Joint Statement by the Department of the Treasury, Federal Reserve, and FDIC

Re:Joint Statement by the Department of the Treasury, Federa... by lupire on Sunday March 12, 2023 @09:21PM (#35129360)

Shareholders lost all the money they spent on capital. That’s a lot. Exec employees extracted a lot, and in a just world that would be clawed back.

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Re:Joint Statement by the Department of the Treasury, Federa... by mlyle on Sunday March 12, 2023 @09:37PM (#35129531)

Imagine this scenario:

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.

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Re:Joint Statement by the Department of the Treasury, Federa... by rvnx on Sunday March 12, 2023 @09:37PM (#35129527)

But wait, I see that SVB was paying 4.50% of interest per year to depositors (cf. https://www.svb.com/account/y-combinator )

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...

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Re:Joint Statement by the Department of the Treasury, Federa... by khuey on Sunday March 12, 2023 @09:40PM (#35129567)

A "money market" account means the money is invested in extremely short term government or corporate bonds. SVB probably wasn't paying that 4.5%, they were just passing through what the market is paying for money market funds right now.

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