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Comment by zhoutong | Hacker News Reader

Effectively there are two banks (Silicon Valley Bridge Bank, N.A. and Signature Bridge Bank, N.A.) with de facto unlimited FDIC insurance, as there's explicit guarantee for all existing and new deposits.

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There is no way this is permanent, right? What's the end goal of this? Rebuild confidence in SVB and then return to normal insurance?

I think the first step they have to do if there is any hope of a successful relaunch, is a full rebrand.

My guess is they are probably looking for a buyer, who will likely roll everything into their offering. So, the more they can get back, the higher the sale price.

Which makes for fewer banks and more consolidation. That sounds like it has its own risks, echos of "too big to fail"

Surely this is the ideal time for planning to split SVB into multiple banks, if the actual intent is to diversify risk (well is it?).

Why do regulators never split banks up? [0] For people who talk so much about managing risk. Reminiscent of GHW Bush's complaint about eating broccoli.

Also, talking about concern about job losses and wider economic impact, compare to in 2020/1 when Congress was fetishizing daily about stimulus packages to save the airline industry, yet long-distance coach companies Greyhound/Boltbus and Megabus were simply quietly allowed to cease business.

[0]: https://www.americanbanker.com/news/regulators-willing-to-br...

> 1/17/2023 The Office of the Comptroller of the Currency and other regulators would consider breaking up big banks that repeatedly fail to correct bad behavior, according to acting Comptroller Michael Hsu.

> Though financial regulators have long had the power to split up banks for incessant violations, Hsu's remarks at the Brookings Institution on Tuesday were the most explicit warning in recent memory of regulators' willingness to break apart large, chronically delinquent financial institutions.

I heard that they often split them for sale, so no single bank has to carry the full risk of another bank run because of low customer confidence.

I think they should reuse some brands that are available again instead of wasting a new name. I could suggest MCI, Charter, Blackwater, etc as all names that would be befitting for these "oops" rebrands.

Somewhere between "$250k" and "infinite" would have been less moral hazard. Feels like we've set a dangerous precedent, but only for depositors who are politically connected and can instill panic. When does the de facto unlimited FDIC insurance expire/ When does Silicon Valley Bridge Bank go back to normal?

Second: IIUC, any shortfall in making SVB depositors whole will come from a levy on the rest of the banking system (and maybe small (<$400m) clawbacks from execs' share sales). How much will that levy cost the rest of us? Can it be legally or politically challenged? Are any Congressmen challenging it? (Where are the libertarian Republicans on this?)

When was the last time non politically connected depositors lost money from their checking accounts?

The only “moral hazard” being created here is encouraging people to deposit money in smaller banks.

If the govt hadn’t created the “moral hazard” then people and businesses would simply have chosen to do all their banking with the much safer big banks like Chase and Citibank.

The reality is that Americans don’t want all banking to be concentrated in the hands, but smaller banks are significantly more risky and inefficient. Depositing money in the smaller banks and not just the top handful is the “moral hazard” that has been created by government intervention.

> When was the last time non politically connected depositors lost money from their checking accounts?

Many times. The typical uninsured depositor in bank failures from 2008 to today got about 75 cents on the dollar.

Depositors in IndyMac in 2008 got 50 cents on the dollar.

> The only “moral hazard” being created here is encouraging people to deposit money in smaller banks.

Or everyone, nationwide, starts moving every penny they have into whichever bank, anywhere, offers the highest interest rates, without regard to how they accomplish that. Let's call it "risk intensification".

The only appropriate thing to do would be to levy a haircut on only the uninsured deposits elsewhere in the banking system. And that's already unfair because it should be retroactive to some degree.

The rest have already been paying for this insurance all along. Wouldn't make sense to levy a fee on fire insurance policyholders when someone without fire insurance has their house burn down.

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