No evidence on my part of back this up, but assuming that the government _isn't_ implicitly involved in de-risking this for banks seems naïve. I don't think these organizations, not exactly known for their civic-mindedness or charity, would risk any of their own precious liquidity without assurances or incentives from the government.
~ Government Officials, on the horrifically unpopular '08 bailouts that nobody lets them forget.
The odds are quite good that the lesson learned in the last crisis was not to tell people what is going on. The US government has consistently responded to every crisis in the last ... 10? 20? ... years by turning on the printing presses. It is a real leap to say this time will be different. Why will it be different? It is a crisis. They're going to print.
I get that the optics of having the government loan money to banks is bad, but realistically, it was wildly successful.
The only change is that some smaller organizations might also get the same unspoken benefit that the big 5 already enjoy.
This keeps them competitive, and as the US Gov and many folks noted, if they did not do this, everyone would flee to the Big 5 and regional/community banking would be wiped out.
This is how it's being framed on many news networks as well. But I don't know if I quite buy it; maybe you can clarify.
The 2008 was considered "different" because it was essentially driven by a bunch of bad bets on sub-prime mortgages. In contrast, this current one is being framed as just ensuring depositors. But that assurance is needed because the banks made bad bets on the bond market. Are the two really fundamentally different?
Bank creditors aren't idiots, they can be persuaded to wait a few years for a $15.3 billion bumper profit if the alternative is losing all their money. The issue is someone is pulling out smoke and mirrors in a complex situation to pretend that everything is going ok. Probably involving, to stick to theme, money printing.
https://theconversation.com/russias-foreign-minister-got-lau...
Putin himself has absolutely, 100%, without question, very publicly stated they needed to go to war against Ukraine to defend themselves against Western aggression. He absolutely framed it as a completely defensive action. Those words aren't some misquote or mistranslation or taken out of context, they're hosted on the Kremlin's website.
I guess you don't consider Putin to be a Russian?
http://en.kremlin.ru/events/president/news/67843
https://www.atlanticcouncil.org/blogs/new-atlanticist/markup...
Please quit spreading lies.
Please quit gaslighting.
Who is the Kyiv regime? I guess to you they're not Ukrainians. Who's gaslighting, the person literally quoting what Putin says, or the one essentially arguing Putin isn't a Russian and the Kyiv regime isn't Ukranian?
The current Kyiv Regime == Western, to Putin. So "defending against Western aggression" is "defending against Kyiv regime" is "defending against Ukraine."
Please quit spreading lies.
You are.
You are continuing to imply that "Western" and "Ukrainian" are the same to Putin. While in your links, which I read, right near the top, there is a statement about "the fundamental threats which irresponsible Western politicians created for Russia consistently, rudely and unceremoniously from year to year. I am referring to the eastward expansion of NATO, which is moving its military infrastructure ever closer to the Russian border." Maybe read the whole thing again.
And please stop your gaslighting already.
As for what I think: I think that we, "the West", are playing a stupid and evil role in this conflict. Furthermore, we are spreading misinformation in order to manufacture consent among the public, often in an incredibly crude manner. I'm prepared to discuss this, but maybe one thing - you pick which - at a time.
If the special operation is having to defend against Western influence, and the Kyiv regime isn't Western, why is he shelling the Kyiv regime?
Your lie is arguing Putin never said they had to defend against Ukranian aggression. In my quote above, he talked about needing to act because of aggressive actions from the Kyiv regime. So either the Kyiv regime isn't Ukranian to you, or Putin did say they needed to defend against Ukranian aggression.
Putin feels the Kyiv regime is an extension of Western NATO influence, and he stated he had to act in defense against their aggression in DNR/LNR/Crimea. This is all in the speech I linked, not twisting any of his words at all.
So yes, Putin has absolutely argued he had to defend against "the regime in Kyiv", which I think most of the world would take to mean Ukraine. So it's pretty fair to say Russia phrased this as "defend against Ukraine", unless you are arguing the regime in Kyiv isn't Ukranian or Putin and the Kremlin aren't Russian.
Could you answer if you believe the Kyiv regime is Ukranian?
I'm not actually arguing that. However: Zelensky was elected largely by the voters in the eastern regions of Ukraine, and largely because he promised to bring peace to those regions. He has failed in that promise and betrayed his voters. Most likely because of Western influence.
>Putin sees the Kyiv regime as Western ... ... he says so in the speech I linked above.... etc.
