[MarkSweep]

The FAQ says:

> All transferred deposits will be separately insured from any accounts you may already have at First–Citizens Bank & Trust Company for at least six months after the failure of Silicon Valley Bank.

That suggests that there is not going to be a reduction in coverage of FDIC insurance.

Separately the Federal Reserve’s lending facility makes it unlikely that the same sort of long-duration treasury notes will bring down a bank.

But yeah, it’s a good point that they did not explicitly spell out what sort of insurance is available for the transferred deposits.

[laser]

Thanks! Still not clear to me if that extends beyond $250K or just not counting against an existing account held there, though. But as mentioned above they probably can just liquidate what they just bought if they need to meet large portion of deposits withdrawn. And the par value repo thing for stuff they already have makes sense would mitigate a run causing insolvency.

[shapefrog]

> Still not clear to me if that extends beyond $250K

It does not. The deposit insurance limit was $250k before the svb collapse, it was unlimited while the (government) fdic held your account, and now it has been transfered back to a private institution it is 250k again.

<Insert "it always was" meme here>

[s1artibartfast]

This is the simple difference between a guaranteed minimum and a discretionary maximum.

In practice, FDIC covers at least 250k

[notch898a]

Only after bank failure can you truly determine what your FDIC insurance limit was. Per Yellen's own admission it is decided by several committees after the bank fails how to retroactively apply the variable insurance, depending on whether they deemed it "systematic." Of course if the depositors are mostly politically connected VCs or investments of politically connected VCs you probably have a better shot of being deemed systematically important.

[shapefrog]

"it always was"

[CTDOCodebases]

It's kind of ironic that the existing fist-citizen customers are actually second class citizens when it comes to having their deposits insured.

[q7xvh97o2pDhNrh]

Well, sure. If you want first-class treatment, you have to go to Zeroth Citizens' Bank.

[goldenkey]

I heard that only reptiles can bank there.

[frankfrankfrank]

Is it ironic though? The whole system is inverted in that way that citizens are second class, and failure is rewarded and the injured punished, aka fraud.

It’s a system that simply cannot go well for the majority of people even if the top continues their plunder and walks away with everyone else’s chips.

It’s not an ironic bug if the intentions of the features are nefarious.

[arcticbull]

> Is it ironic though? The whole system is inverted in that way that citizens are second class, and failure is rewarded and the injured punished, aka fraud.

Who exactly got rewarded here? Not the bank shareholders, not their management - only depositors got protected, aka the system actually worked for once.

> It’s a system that simply cannot go well for the majority of people even if the top continues their plunder and walks away with everyone else’s chips.

This simply did not happen here. It happens a lot. It didn't happen here.

[riffraff]

> only depositors got protected, aka the system actually worked for once.

but these depositors above 250k should not have been protected, they have been rewarded for not managing their finance well.

Should the FDIC guarantee all depositors? Perhaps, but then those were not the rules.

[seurimas]

Point in fact, those were the rules. The DIF protected them past 250k. This was not an exceptional measure. Everything worked as intended.

[riffraff]

the FDIC itself called this a "systemic risk exception", but SVB and Signature were not considered systemic before this, and thus had not behaved the same as the systemically important banks.

I am not sure we can say anything worked as intended.

[machina_ex_deus]

The banks got to play and invest that money off those depositors. The investment was in government bonds. So essentially, the government got to use those depositors money, and then turned around and gave them back their money. Oh and it also inflated away the value of that money. If you think this is capitalism or the system working properly, you're deeply wrong. Finally, if this thing didn't blow up, those depositors would've seen none of the profits from lending to the government which is clearly a risky business.

This is the same old story, governments printing money. This time they held hostages as they were printing their money. Almost like Money heist. Funnily enough, the narrative is so strong they are somehow the heroes. Maybe because people can't understand that inflating money is stealing.

[arcticbull]

> The banks got to play and invest that money off those depositors.

And they got wiped out because they did it badly, while depositors kept their deposits. The system works.

> So essentially, the government got to use those depositors money, and then turned around and gave them back their money.

The government didn't give them back their money, the loss came from the DIF, which is a fund made of private contributions assessed to member banks. No government money was spent making depositors whole. I wouldn't care if it was personally, I think that's kind of the point of the government, but in this case that's simply not true.

> Finally, if this thing didn't blow up, those depositors would've seen none of the profits from lending to the government which is clearly a risky business.

Er, no, the bonds would have matured and they would have received face value plus interest. Lending to the US government is the least risky thing one can do, three-month treasury yields determine the 'risk-free' rate.

> This is the same old story, governments printing money.

The Fed actively manages the money supply. I'd look at where the demand for dollars is coming from to better understand the system and what's actually happening in the economy. These simplifications border on conspiracy.

[hartator]

> while depositors kept their deposits. The system works.

I think depositors should still refund the 4.50% APY SVB on business savings was paying.

> No government money was spent making depositors whole.

That’s not true. There was a new 50bn debt hole in money created from thin air. Tax payers are footing the bill temporary at minimum.

[machina_ex_deus]

The government is a financial bully. It starts by printing money for itself, and using the value of the money in the present. Then it causes inflation which robs financial value out of everyone who lended to it. The actions of the Fed are extremely unpredictable.

If you're not a part of some inner clique you can't tell when will the Fed pivot. It took the Fed a goddamn one year too long to raise rates. Everyone who has no knowledge of the Fed actions beforehand is losing huge financial value. hundreds of billions of dollars rest on these decisions, and any common person who trades and does any financial decision in the wrong side of the Fed is being robbed of financial value by the Fed. Instead of playing capitalism we've been playing Simon says.

[hnthrowaway0328]

I think the right way to think about this is a quote from the venerable Sir Desmond: "If you're incompetent you have to be honest, and if you're crooked you have to be clever".