[Alupis]

Run your bank off a cliff, require every rule be broken to save your bacon, and now ask people to reline your coffers with more deposits. Absolutely stunning...

On second thought - SVB is apparently the safest place on the planet to park enormous amounts of cash. Why would you not deposit everything here? The Government will just save you if SVB screws it up again... right? Absolutely zero risk in parking everything with SVB... what a great signal to be sending the public.

[jacooper]

It isn't really the same bank nor the same CEO

[Alupis]

The result is the same. SVB has infinity insurance on all deposits, provided courtesy of the tax payer.

This is a naked attempt to pump the value of SVB assets, and seek a less-than-fire-sale to another institution.

[tedajax]

All of the funds are provided from a fund the banks pay into. There is no taxpayer money supporting the depositors.

[Alupis]

This is the biggest lie you will ever read (not you specifically, but this pitch).

The funds will be recovered from special bank assessments, which means you and I will pay to bail out SVB and Signature via increased bank fees and more over the next decade. Not to mention the FDIC is guaranteeing depositors will be made 100% whole, which means again, you and I are guaranteeing the deposits if this special bank assessment comes up short or falls through.

So no, taxpayer money is not directly used - that part is true. But it is patently false that taxpayers will not be paying to bail these banks out.

It's a giant political game being played... avoid the look of a recession no matter what. Don't even speak the dreaded "B" word...

[rhaway84773]

The depositors will be paid back by their own money. The money hasn’t disappeared anywhere. It still exists, and the bank will still make a profit as the MBSes it paid into will continue returning money to the bank. It will simply make a profit that’s less than what it could have made with the same shareholder equity with way less risk in other investments. Which is why shareholders got wiped out.

This was a classic bank run. A combination of the concentration of depositors from a single industry, massive swings in the monetary flow of that industry, poor investment decision making, and having regulations loosened on it meant that SVB saw far too many short term depositors call for their money and had too much of that money tied up in long term investments.

The government has the liquidity and the reputation that is needed to prevent this from becoming a problem.

The cost that is being borne by the taxpayers is the cost of people depositing money in smaller industry focused banks, which have greater risk, and lower efficiency. If you really wanted to eliminate the cost, the solution would be to have everyone deposit their money in a handful of Too big to fail banks, which would almost certainly be cheaper and more efficient, but is also a bad economic system because of the political power those entities gain.

[Alupis]

> in a handful of Too big to fail banks

Like SVB?

The red carpet was rolled out to prevent anyone form being harmed by SVB... and zero lessons will be learned and we'll just do it all again, but with a different name this time.

Everything that happened meant SVB was supposed to fail and drag down all of it's high-flying customers with it. Yet... here we are, pretending this isn't a taxpayer guaranteed big bank bailout during a looming election cycle with record inflation we're also pretending isn't real.

Politics makes things... insane.

[sroussey]

Don’t all banks have that right now?

[tenpies]

On paper, only SVB.

In practice, we just saw that the US government will gladly retroactively change the rules to insure any amount of money. For all practical purposes, trillions of dollars in deposits became insured by US tax payers this week.

And that's on top of the totally-not-QE BTFP facility they conjured up. That is available to all insured banks who have any underwater asset that they wish to move to the Fed's balance sheet at par for a mere ~5% per year.

[jacooper]

> For all practical purposes, trillions of dollars in deposits became insured by US tax payers this week.

By the FDIC, not the tax payer.

[TMWNN]

Said insurance is paid for by bank customers. The union of bank customers and taxpayers is 1.

[dragonwriter]

No, though all banks now have protection against the HTM assets fire-sale conditions which caused SVB to fail, which, from the perspective of stockholders, executives, and non-depositor creditors is a lot better than infinite deposit insurance, because its a lot stronger protection against failure (which wipes out those three groups), even if its not a stronger protection for depositors if failure happens anyway.

[Alupis]

No, only SVB and Signature enjoy infinity insurance. Everyone else that played by the rules gets a measly $250k max...

[dragonwriter]

> No, only SVB and Signature enjoy infinity insurance.

