group primarily benefiting are exactly the group who should well understand something as basic as FDIC coverage limits and supplemental insurance.

[2] While it is technically true that the taxpayers will not be directly footing the bill, they neglect to mention that as soon as said taxpayers put on their consumer hats, they will in fact be paying for this in the form of increased fees/decreased interest rates on deposits/increased borrowing interest rates, no matter how slight.

but the depositors aren't the ones whose actions caused the consequences... (well, you know what I mean).

The bank (which took actions) faces the consequences of no longer existing.

The customers don't lose their money.

Their decision and action was to deposit in excess of the FDIC insured amount without supplemental insurance that was their responsibility to have or ensure their bank provided. The reality of the situation is that those who did so are now being retroactively granted supplemental deposit insurance after a loss and free of charge. The rest of us are paying for this gift courtesy of the government... again. (sure not as taxpayers, merely as consumers)

If we accept that the purpose of that FDIC insurance in the first place was to prevent bank runs. then, this "gift", is really the gift of stable, reliable banks. In general, this benefits us all.

What we see at these banks is that the large shareholders themselves have enough impact to cause a bank run, and they don't have the security of the FDIC to fall back on. So doesn't this show that the FDIC insurance was never enough to do what it was supposed to? What is being done here is breaking the game-theory payout structure that causes bank runs in the first place. It will prevent the same bank-run contagion individual investors are susceptible to from happening with larger investors. If we accept that the 250k insurance is worthwhile, then this seems good for the same reasons.

If your objection is that depositors were not paying to properly insure themselves, then you should be happy with what is happening--depositors will be forced to pay to insure themselves via the bank, and bank service prices will reflect the cost of being properly insured. Shouldn't we all have been paying the price of properly insured banks all along as consumers, anyway.

Isn't this a move in the right direction?

FDIC insurance was never intended to cover everything, hence the limit. It was designed to ensure that the general public[1] could have confidence that their deposits were safe. Larger players were also covered... up to the same limit. That is fair and reasonable. For those with significant assets supplemental deposit insurance products are a thing, just as home and auto insurance is, and these people/companies opted not to purchase it or otherwise prudently manage their money given the very well known limits of FDIC coverage.

Why should I be happy that the rest of us are now being volunteered to pay for insurance coverage for the group most able to understand the risk they were taking and pay for it themselves? If that weren't bad enough, this new coverage only applies for some banks. This is exactly the socialization of losses that so infuriates the general public. Not only are we paying for it, albeit indirectly, but most of us aren't even eligible for it ourselves.

This is yet another move in the exact wrong direction.

[1] i.e. the majority of individuals and small businesses who tend to be less sophisticated. As a result this quite easily understood system was put into place. I also don't buy any argument that something average Americans understand is just too complex or arcane for a group of largely 'qualified investors' and VCs.

> Why should I be happy that the rest of us are now being volunteered to pay for insurance coverage for the group most able to understand the risk they were taking and pay for it themselves?

Because, now you don't have to worry about all the banks collapsing with run-contagion, which is a problem with large enough scale (collapsing the economy) that it does affect you.

You should be happy in the way an apartment's occupants are happy when the fire department puts out a fire in a different apartment in the building, even though it "didn't affect my apartment."

> You should be happy in the way an apartment's occupants are happy when the fire department puts out a fire in a different apartment in the building, even though it "didn't affect my apartment."

We're being spoon-fed the not-a-bailout rhetoric by a bunch of pyromaniacs. Your analogy would be great were it not the case that this is the nth case of arson. We put arsonists in jail for doing things that put us at risk, why are banks different?

The banks mismanaged their risk and here we are looking to blame lack of regulation and the government because it let an arsonist run amuck.

I see no reason why we shouldn't all open a bank, be imprudent, and ask for a bailout, citing system-risk to the financial system should we not get it.

> I see no reason why we shouldn't all open a bank, be imprudent, and ask for a bailout, citing system-risk to the financial system should we not get it.

How is that a good plan when you would lose the bank? The owners of SVB lost everything!

It literally can't be a bailout [of the bank] if the bank ceases to exist:

>an act of giving financial assistance to a failing business or economy to save it from collapse

It could be called a bailout of the banking system or of the American economy - but it's not bailing out SVB by any measure.

You’re right, they aren’t. They are being used as meat shields for the banks failure. They are used as collateral damage because it is absolutely unfathomable that a bank use deposits to hedge against interest rate sensitive bets.

Yet here we are. Another round of bailouts that this time are rationalized as “not a bailout” because the bag holders, through no fault of their own, depositors, are the ones left holding the bag. A bank run was produced and in the name of financial and systemic risk avoidance, the free market finds itself, yet again, in need of a not-a-bailout backstop.

Other commenters stating that “the banks will pay, not the tax payers” need to get their heads out of the sand.

Except if fdic simply distributed assets, most depositors would not lose everything, just around 25-30 percent.

Not sure why people are acting as If, without government intervention, depositors would lose everything

Svb is insolvent today but they weren't assetless

"Another bank is getting a bailout"

No they are not. The shareholders and bond holders are getting wiped out. It is only the depositors that are being made whole. This is not like 2008 where they loaned cheap money to banks to keep them afloat but allowed the owners to remain.

Except they are exactly loaning cheap money to all the banks that have not yet failed while claiming moral superiority for letting svb fail

Wall Street — not taxpayers — will pay for the SVB and Signature deposit relief plans

https://www.cnbc.com/2023/03/13/wall-street-not-taxpayers-wi...

They will not. They will pass the cost on to the end consumer. You seem to mosunderstand how finance works. When you're the middleman, you have no problems. Only the consumer does.

Competition between banks reduces prices the same way it always does.

The banks that failed in the last week were closer to monopolies than most banks and it doesn't seem like it helped.

There is no evidence of a “bailout” here or anywhere else in public. Post it when you have it.

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