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Comment by jmclnx | Hacker News Reader

I could not get into either articles, but..

One can hope at the very least all the execs bonuses for the past 2 years need to be refunded to help pay for what the FDIC needs to pay out.

Why ? Yes, they said the Taxpayer will not pay, but that is a kind of lie of omission. The Fees Banks Pay the FDIC will be raising, that was stated. But where do these fees come from ? You know who, we will pay higher fees on our Bank accounts and higher interest rates on Loans and probably Credit Cards.

None of the journalist asked or brought up that point. So yes, the Taxpayer will pay for so they would not loose the amounts over 250,000. Again, no risk for the well-to-do but "main street" pays.

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In their big announcement, the Fed did say that ultimately all costs will be recovered from the bank's remaining assets (and will not fall on the taxpayer).

The government is still providing liquidity and coercive muscle -- so it's still a bailout, plain and simple. Despite the attempts we are seeing to paint it otherwise.

The Fed is saying it will be funded by the banks remaining assets and the "banking system" which assumes higher FDIC premiums, which the banks will likely transfer to customer as additional fees. The taxpayer is definitely paying for it (just with extra steps).

Not higher fees. The FDIC will use a special assessment like they did in 2009. This special assessment was 5 basis points last time. 5 cents on $100. Hardly a major expense to pass on. Banks are highly competitive and those that do pass on the assessment will lose customers to those who eat the 5 basis points.

By that definition literally everything is taxpayer funded and thus taxpayer funded is a meaningless term.

> it's still a bailout, plain and simple. Despite the attempts we are seeing to paint it otherwise.

How do you define a bailout? The shareholders and bondholders of the bank lose everything. The customers (depositees) get their money back. You consider that a bailout?

How do you define a bailout?

Per what sources like Investopedia, Wikipedia, and all the major English dictionaries say. None of which limit the term to protections for investors.

What happened to the executives, board, and shareholders? I honestly don't know as I haven't followed that closely, but to me those are the most important three questions, and in that order, because that determines the level of moral hazard.

I'm less concerned over semantic arguments of what technically constitutes a bailout. Personally a stable banking system is important to me, as is accountability for risky investment strategies. I have a hard time seeing the situation is black and white enough to jump to a conclusion on exactly what the delta is between what happened and what should have happened.

The executives have been fired, the board has been fired, the shareholders have been zeroed out.

The shareholders are currently suing the board and the executives for running the bank into the ground.

Ten years from now, once all the long-term investments settle, if there's any money left over, the shareholders might be entitled to two turnips and cup of coffee from Uncle Sam.

As far as 'The guilty getting their just deserts', this is a rare example of the world mostly working in a just way.

Really?

There are jurisdictions where executives responsible for this sort of failure would be shot and have their assets confiscated.

Neither is likely in this instance.

It sounds like you're advocating for summary execution. That's not really done in the civilized world. What do you really mean?

I think he's arguing for going beyond zeroing out the shareholders.

That's an uncharitable reading.

There'd be a trial before their assets are seized and they're executed.

If being civilized has led to clown world, perhaps alternate modes of civilization should be instituted.

I believe the entire executive is without a job. Likewise with board. Shareholders will be able to get what they can that is left over after depositors are made whole, but that seems like it will be effectively zero.

As for consequences beyond that? Unsure.

Hopefully the CEO (now on his second failed bank) doesn't "fail upwards". I mean it's one thing to have a poorly performing bank on your resume... it's another to have two banks forcibly closed by the FDIC.

Wiped out.

It's a bailout of the creditors. The bank itself is evaporating.

It's not a bailout because the stockholders were wiped out.

I guess you can say that customers were bailed out, but the bank was not.

and the govt made a profit from TARP.

I don't want the US government to be driven by a profit motive any more than it already is...

>> and the govt made a profit from TARP.

TARP had three players:

TARP Fund: via The US Government (fiscal),

POMO/QEx: via The Fed (monetary), and

The Banks (those bailed out)

TARP "made a profit" by the Fed printing money and buying assets at way above market value from the banks. It didnt cost anything because we just printed the money, but there was a cost...inflation. We just spread the cost secretly to everyone.

Real impacts of printing money: Houses jumping in value by 40 or 50%, meanwhile:

https://www.costar.com/article/266860380/most-us-households-... Most US Households Can't Afford a Median-Priced Home

https://www.nahb.org/blog/2022/03/36-million-households-cant... "36 Million Households Can’t Afford a $150,000 Home"

Just jumping in to point out that to make the profit from TARP, the government had to distort the economy in ways that won’t be fully understood for maybe 30 more years.

Yeah, I don't get this "It didn't cost the taxpayers a cent, so really it's all good, man, and not really a bailout" line that some people keep putting out, at all.

> govt made a profit from TARP

That's like selling your used car for a "profit" during the recent supply chain issues caused by the pandemic. Sure, you might have gotten more dollars from the sale than you did when you purchased it. But those dollars are worth a lot less now, and you would not be able to repurchase an equivalent car with those dollars.

The TARP profit line is how they deflect some of the outrage from yet another bank bailout. "See, it didn't cost you, the taxpayer, anything!".

They are not profiting in the SVB bailout. The available SVB assets aren't increasing in value unless interest rates go back to zero.

The assets do not have to increase in value, the face value on them is enough (if what I am reading is right), but that is if you hold the bonds until maturity. SVB's problem was that suddenly they could not wait for maturity their depositors were asking for their money right now.

Since most of the money is in treasury bonds, the government can either wait until then, or maybe nullify the bonds that are now in their hands, since it is now the government owing the government money (there is probably some complexity there, but I don't know my way though it). In the mean time the depositors' money needs to come out of the FDIC, and that is probably going to increase costs for banks (and thus their consumers), until things can be worked out.

Do different banks pay different amounts into FDIC insurance based on how risky the FDIC considers them? If so then it’s really the FDIC adjusting their risk model to treat most mid-size banks as likely to cause systemic failures if they fail, and requiring the riskiest banks to cover the cost for that updated model based on how likely the FDIC believes they are to fail.

I don’t know that pricing insurance based on the actual cost of the potential external harm can really be considered a tax increase.

Yes. Banks are evaluated for their risk and pay assessments based on their risk scores and total deposits (give or take). The riskiest banks pay the most.

What upsets me the most is that the execs gave themselves bonuses in to their personal FDIC insured accounts, essentially writing a bad check for free bailout money, after the bank went negative.

Source?

SVB had a bonus schedule like every other company, and paid out those bonuses to all eligible employees. The payments were for work done in 2022. There is literally nothing to see here.

https://www.cnbctv18.com/market/silicon-valley-bank-employee...

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