The government should get 100% of the immediate cash it provides to cover the $250K per account. Hopefully with interest.
> Isn’t that a small price to pay to avoid a total collapse of the local and regional banking system?
No that’s the type of bankrupt logic (pun intended) that would create an even bigger financial crisis due to incentivizing bad risk taking by banks.
And SVB paying out depositors $.80 on the dollar isn’t going to collapse the banking system.
https://finance.yahoo.com/quote/PACW - Down 60% https://finance.yahoo.com/quote/FRC - Down 30% https://finance.yahoo.com/quote/SBN - Down 40%
Meanwhile huge bank stocks are up or unchanged
https://finance.yahoo.com/quote/JPM https://finance.yahoo.com/quote/WFC
Did these banks all make the same stupid decision as SVB? Unlikely but maybe. More likely though is the risk that people get spooked over SVB customers losing their deposits (even just 20%) and decide to move their money away from smaller banks like SVB to huge banks like Citi, Wells Fargo, etc. Personally if there were a chance I'd lose just 10% of my balance I'd make the switch, it's the only rational thing to do if other depositors are taking a haircut elsewhere. It's not going to collapse the entire banking system, just the local/regional one, which you see is already starting to happen.
I fail to see how burning most of grandma's life savings (and other innocent people who probably never experienced a bank run before) and allowing the collapse of regional banks is somehow better than backstopping depositors now and making much tighter banking regulation for smaller banks going forward to prevent this from happening again. Do we want the nation's banking infrastructure to consist only of 3 or 4 enormous banks or do we want the options that a lot of smaller local banks who are able to cater to the specific needs of their communities provides?
Then they can borrow at the discount window and wait out the storm.
Making a sob story about a 70 year old granny doesn’t change the facts.
And she wouldn’t take a $750K haircut. She’d get $250K guaranteed and her share of the remainder which is not going to be zero. Probably much closer to 80+% of the balance above $250K.
> If an enormous earthquake strikes one region causing billions of dollars of damage but you live on the other side of the country do you complain about the federal government spending your tax dollars to help those people rebuild?
If it’s going to be done with funds not allocated or aligned with FEMA then damn straight I’ll complain. Society does not have infinite money. If they want to increase funding for something then we have a process for that.