Yes, they were, that's why the systemic risk exception was invoked for them.
> but they didn't need TARP
They needed the systemic risk exception and their own specific, $20 billion capital injection and government loss protection bailout plan very similar to Citigroup's to be announced (the announcement itself stabilized things enough that they ended up not needing the bailout, which also happened with Wachovia’s before Citigroup.)
If it fails, you can restart and recreate a bank, but you, your partners and your friends keep all the profit and privileges that you collected before the failure.
All that at the expenses of the government.
Your main task is to not fail too early, so you can recoup your initial investment (and if it can last forever if you are lucky / well-managing the risk, then better for you!)
Better to just ban such executives from the banking industry and set up better monitoring of banks to catch those that are trying to pull a SVB.
That would not be what I would argue for, but at 10% haircut for all depositors would create a nice incentive for reverse KYC.
* I don't really know if we should blame them for that. Who could have expected interest rates to rise so sharply, much less anticipate all the consequences from it doing so?
You invest $1.
Other people deposit $50.
You take $51 to a Las Vegas roulette table and bet it all on black.
50-50 chance there's $102 afterwards and shareholders and employees get to share most of the $51 gain; 50-50 chance there's $0.
Taking outsized risks with other peoples' money is a great gig for both stockholders and executives. We normally prohibit financial services firm from engaging in this kind of behavior, because the economic incentives favor outsized risk.
Even if depositors lose 5%. 5% that they shouldn't have earned because of the ultra high-risk position taken, maybe it's from them it should be taken...
There are plenty of small banks that didn’t ignore when Powell/the Fed were repeatedly saying “inflation ain’t over, interest rate hikes are coming.” We talked about this in another thread. What SVB did wasn’t essential, smart, innovative, etc. There is a reason they are crumbling so catastrophically. And I’ll give you a hint: it wasn’t due to a bold vision or new ideas or being disruptive or whatever.
Simply put: SVB was reckless and went against known information.
>Unfortunately, SVB blew its top off. But the system itself is good.
Yes. Canadians who brag about how none of their banks had to be bailed out in the 2008 crisis are a) wrong (they received tens of billions from Ottawa, and US TARP money), and b) don't realize that the Big Five Canadian banks have far, far, far more market share than the US's Big Four. As you said, there is no equivalent of a Silicon Valley Bank in Canada. There are no regional banks whatsoever; no smaller player that may be more friendly to startups, or otherwise more flexible, than the Big Five.
Let me repeat: Canada lacks the equivalent of regional banks, and that's a problem for entrepreneurs looking for banking (let alone loans) for new ventures.
Canada also had its own duration mis-match crisis with Asset-Backed Commercial Paper where debtors expected to just roll over the paper every 30-45 days... until they couldn't and it froze up. Took a decade to unwind.
https://www.advisor.ca/news/industry-news/lesson-to-learn-fr...
> There are no regional banks whatsoever
Sure there are. Laurentian Bank is almost entirely based in Quebec. National Bank of Canada has almost all of its branches in Ontario, Quebec and NB.
Then there are the credit unions which are almost entirely provincial (with a riskier backstop than that of US credit unions).
Source: https://www.canada.ca/en/financial-consumer-agency/services/... (and the marketing campaigns of the credit unions)
That's inaccurate. They don't the market share small US banks do collectively, and none of them are particularly focussed on tech startup, but they do exist, alongside credit unions - https://en.wikipedia.org/wiki/List_of_banks_and_credit_union....
The ATB seems particularly of note - directly owned and backstopped by the Alberta Provincial government, has ~15% of banking in the province.
Wells Fargo/BoA are "too big to fail" institutions in the United States.
They got significant back hand, handshake deals, from Washington institutions to not only stay afloat, but for hundreds of little issues.
In essence, the FDIC is a well crafted "redistribution," of all the under the table benefits Wells/BoA get from lobbying the Feds, to the smaller banks.
The US has a deep interest in keeping its smaller banks alive.
I can say, in Australia, the small business lending market is hugely overvalued due to monopolist price gouging by a handful of large institutions.
In Canada, I'm told the situation is similar. Costs to small business are immensely higher than the United States.
Banks similar to Silicon Valley Bank are essential because they undercut BoA, and prevent the "Canada" situation.
Unfortunately, SVB blew its top off. But the system itself is good.