Silicon Valley Bank Bailout vs. Student Debt Reduction

[Fergasun]

I think helping people reduce their student loan debt is more valuable to society than bailing out a bank that lent money to the ultra rich.  Either way, it should be hypocritical to support bailouts of banks over students. 

 

 

[PleaseBlitz]

Pretty sure being shuttered and taken over by the government is not how bailouts work. 
 

Quote

On the basis of the Ultimate Findings set forth above, separately and cumulatively, pursuant to Financial Code section 592, it is ordered that the Commissioner take possession of the property and business of the Bank, and the Commissioner hereby takes possession of the property and business of the Bank.

DATED: March 10, 2023

San Francisco, California

 

Anyways, I think @Sacks 'n' Stuff nailed this in the other thread. 

 

 

 

Edited March 11 by PleaseBlitz

[The Evil Genius]

Along those lines...should FDIC still cover businesses (and the few individuals) accounts with over 250k. Or only up to 250k?

[PleaseBlitz]

Double post. 

Edited March 11 by PleaseBlitz

[bearrock]

2 hours ago, The Evil Genius said:

Along those lines...should FDIC still cover businesses (and the few individuals) accounts with over 250k. Or only up to 250k?

 

Hard to imagine that there will be political will for a bailout.  Given the estimated loss of uninsured funds (10-15% has been floated), maybe government could agree to issue immediate interest free loans up to a certain percentage of the receivership certificate with the certificate as collateral.  

 

By no means an expert on what went wrong with SVB, but looks like some of what went wrong are type of risk taking that is fairly unique to venture capital world (for which I'm not sure SVB really should be let off the hook).

[Ball Security]

6 minutes ago, bearrock said:

 

Hard to imagine that there will be political will for a bailout.  Given the estimated loss of uninsured funds (10-15% has been floated), maybe government could agree to issue immediate interest free loans up to a certain percentage of the receivership certificate with the certificate as collateral.  

 

By no means an expert on what went wrong with SVB, but looks like some of what went wrong are type of risk taking that is fairly unique to venture capital world (for which I'm not sure SVB really should be let off the hook).

Some blogs that I’ve read on this are really downplaying contagion risk whereas your CNBCs, FOXBusiness, etc, are playing it up. Obviously fear sells.

[bearrock]

3 minutes ago, Ball Security said:

Some blogs that I’ve read on this are really downplaying contagion risk whereas your CNBCs, FOXBusiness, etc, are playing it up. Obviously fear sells.

 

Yeah, definitely divergence of opinion on the fall out.  If Monday reaction is terrible, I'm sure bailout becomes a lot more likely. I mean at the end of the day, we're talking 160 billion or so liability with assets that supposedly have book value of 200 billion.  I can see the merit of playing safe to stabilize the market and deal with the potential losses later.  The problem is that I don't think feds have enough time to digest how much of the so called secured debts are really secured by shaky promise of future investments into these ventures (which many experts seem to be of the opinion is a lot closer to unsecured debt than a secured debt).

[Fergasun]

Here is my issue.  The same type of people clamoring for bailout of depositors and saying things like "Even Warren Buffet cannot evaulate a bank's health" are the same who railed and lobbied against Dodd-Frank which was weak to begin with and parts repealed. 

 

Also... doing this for Silicon Valley, but not everyjoe college degree holder. 

[Destino]

3 hours ago, Fergasun said:

I think helping people reduce their student loan debt is more valuable to society than bailing out a bank that lent money to the ultra rich.  Either way, it should be hypocritical to support bailouts of banks over students. 

 

 

the issue with SVB that matters is companies making payroll. I don’t give a damn about the rich losing some change, but these banks are holding corporate accounts used to make payroll. 

[bearrock]

1 hour ago, Destino said:

the issue with SVB that matters is companies making payroll. I don’t give a damn about the rich losing some change, but these banks are holding corporate accounts used to make payroll. 

 

That's why I think allowing immediate access to a portion of the funds is important.  If the expected loss is 10-15%,  seems like allowing access to 60-70% of the fund has nothing to do with a bailout.

[Ball Security]

I am getting a kick out of my LinkedIn contacts Monday morning QB-ing this thing.  Did not realize I was connected with such experts. 🤓

[Jabbyrwock]

1 hour ago, Ball Security said:

I am getting a kick out of my LinkedIn contacts Monday morning QB-ing this thing.  Did not realize I was connected with such experts. 🤓

 

This is the internet...more experts here than a Holiday Inn Express.

