Other laws, which have nothing to do with depositors and how to treat them. I’m confused as to why you think these two issues are linked.

I would hope these execs are prosecuted and any bonuses clawed back but that would be under the purview of a different agency (sec) not fdic, and is not an immediate concern, whereas a massive financial shock and 100s of companies closing due to lack of funds is.

I’m not a lawyer, but it’s unclear to me - a random internet observer - that anyone performed anything illegal. It strikes me more as a bet gone colossally wrong, basic human mismanagement, capitalism in action, etc.

Depends on the deals with startups and their founders. Look up tied selling.

I think the implication is that if you make depositors take some of the risk then they'll be more proactive in their oversight of their banks' executives. I'm not sure how realistic that assumption is in practice though ...

In practice, they yell for what's happening - making depositors whole through government means. Or maybe additional regulation.

Which plan exactly? Yellen specifically said they have no interest in bailing out the bank itself and only care about depositors.

> “Let me be clear that during the financial crisis, there were investors and owners of systemic large banks that were bailed out . . . and the reforms that have been put in place means we are not going to do that again,” Yellen said on Face the Nation.

> “But we are concerned about depositors, and we’re focused on trying to meet their needs.”

I think there’s confusion in this thread, as some are advocating that depositors be made fully whole, and some are interpreting Yellen’s comments to mean that’s what will happen.

Aren't the execs in this case losing the vast, vast, vast majority of the money they old in the bank? I haven't seen anything that makes it seem like they're getting out of this unharmed, and especially not at anyone else's expense.

I also don't know how refusing to make depositors whole would disincentivize bas behavior by execs, anyway? Seems like two unrelated issues.

The depositors may have been able to borrow money at excessively favorable terms. For example, the bank lending money to businesses that otherwise would not have been lent to, or lent to at a higher interest rate. Or home mortgages for the business’s employees at lower rates, subsidized by the bank’s mismanagement (taking excess risks).

How would punishing depositors disincentivize this behavior from executives?