If a lending facility, only available to banks, at par for assets that are under par is not a bailout…

What would you call it?

It's not allowing the bank to continue to operate under its current owners. Equity holders are likely getting zeroed and debt holders are likely taking a haircut. It's deposit insurance, not a bailout (at least in the sense of how the term is normally used), and where the money is coming from is irrelevant to that.

Those are not the terms of the BTFP. Nowhere does it say that to access this facility you must go under FDIC receivership and wipe out stockholders and bondholders.

It’s not available to banks, only to used-to-be-banks.

False. Check the linked press release in my parent comment - the BTFP is available to all banks and allows them to use their under par assets as collateral for loans at par from the Federal Reserve.

“ Borrower Eligibility: Any U.S. federally insured depository institution (including a bank, savings association, or credit union) or U.S. branch or agency of a foreign bank that is eligible for primary credit (see 12 CFR 201.4(a)) is eligible to borrow under the Program. “

Fair. Thought you were talking about making SVB depositors whole.

I’d call the BTFP a mechanism to stabilize the banking system in the US, given rising interest rates. I guess I don’t care as much about the semantics, though.

It wipes out losses accrued up to March 12, 2023 on eligible securities, for one year. It's taxpayer funded. Terms are super generous: only a 10bp premium. It's at least a bailout for one year. It may or may not get extended.

It also works against the Federal Reserves stated policy of shrinking their balance sheet due to inflation.

I do think it's somewhat clever. It basically lets the private banking sector control the pace of QT. If liquidity dries up somewhere in the system it does a one-year targeted QE.

I'd say it's bailout-y to value collateral above market value, but isn't totally free money and we haven't seen all the terms for it. At least the Fed is safer holding long term bonds than anyone else.

> If a lending facility, only available to banks, at par for assets that are under par is not a bailout… > What would you call it?

Obviously I'd call it a loan.

Depositors are just shareholders with higher priority and an apparently unlimited (previously capped at 250k) insurance policy

Unlimited insurance AND still keeping the profits from the juicy interests.

> Planes wouldn't have stopped to exist, cars wouldn't have stopped to exist. > The entities would have disappeared and new ones would get created.

That seems unnecessary considering how many jobs were at stake.

The airlines got bailouts specifically because they had union contracts that wouldn't have survived otherwise. It was for the workers.

Though, planes probably would've ceased to exist eventually, they need continual maintenance.

Isn't bailing out startups who pay employees a similar position?

Only if unemployment in the startup sector was a big problem and they were unionized.

How about, the government simply take an equity position in these companies. That way, when the inevitable unicorns come along, they can make the VC profit. Instead, the government is simply taking a pure loss... for what? Literally, an equity position is a net win. The loss is capped out at the equity position (which they're already losing now), while the gain is unlimited. Sure, there is every interest in protecting workers. But we're also protecting shareholders in these companies, and eliminating their risk, while not taking any of the reward. When these shareholders make money on the startups, they will be first in line to demand low taxes and lauding the 'free' market. How silly

Taking an equity position in a failing company that needs a bailout is obviously dumb. You want equity in the ones that don't need bailouts, i.e. you want a social wealth fund.

We the people don't need equity to make money from companies growing, though; we have income taxes.

Taking an equity position in all the startups that are banking at SVB is not a failing proposition at all. You misunderstood what I'm saying. I'm saying that the fed is bailing out thousands of companies that have huge upsides. By keeping those companies in business via the fund transfer, the fed is allowing the founders / investors to make a huge upside, while retaining no right to the upside. The fed just eats the loss. I'm saying, in exchange for providing liquidity for employee wages and invention (the supposed social goods we're paying for) the government should take an equity position.

In no way do I think the government should own SVB's assets, which is what is actually happening here, as the government is going to eat the cost of retaining SVB's assets while insuring them at full face value despite that being 15B over market value right now.

> we have income taxes.

Alas the investors and companies being bailed out are not known for being very good at paying those.