I read the entire thing and I don't see it. Which paragraph are you talking about? Is it this one:
"...the leading NATO countries are supporting the far-right nationalists and neo-Nazis in Ukraine, those who will never forgive the people of Crimea and Sevastopol for freely making a choice to reunite with Russia. They will undoubtedly try to bring war to Crimea just as they have done in Donbass..."
because that's certainly not about "Ukrainians" in the sense that you keep on implying.
>Could you answer if you believe the Kyiv regime is Ukranian?
Let me try. The current Kiev regime is made up of Ukrainian nationals. However, it is no longer acting in the interests of Ukrainian people. It has become a sock puppet of the NATO countries. So I believe that it is "Ukrainian" in the same sense that the ruling party of China is "communist" or that Donald Trump is a "conservative". Hope that answers your question.
"Focused on their own goals, the leading NATO countries are supporting the far-right nationalists and neo-Nazis in Ukraine, those who will never forgive the people of Crimea and Sevastopol for freely making a choice to reunite with Russia."
"Any further expansion of the North Atlantic alliance’s infrastructure or the ongoing efforts to gain a military foothold of the Ukrainian territory are unacceptable for us." What foothold would he be talking about here if not a Westernization of the regime in Kyiv?
"...are supporting the far-right nationalists and neo-Nazis in Ukraine"
> because that's certainly not about "Ukrainians" in the sense that you keep on implying.
What nationality are those people who are those "far-right nationalists and neo-Nazis in Ukraine"? Isn't he referring to the regime in Kyiv and its supporters with this language? Is Zelenskyy not a Ukrainian? Are those people in the Ukrainian army with the Ukrainian flag on their uniforms not Ukrainian? What nationality are those nationalists supposedly fighting for? Talk about gaslighting.
If you dismiss what he is saying directly, and look for some obscure meaning instead, with some help of semantic distortion you will find what you want to find.
>What foothold would he be talking about here
Very obviously NATO foothold, that's the "North Atlantic alliance".
>What nationality are those people who are those "far-right nationalists and neo-Nazis in Ukraine"?... etc.
They are Ukrainians. And Ku Klux Klan members are American. But you can't interchange the terms willy-nilly. Eg it is wrong to say "Americans advocate the use of violence against people of colour and Jews".
> And Ku Klux Klan members are American. But you can't interchange the terms willy-nilly. Eg it is wrong to say "Americans advocate the use of violence against people of colour and Jews".
Those leading NATO countries are supporting the regime in Kyiv, the government headed by Zelenskyy, which he also "will never forgive the people of Crimea and Sevastopol for freely making a choice to reunite with Russia." Ergo, by Putin's own words, Zelenskyy == a far right nationalist/neo-Nazi. If I say a rectangle is a four sided shape with all right angles, and describe a shape with four sides and all right angles, I just called it rectangle without actually using that word directly, right?
This is very different from your example with the KKK, as the leaders of the KKK aren't currently the leadership of the US government. If the leadership of the US government was composed of largely KKK members and they started instituting KKK policies, I would agree with that statement. Are you seriously suggesting that Putin explicitly wasn't connecting Zelenskyy to the "far-right nationalists and neo-Nazis" here?
>Those leading NATO countries are supporting the regime in Kyiv, the government headed by Zelenskyy
Unfortunately, this is a misleading half-truth.
The truth (this is my opinion, but based on literally hundreds of hours of scouring the internet for information) is that:
1) Zelensky was elected because Ukrainians, especially Eastern Ukrainians believed that he would work to bring peace to Donbas;
2) For a year or so after his election, he actually tried to do that. The West disapproved and pressured him to change course, while the far right nationalists basically told him to f@#k off and made public death threats against him. I don't know if you understand Ukrainian, but at least skim these videos https://www.youtube.com/watch?v=_KxLuDpP4_w / https://www.youtube.com/watch?v=d5RRDnF7lKM to get an idea. I think Putin called Ukraine a failed state at that point.
3) After a while, Zelensky basically folded and let foreign backed parties and interests dictate Ukrainian policy. Ultimately leading to where we are today.
So it is not so much that "leading NATO countries are supporting the regime in Kyiv". but rather "the regime in Kyiv is a NATO puppet regime".
>This is very different ... Are you seriously suggesting that Putin explicitly wasn't connecting Zelenskyy to the "far-right nationalists and neo-Nazis" here?
I'm certainly not suggesting that, quite the opposite. He was connecting the two, just not in the way you imply. He quite rightly IMO is saying that Zelensky is carrying out the agenda of far-right nationalists and neo-Nazis. But not "Ukrainians", meaning the people of Ukraine in general.