No, only the balances of SVB and Signature at the time of the failure of the former banks have that. There’s no prospective guarantee inheritable by an acquirer. (Admittedly, any bank that could reasonably bid for them, especially for SVB, would probably independently qualify for the systemic risk exception itself if it suddenly failed, but also any bank that could reasonably bid wouldn’t be in any near term risk of that, either.)

[Alupis]

SVB may be called something different today, and probably something different in the near future, but we all know what we're talking about here.

Like I said downstream - if my bank fails next year (or 10 years from now) and I do not get infinite deposit insurance - then where are we? Just the well connected get special treatment? Seems so...

[easton]

In writing yes, but the FDIC always makes depositors whole somehow. Otherwise the banking system would collapse.

If some bizarre scenario were to happen (a failure of two of the big four) which the FDIC couldn’t recover, in the words of Dwight Schrute, “you’ve all been dead for weeks”.

[dragonwriter]

> but the FDIC always makes depositors whole somehow.

This lie keeps getting repeated, but while it usually manages to do that (by facilitating a buyout, often before or over a business day – sometimes longer in calendar time because of a weekend – when the bank is closed), it doesn’t always, even when it facilitates a buyout rather than being forced to create a takeover bank.

When it does takeover without facilitating a buyout, it never protects uninsured deposits without invoking the systemic risk exemption.

> Otherwise the banking system would collapse.

Well it does where the banking system would collapse, that’s literally the point of the systemic risk exception.

[Alupis]

> the FDIC always makes depositors whole somehow. Otherwise the banking system would collapse.

When was the last time any of this happened?

[fisherjeff]

https://www.federalreserve.gov/monetarypolicy/bank-term-fund...

[Alupis]

That's a loan, not insurance. Not the same thing, and a bank in SVB's situation last week would not be able to pay back a loan anyway.

[dragonwriter]

> On second thought - SVB is apparently the safest place on the planet to park enormous amounts of cash. Why would you not deposit everything here? The Government will just save you if SVB screws it up again… right?

I mean, SVB (and every other bank except those three) wouldn’t exist today if people treated the three banks the government decided to invoke the systemic risk exception for [0] in the last financial crisis that way, so, I’m going to guess the market will also not treat SVB that way.

[0] Two of which didn’t end up needing the exception to actually be used because the mere announcement of the decision facilitated other resolutions.

[dylan604]

Is that a fair assessment or just a knee jerk reaction to first reading?

How long will the FDIC make this unlimited protection available to SVB++? Is it just long enough to calm everyone down, and then in a few weeks/months release a very quite announcement that the guarantee is going back to the original $250k? If it is new gov't policy that all accounts every where are guaranteed for ever, then that's a huge banking shift that seems like something that would require a bit of congressional approval. But that's just me not knowing a damn thing about how the FDIC decisions like this are made

[Alupis]

If my bank fails next year, and I don't get infinite deposit insurance - where are we then?

The fact that the FDIC website still says $250k cap is amazingly laughable. It's either unlimited for everyone every time, or it's $250k for everyone every time.

The reality is - it's infinite deposit insurance if you are well connected. Let that sink in folks.

[dylan604]

obviously this is a rhetorical question, but are you really going to be hurt by the $250k cap? really?

If so, maybe it's time for a better banking plan than "all eggs in one basket"

[Alupis]

The point is not whether or not I personally would be hurt by this, or rather the metaphoric I, for the matter.

The point is the rules where changed mid-game to protect a bunch of very well connected people that played extremely loose with the "rules" and will suffer zero consequences as a result - because my personal dollars are being used to protect them.

Regarding the $250k cap in general - in my opinion, it's far too low. It's lower than the average price of a house in a large amount of the country.

[dylan604]

To be clear, who are the people that "played extremely loose" in your ire? The bank management or the individual bank account holders that had more than $250k in the accounts?

What does the price of a house have to do with the cash-on-hand bank accounts of the average citizen?

[rhaway84773]

This is not the same bank.

It’s the Silicon Valley BRIDGE Bank. The one that was created by the government after shareholders were wiped out and the execs were fired, and new management was appointed.

Of course, a lot of operations, data, tech will continue. How else would they ensure customers etc are provided access to their funds and are able to carry out their regular banking services.