This is all so silly.
You’ve got the 4 musketeers on twitter sewing fear, begging for the not a bailout bailout all while the rhetoric for student relief is summarized by “ bootstraps, you have em? Personal responsibility, you got it? “
Now they break a bank because they mismatched their maturity dates and risk and they get their bailout not one week later?
Pretty clear who this system serves.
If you want to rant against the customers of a bad bank getting bailed out, that's fine, but the bank wasn't bailed out, it was wiped out. The new bank is the owner of the old banks assets and responsible for the old banks debts. The owners of the old bank have nothing to do with the operations of the new bank.
Banks will continue to be able to make horrendous decisions and not have any fractional reserve requirements. Executives will continue to get absurd performance benefits until losses are realized. Depositors won’t have to care that the institution where they dump millions of dollars is run by someone doing their best financial John Wayne Gacy impersonation. And we’ll all suffer because institutionally these horrendous investments are backstopped.
Please just let one of these banks fail. A few more will. Lots more should. And then maybe we’ll see them act with any sort of prudence.
What the hell else are they supposed to do with the assets that are left in the bank? Giving them to the people the bank owed money makes a lot more sense than lighting them on fire or whatever. Do people think that the FDIC/government funds end up being a significant portion of the money that goes to the depositors or something?
Hundreds of thousands of employees from tens of thousands of small businesses aren't getting paid salaries for the last 1-3 weeks. And aren't getting paid this week. And very likely are out of a job. Same for those businesses vendors and subcontractors. Hundreds of thousands left without a health care plan with two weeks notice because premiums will go unpaid and afterall the employer is the true contractor of the plan, if they go out of business because most of their cash deposits were just destroyed. That seems bad.
What sort of influence levers do these depositors have over their bank's investment policies either before of after the fact? It seems pointless.
No one is suggesting anyone burn svbs assets. Only that we do not print more money to make up the difference between the face value and the market value
Why should a bank's depositors take haircuts before its bondholders and shareholders?
>Only that we do not print more money to make up the difference between the face value and the market value
The difference is made up by FDIC special assessment on banks.
No they are not. The shareholders and bond holders are getting wiped out. It is only the depositors that are being made whole. This is not like 2008 where they loaned cheap money to banks to keep them afloat but allowed the owners to remain.
https://www.cnbc.com/2023/03/13/wall-street-not-taxpayers-wi...
The banks that failed in the last week were closer to monopolies than most banks and it doesn't seem like it helped.
A bailout is when they save the bank owners. The SVB owners lost the bank. There's no happy result for them.
If you had your deposit for the home in Silicon Valley Bank, it would be serving you. It would probably suck if you saved that up for retirement or a mortgage, and lost it. In that scenario would you be saying how great it is because it showed the government really served you?
Bank runs are a real thing that could ruin you wherever you're banking. If the large accounts realize that that smart move is to pull their money every time Peter Thiel yells fire, because they are unprotected, other banks can go under too--maybe yours, or maybe the bank where your company's payroll funds are!
[1] Beyond the group primarily benefiting are exactly the group who should well understand something as basic as FDIC coverage limits and supplemental insurance.
[2] While it is technically true that the taxpayers will not be directly footing the bill, they neglect to mention that as soon as said taxpayers put on their consumer hats, they will in fact be paying for this in the form of increased fees/decreased interest rates on deposits/increased borrowing interest rates, no matter how slight.
The bank (which took actions) faces the consequences of no longer existing.
The customers don't lose their money.
What we see at these banks is that the large shareholders themselves have enough impact to cause a bank run, and they don't have the security of the FDIC to fall back on. So doesn't this show that the FDIC insurance was never enough to do what it was supposed to? What is being done here is breaking the game-theory payout structure that causes bank runs in the first place. It will prevent the same bank-run contagion individual investors are susceptible to from happening with larger investors. If we accept that the 250k insurance is worthwhile, then this seems good for the same reasons.
If your objection is that depositors were not paying to properly insure themselves, then you should be happy with what is happening--depositors will be forced to pay to insure themselves via the bank, and bank service prices will reflect the cost of being properly insured. Shouldn't we all have been paying the price of properly insured banks all along as consumers, anyway.
Isn't this a move in the right direction?
Why should I be happy that the rest of us are now being volunteered to pay for insurance coverage for the group most able to understand the risk they were taking and pay for it themselves? If that weren't bad enough, this new coverage only applies for some banks. This is exactly the socialization of losses that so infuriates the general public. Not only are we paying for it, albeit indirectly, but most of us aren't even eligible for it ourselves.
This is yet another move in the exact wrong direction.
[1] i.e. the majority of individuals and small businesses who tend to be less sophisticated. As a result this quite easily understood system was put into place. I also don't buy any argument that something average Americans understand is just too complex or arcane for a group of largely 'qualified investors' and VCs.
Because, now you don't have to worry about all the banks collapsing with run-contagion, which is a problem with large enough scale (collapsing the economy) that it does affect you.
We're being spoon-fed the not-a-bailout rhetoric by a bunch of pyromaniacs. Your analogy would be great were it not the case that this is the nth case of arson. We put arsonists in jail for doing things that put us at risk, why are banks different?
The banks mismanaged their risk and here we are looking to blame lack of regulation and the government because it let an arsonist run amuck.
I see no reason why we shouldn't all open a bank, be imprudent, and ask for a bailout, citing system-risk to the financial system should we not get it.
How is that a good plan when you would lose the bank? The owners of SVB lost everything!
>an act of giving financial assistance to a failing business or economy to save it from collapse
It could be called a bailout of the banking system or of the American economy - but it's not bailing out SVB by any measure.
Yet here we are. Another round of bailouts that this time are rationalized as “not a bailout” because the bag holders, through no fault of their own, depositors, are the ones left holding the bag. A bank run was produced and in the name of financial and systemic risk avoidance, the free market finds itself, yet again, in need of a not-a-bailout backstop.
Other commenters stating that “the banks will pay, not the tax payers” need to get their heads out of the sand.
Some of them did get bonuses that day - of course then they lost their jobs. I'm not sure if there's a mechanism to claw back excess bonuses, but if SVB goes through bankruptcy after this it should be possible.
Not sure why people are acting as If, without government intervention, depositors would lose everything
Svb is insolvent today but they weren't assetless
You live in one of the richest countries in the world and probably make 4x median income even for the US anyway. Move somewhere else if you want your money to go further.
Neither alone is enough.
_We're_ the financial and IP rights imperialists! If anyone's buying any countries on international markets it's us.
Sure they take the USD we print for them, but then what are they going to do with it? Keep it in US bank accounts.
Other than giving your 97% uninsured money to a place without checking its financial situation and pretending you're not just another creditor.
There are places with cheap housing in the US, generally not in the good jobs areas but if you're retiring that's not so much a problem.
* that's when people move out of their parents' house or decide to not have roommates anymore
All 3 are very highly connected with crypto / SPACs / VCs / any financial scam you can imagine during post-Covid bubble.
There are close to 0 'mom and pop' depositors in these banks.
So they also had some things people would think of as "regular" businesses, like local wineries, nonprofits, affordable housing developers etc. who were all in trouble.
(I think of all of those as rich people hobbies, but most people think farmers are salt of the earth working class types for some reason, so they have better images.)
One of the most painful ways to learn is in production, but if that’s what we have to do…
If you just want to take a random bank and set all its accounts on fire to reduce the money supply, that seems like a bad way to fight inflation.