As well as the broader “NATO moving up to our doorstep” justification, the more specific (as to timing) “Ukraine shelling and moving troops to prepare to follow up the shelling with a massive ground offensive against the DPR/LPR” excuse is regularly used by both Russian official sources and Russian proxies.
Russia has described them as Russian by identity and allegiance and responsibility of the R.F., even if not juridically (and has since purported to annex them juridically, as well.)
Putin also cited direct military threat by Ukraine to Russia generally (including nuclear threat), and invasion threat to “Russian” Crimea specifically, in his speech coinciding with the opening of the 2022 invasion.
"Western" = "Ukrainian"
"DNR/LNR" = "Russia"
"Threat" = "aggression"
Next, we will be "warmongering" = "peacemaking". Oh wait, this is already a thing. Along with "ignorance" = "strength".
Next thing I know you're going to tell me Autonomous Republic of Abkhazia is a real, sovereign country and totally not just Russia invading a neighbor.
Not sure of you are agreeing with what I said above, or disagreeing. Can you re-read the thread carefully and clarify?
Well, I had to look this up on Wikipedia, but in a nutshell, that is roughly correct. To be precise, Abkhazia is a de facto independent state, and has been since the Georgian-Abkhaz war of 1992. Russia only recognised its independence in 2008, probably in response to Georgia's plans to join NATO.
In 2008 the wizzes of the banking industry had made billions of bad loans. Who paid for it? Anybody who saved instead of spent and invested instead of speculated. In other words, almost all of us did. Once all the pluses and minuses are canceled out we’re all poorer for it. Saying anything else is putting lipstick on a pig.
I'm not sure that getting paid back by reinflating a bubble is the net positive you think.
https://fred.stlouisfed.org/series/WALCL
It sure seems to me that at least $1T stayed printed. Of course, that amount seems positively quaint now.
Looking at the Fed's balance sheet is a simple way to track the big picture.
In one instance, the fed took over assets to backstop troubled banks, in the other, it sought to increase the monetary base.
It’s not a “dumb trick” it’s basic monetary policy.
Other countries did less well out of the event. The UK still owns the emergency nationalised RBS. AIB blew up Ireland quite badly; Kaupthing even worse for Iceland, and so on down to Cyprus where the depositors were deemed to "dirty money" to get a bailout and actually took losses.
I also don't think people have considered what the alternative society of "contagion" would have looked like, where enough banks had failed that a significant fraction of companies could not make payroll and millions of Americans suddenly could not buy anything.
The best we got was the Volcker rule (RIP). and even that wasn't nearly enough. If you're "too big to fail" you're _too fucking big_.
Anyone who thinks 0% made sense for that long just thinks 0% makes sense. They probably aren't capable of spotting a situation where positive interest rates are sensible.
And that is all the incentive they need.
SVB isn't like the 2008 banks that held mortgage-backed securities that turned out to be full of people who lied about their income and assets and would never get repaid. SVB had treasuries that absolutely would have been repaid.
SVB was trying to do an equity raise to solve their short-term liquidity issues. If they'd done so quietly, and gotten money from a big institution before going public, they'd probably have been fine. Instead, the public equity raise spooked people, caused a bank run, and made their liquidity go from "risky" to broken.
Is there any (publicly viewable) analysis of the extent to which this is - or isn't - true?
It certainly would have survived longer, and for all I know maybe they would have been fine for the 6-7 (iirc) years remaining on those 10yr assets.
But at the same time, with money no longer as cheap as it had been for a long time, it's likely that had they not had the immediate run they would have seen money gradually leaving the bank as less new money gets put into VC and as their startup customers gradually spent down their investment lump sums without raising any new money. Would that gradual trickle out have been strong enough to push them under in the following months or years even without a bank run?
The liquidity problems seem to have lead to the bank run, but the immediate cause of the collapse was VCs panicking.
The liquidity problems caused the flight - why else would they take a $1.8b haircut on a securities portfolio and then try a bone-headed cap raise to cover the difference?
However, just because the link can be drawn, doesn’t mean it was the ultimate underlying cause. If the depositors weren’t so heavily coordinated and concentrated together, there’s no way the money would have come out that fast, if at all. Regardless of the loss on the bond sale.
Actually VC funds don't have much capital. If I agree to put $10MM into a $50MM fund as an LP, I don't send them $10MM. What I agree to do is that when they make an investment in Startup X, they can call me and ask for a fifth of that investment.
LPs invest in venture firms on the theory that the firms can pick good startups. I want the use of my money until they ask for it.
(This explanation ignores the annual management fee and the fact that some VCs have made a lot of money in the past).
