Re:Joint Statement by the Department of the Treasury, Federa...
by belter on Sunday March 12, 2023 @07:03PM
(#35127708)
Ok. Lets say next week a larger bank, is shown to have made some other risky bets...Are you still in to make all depositors whole? Let's say JP Morgan or Goldman Sachs?
Re:Joint Statement by the Department of the Treasury, Federa...
by jnwatson on Sunday March 12, 2023 @07:06PM
(#35127771)
Large banks have different rules and are scrutinized more carefully.
Re:Joint Statement by the Department of the Treasury, Federa...
by belter on Sunday March 12, 2023 @07:15PM
(#35127917)
But would still love to know, what the course of action in that case should be...
Re:Joint Statement by the Department of the Treasury, Federa...
by blackoil on Sunday March 12, 2023 @08:50PM
(#35129005)
That will break the economy, so Congress and Fed will have to jump in to provide the liquidity required. Like in 2008
Re:Joint Statement by the Department of the Treasury, Federa...
by luckylion on Sunday March 12, 2023 @06:57PM
(#35127620)
> Banks pay premiums to the FDIC for their insurance, and it's a requirement of all chartered banks.
Do they have special rules for when the FDIC decides to retroactively insure some bank's deposits for more than $250k per account holder? Because now everyone's insurance premiums will go up to cover this, won't they?
Re:Joint Statement by the Department of the Treasury, Federa...
by reissbaker on Sunday March 12, 2023 @07:03PM
(#35127710)
What? The FDIC controls the premiums, because the FDIC is the insurer. Moreover, the FDIC is not actually paying out any insurance claims here! SVB is being acquired, and the acquirer is providing access to funds on Monday, not the FDIC. There is no cost to the taxpayer here, and the FDIC is not raising premiums as a result of this either. It didn't pay out any claims (and wouldn't likely raise premiums even if it did).
Re:Joint Statement by the Department of the Treasury, Federa...
by luckylion on Sunday March 12, 2023 @07:06PM
(#35127762)
Not the taxpayers, all the other banks which are funding FDIC have to pay:
> Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law.
So even those that were not insured will now be retroactively insured, and the better-run banks will have to pay for it, won't they?
This is not some conspiratorial secret. Banks pay premiums to the FDIC for their insurance, and it's a requirement of all chartered banks. The FDIC has the right to backstop deposits in excess of the deposit limit by invoking a "systemic risk" clause (I'm not sure exactly which law this comes under, whether it's some of the original laws that created the FDIC, or more recent post-financial crisis updates). When the FDIC fund gets depleted, they have the right to invoke a special assessment against banks.
> Now expect a contagion effect it next week
The whole point of doing this is to prevent a contagion. The reason there was a bank run against SVB was a mix not just that their asset values had deteriorated (that was well known for some time), it's that their non-diversified deposit base of VC-funded start ups have gradually needed to up their withdrawals since early 2022. SVB would have survived if there wasn't a run on the bank, and the whole purpose of this action was to prevent further runs by saying that deposits will be protected.