[CousinsCowgirl84]

8 hours ago, Fergasun said:

I think helping people reduce their student loan debt is more valuable to society than bailing out a bank that lent money to the ultra rich.  Either way, it should be hypocritical to support bailouts of banks over students. 

 

 

This has already been decided.

[CjSuAvE22]

 

9 hours ago, The Evil Genius said:

Along those lines...should FDIC still cover businesses (and the few individuals) accounts with over 250k. Or only up to 250k?

up to $250k I believe 

[Destino]

7 hours ago, bearrock said:

 

That's why I think allowing immediate access to a portion of the funds is important.  If the expected loss is 10-15%,  seems like allowing access to 60-70% of the fund has nothing to do with a bailout.

I agree with this, giving access to just 250k (which is what I’ve heard will be done Monday) seems absurd.
 

anyone know if there is a priority to who gets paid first?  Seems like depositors should be made whole first, but I’m entirely ignorant to how this plays out.  
 

lost in the high level rage over banks generally being a plague on humanity, are the almost 9 thousand employees that are SOL.  I heard they got their yearly bonuses just before the fees took over, and I’m glad.  Those were for 2022 and hopefully helps them, because I doubt many of them saw this coming.  

[CjSuAvE22]

2 hours ago, Destino said:

I agree with this, giving access to just 250k (which is what I’ve heard will be done Monday) seems absurd.
 

 

Hmmm but what if each account is only insured up to $250k, Wouldn't that mean the rest of the cash is uninsured? I don't know I think anyone with lets say 1 million will get 250k back and the rest might be gone. Not sure tho

[TheGreatBuzz]

Why didn't these account holders break up their money into a bunch of accounts each with a $240k balance?  Then all their money would heave been protected, right?

[The Evil Genius]

41 minutes ago, TheGreatBuzz said:

Why didn't these account holders break up their money into a bunch of accounts each with a $240k balance?  Then all their money would heave been protected, right?

 

It doesn't entirely work that way. Say you have 300k with a bank. 150k in 2 separate checking accounts...or 150k each in savings and checking. FDIC treats those as "single accounts" (edit that's a category name, not as seperate accounts) and you've exceeded the 250k insured threshold for single accounts. Now, you could get another 250k in insured money by having a joint account as well, or a trust fund, or some retirement accounts, or a business account. Those are all considered separate accounts and each have a 250k insured limit.

 

What I don't understand fully is how businesses bank their money for payrolls and other things. Are people going to miss out this week/month on their paycheck because Silicon bank failed? Was there additional insurance bought for the $s in excess of 250k?

 

But I do strongly suspect if the government lets this bank fail on Monday, we are going to see a lot of smaller regional banks get run on soon. 

 

Edited March 12 by The Evil Genius
Typos

[The Evil Genius]

I'm not a fan of Mark Cuban but I do think he makes some interesting points, the first being that the 250k limit is too low.

 

Of course..Cuban does have a short memory.

 

 

 

Edited March 12 by The Evil Genius

[tshile]

30 minutes ago, The Evil Genius said:

It doesn't entirely work that way. Say you have 300k with a bank. 150k in 2 separate checking accounts...or 150k each in savings and checking. FDIC treats those as "single accounts" (edit that's a category name, not as seperate accounts) and you've exceeded the 250k insured threshold for single accounts

Where are you getting this from because that’s not at all correct based on what my assigned financial advisor told us and guided us in configuring things. Nor does it match what anyone else I know has said about how these rules work. 
 

the only time, as i understand, separate accounts are treated as one is if they are the exact same account and the account holders are configured the same way. 
 

ie: two people have two joint checking accounts configured with both being primary account holders. 
 

simply making me a the primary and my wife the secondary on one, and flipping roles for the other, solves that problem. 
 

Making one a checking and another a savings or money marketing account also solves it. 
 

theortrically a couple can have:

a savings account with A as primary B as secondary

a savings account with B as primary and A as secondary

Two checking accounts configured similarly

two money market accounts configured similarly

 

all at the same banks all insured up to 250k 

 

 

[TradeTheBeal!]

It’s wild to see all the Trump/Putin/Elon simp accounts on Twitter try to spark a nationwide “bank run”.  I bet cowgirl has already pitched a tent in front of her local Truist branch for Monday AM.

 

 

Edited March 12 by TradeTheBeal!