Let's be real, banking is a public-private partnership. While it IS significant that the banks themselves are doing this, and not the Fed/FDIC, it would also seem quite possible (likely?) to be some nudging from the Fed/Treasury. Some form of "hey, we did our part (the new emergency backstop), you guys need to show you're worth this effort".
While the top-tier of banking is obviously in competition with each other, they're also bound together by their shared interest in the status quo, and then doubling bound together by the Fed/USG also being very interested in the status quo. So it's cartel-like, but it would be a mistake to only include the banks as members of the cartel.
Propping a competitor up in this nature is fairly hard to argue as "restraint of trade".
If you wouldn't mind reviewing https://news.ycombinator.com/newsguidelines.html and taking the intended spirit of the site more to heart, we'd be grateful.
Banks directly acting to help their competition? Why? Isn't that how competition is supposed to work?
What we're seeing is yet another version of capital and capitalism in decline, and rich financiers are still claiming the empire is wearing a wonderful robe. News flash! he's wearing nothing at all.
That's like saying we can't implement renewable energy until the grid goes dark, and the best way to get reform is to go round blowing up some power stations. People are depending on this infrastructure to work! Advocating for bank failures without regard to the consequences to the users is the sort of accelerationism that you normally only hear from revolutionary Communists.
What is the acceptable level of collateral damage from bank failures to you?
Putting their own money in can be entirely in their own self interest if it stops problems from spreading. None of those banks want the kind of problems that come with SVB, Signature and First Republic (and whichever one is next).
The spectre of more regulation given all of the recent failures from 2008 to today has them spooked I bet.
Exactly. Also probably the fear of a wider contagion contained by a government response that leaves the shareholders and executives high and dry (rather than the comfortable 2008-style bailouts). It's not in anyone interest for this to blow up further, which could spur fundamentally selfish organizations into seemingly altruistic action.
It seems to me that there is a considerable amount of risk to the participating banks if FRB fails. "Hold the line" is right - if more banks fail, these participating banks will lose a lot more than their $1B each.
I do wonder if there's something specific to FRB that made them pick this - is it the most likely to go next? Did it have published liquidity issues?
Obviously these big banks have a strong interest in maintaining confidence in the wider banking sector so want to make sure it doesn’t go under.
$5 billion each.
(Some are subscribed at $1bn and some at $5bn. That must have been an interesting meeting.)
Having your money be secure but inaccessible for several months is obviously a problem if you're a business that needs to make payroll, or a crypto exchange that needs to allow customer withdrawals.
If the bank has plenty of cash but some of it's time-locked, then JPMorgan aren't at risk of losing their entire $5bn - they merely risk having it tied up for a year or two, perhaps getting an uncompetitive interest rate.
I have deposit accounts in several of the banks listed. So my money is involved in a potentially bad investment. At least the balances I have do not exceed the FDIC insurance limit per bank.
That's is both the cure and the problem. All of your money is protected by the FDIC. So it's not "At least". Your deposits are protected.
But SME companies have just realized that they are not protected and are busy rearranging their finances, which is seeing a lot of outflows from smaller banks, both to distribute money under the $250K limit as well as a "run to quality" to the big banks.
All small banks with a mix of customers leaning towards SME will be impacted.
Obviously the real benefit to them is calming the panic in the banking sector, which is harmful to all of them.
But you can see how this works: because the FDIC intervened and gave 100% on SVB where perhaps it might only have been 95% otherwise, the banks are now able to privately assemble an intervention into First Direct, which is even cheaper because now FDIC don't have to intervene!
What concern, exactly?
Their CEOs can’t sit around a table and discuss joint billion-dollar strategic action. It’s the definition of a “conspiracy in constraint of trade”.
I agree. Either this will work, or the FED will step in and protect their member banks. Risk: zero.
Now the FDIC has indicated that it will insure deposits in unlimited amounts doing a direct deposit maybe a more attractive option to banks? That $30B previously was sitting around at the Fed earning a risk free return at prevailing interest rates. I have to assume that there is special treatment here and the banks are earning above market returns and the banks didn’t put cash-at-risk sitting in zero interest accounts out of the goodness of their hearts.
If that is the case the Fed, FDIC and Yellen have effectively nerfed the interbank market.
My understanding is that the FDIC does not have cash on hand to cover "unlimited" amounts. My (somewhat dated reference, 2010) said they have about $0.70 for every $100 insured, based on the idea that the number of depositors they would have to cover at any single time is relatively small. Similar to the idea that banks don't have to have enough reserves because depositors won't all request to pull their funds at the same time.
Or am I wrong on that understanding?
In reality Congress would step in, but they did the above for SVB.
See 5-(c): https://www.law.cornell.edu/uscode/text/12/1817
> In addition to the other assessments imposed on insured depository institutions under this subsection, the Corporation may impose 1 or more special assessments on insured depository institutions in an amount determined by the Corporation if the amount of any such assessment is necessary—
(C) for any other purpose that the Corporation may deem necessary.
Practically this means that FDIC can levy on the banks for some amount more that won't crash the banks; anything above that and they'll be going to Congress, or the Treasury will do some trickery.
It's interesting to remember that banking, at least from the perspective of the commons (depositors), is an issue of trust.
The more the commons say to withdraw their deposits, the more deposits will be withdrawn and the more banks will collapse; and the more banks will collapse the more the commons will say to withdraw their deposits, the more deposits will be withdrawn and the more banks will collapse.
The opposite also holding true.
Objectively, there is simply no value in giving one's money to a bank other than the ostensible claim that they will keep your money safer than if you just stash it under your bed.
Given that, the FRB, FDIC, and banks et al. pulling out all the stops to reinforce depositor confidence is not surprising. It's a natural response to fear making the rounds in the commons.
Same sentences read to me completely differently:
"First Republic is in so deep shit that we must intervene immediately with funds we will miss dearly - we are troubled too - so it would not drag all of us down later. We also need to push pompous text in the attempt of covering how big our troubles are."
Sounds more believeable than "betting" for fun or being philantrophic all of the sudden.
Is it though? Although there's no upside, there's also little downside since deposits are at the top of the liquidation stack in the case of bankruptcy.
It is. But perhaps less so than it appears.
First, there may be downside to JPMorgan if First Republic fails, and especially if dominoes continue to fall after that. So JPMorgan has the upside of avoiding the downside, at least.
Second, JPMorgan is officially recognized as a systemically-important bank. They will not be allowed to fail. So their risk from this move is the risk of some loss, but not the risk of collapse/destruction.
Still a bold move, and one that, as you said, talks quite loudly.
This money is NADA, is part of a fund every bank saves for things like this, they are literally just burning cash with this movement because 30 billion alone isn't enough to cover for any of them, even them "small" ones like First Republic.
This is a political movement, in a time where these banks should be investing said "actual" money (another misnomer) in literally unfucking federal government gridlocks on systemic reforms.
Banks make hundreds of billions every year, for them to take 2.5 or 1b to fund whatever is literally part of the business, not even computed as loss since it can be classified as net cost avoidance if this money actually ends up helping systemic chaos because these things are way pricier than 30bn.
LOL, your analysis is literally made for children books, I'm not even scratching the surface here.
The upside is the contagion doesn't spread to them.
No bank - and that is no bank - can survive a majority of its depositors all withdrawing their funds rapidly. Even the big banks can't survive that.
The $250k backstop for the FDIC should prevent the regular depositors from doing a bank run, but when the depositors are more single sector business oriented then that is a more real fear.
By putting in $30B into the bank it provides a few things. First, it is $30B of money that the big banks aren't going to be moving out soon. It is liquid money that can be used so that First Federal doesn't have to sell securities at a loss to close out depositors accounts (this is what got SVB). Secondly, it is a statement from the banks that they trust (with their money where their mouth is) that the bank will not fail - because if it does, they're way about that $250k FDIC insurance number. Those deposits are very much like yours and mine - just with a few more zeros on the end. They are deposits - not bond sales or other financial instruments, but rather cash in the bank.
From yesterday: https://www.marketplace.org/2023/03/16/first-republic-bank-3...
From this morning: https://www.marketplace.org/shows/marketplace-morning-report...
"Bank of America, Citigroup, JPMorgan Chase and Wells Fargo announced today they are each making a $5 billion uninsured deposit into First Republic Bank. Goldman Sachs and Morgan Stanley are each making an uninsured deposit of $2.5 billion, and BNY-Mellon, PNC Bank, State Street, Truist and U.S. Bank are each making an uninsured deposit of $1 billion, for a total deposit from the eleven banks of $30 billion. This action by America’s largest banks reflects their confidence in First Republic and in banks of all sizes, and it demonstrates their overall commitment to helping banks serve their customers and communities. Regional, midsize and small banks are critical to the health and functioning of our financial system."
Big highlighter on "deposit". No government or even FDIC money is involved in this.
It's significant that this is a private action. It's basically the exact opposite of the VCs telling each other to get their money out of SVB; it's a bunch of banks putting their own money into FRB. A "hold the line" move.
"We, JPMorgan, are willing to bet $5bn that First Direct does not fail, with no upside to us if they do not" is a rather powerful statement.