[The Evil Genius]

7 minutes ago, tshile said:

Where are you getting this from because that’s not at all correct based on what my assigned financial advisor told us and guided us in configuring things. Nor does it match what anyone else I know has said about how these rules work. 
 

the only time, as i understand, separate accounts are treated as one is if they are the exact same account and the account holders are configured the same way. 
 

ie: two people have two joint checking accounts configured with both being primary account holders. 
 

simply making me a the primary and my wife the secondary on one, and flipping roles for the other, solves that problem. 
 

Making one a checking and another a savings or money marketing account also solves it. 
 

theortrically a couple can have:

a savings account with A as primary B as secondary

a savings account with B as primary and A as secondary

Two checking accounts configured similarly

two money market accounts configured similarly

 

all at the same banks all insured up to 250k 

 

 

 

I assume those savings wouldn't be a joint savings? My understanding is that joint accounts are separate from single accounts. But I would always defer to your expertise with it and your financial advisors info. 

 

I found this info in a quick search.

 

Quote

FDIC insured up to $250,000.

Deposits in checking, savings, money market and certificate of deposit accounts are insured up to $250,000 per depositor, per ownership type. It's possible to qualify for more than $250,000 in FDIC coverage if you have deposit accounts in different ownership categories such as Single Accounts, Joint Accounts, Individual Retirement Accounts, and Trust Accounts. Additionally, business account deposits are insured—also up to $250,000—separately from the personal accounts of the entity's stockholders, partners, or members.

 

https://www.capitalone.com/bank/fdic/

 

Also more info here.

 

https://www.capitalone.com/bank/money-management/banking-basics/fdic-insurance-limits/

 

Quote

The FDIC wants to make sure it can cover everyone with a bank account, so to make that happen, it caps how much money it insures. The FDIC says its standard is to cover up to “$250,000 per depositor, per insured bank, for each account ownership category.¹ 

 

Here’s an example: Let’s say you have $100,000 in your checking account and $150,000 in your savings, all at the same bank. The FDIC classifies those under the same category: single accounts.⁴ So you would have hit your FDIC deposit limit. Every additional cent deposited into either account would be uninsured. But if you have money in other banks or other deposit categories, you may have additional coverage.

 

Other categories

The FDIC also insures categories other than single accounts. Those categories include joint accounts, certain retirement accounts, trust funds, business accounts and government accounts. You can learn more about the FDIC account categories on the agency’s website.

 

Edited March 12 by The Evil Genius

[Ball Security]

40 minutes ago, The Evil Genius said:

I'm not a fan of Mark Cuban but I do think he makes some interesting points, the first being that the 250k limit is too low.

 

Of course..Cuban does have a short memory.

 

 

 

Yeah, blaming the regulators here is weak sauce.

 

Also, I’m willing to bet that his third point is a direct shot at Peter Thiel.

[bearrock]

40 minutes ago, tshile said:

Where are you getting this from because that’s not at all correct based on what my assigned financial advisor told us and guided us in configuring things. Nor does it match what anyone else I know has said about how these rules work. 
 

the only time, as i understand, separate accounts are treated as one is if they are the exact same account and the account holders are configured the same way. 
 

ie: two people have two joint checking accounts configured with both being primary account holders. 
 

simply making me a the primary and my wife the secondary on one, and flipping roles for the other, solves that problem. 
 

Making one a checking and another a savings or money marketing account also solves it. 
 

 

That's not how it works.  FDIC insurance operates on ownership categories.  There are several categories (e.g. Single owner accounts, retirement, joint owners, trust, etc).

 

Quote

theortrically a couple can have:

a savings account with A as primary B as secondary

a savings account with B as primary and A as secondary

Two checking accounts configured similarly

two money market accounts configured similarly

 

all at the same banks all insured up to 250k 

 

If your financial advisor told you that, you need a new advisor.  That most certainly is not how it works.  All those accounts would be in the same joint owner category with each owner getting a 250K insurance against the combined value of their interest in the accounts (so if all 4 accounts had 250K, 500K would be uninsured)

 

https://www.fdic.gov/resources/deposit-insurance/brochures/insured-deposits/

 

[PleaseBlitz]

My initials happen to be SVB and that’s usually how I sign internal emails at my law firm that specializes in banking law. I am now signing them “SVB (not the one that collapsed)”. 
 

I AM SO CLEVER YOU GUYS!