Silicon Valley Bank Bailout vs. Student Debt Reduction

[bearrock]

21 minutes ago, Fergasun said:

 

This is the Fed Action:

So the Fed is once again stepping in as a lender of last resort.  

 

We need a law to clawback bonus money from CEO and CFO and other Senior Executives in cases like this.   I think there is something shady about they way this one bank is such s lynch pin of funding for Silicon Valley.  Bribes, kickbacks, loans not available to the average person. 

 

Those are addressing two different things though.  SVB deposit protection above and beyond FDIC insurance limit is being funded (if current SVB assets are insufficient to cover them) by assessments on other banks.

 

The BTFP is a lending program backed by federal funds to allow banks who may have overskewed their assets on high quality long term assets to use it as collateral to access funds to ensure short term liquidity.  That's a preventative action to avoid future SVBs.

 

But yeah, totally agree that individual accountability of executives have to be on the table in situations like this.  The timing of the stock sales by the CEO and the spooked run on SVB by the venture capital industry seem pretty fishy.  Gotta wonder who knew what and when.

[Spaceman Spiff]

I don't know what the ****s going on, but I will say it's disgusting that there's a certain segment of the population that appears to be soaking up some schadenfreude here because their guy isn't in office.

[TradeTheBeal!]

7 minutes ago, Spaceman Spiff said:

I don't know what the ****s going on, but I will say it's disgusting that there's a certain segment of the population that appears to be soaking up some schadenfreude here because their guy isn't in office.

Amusing how #stockmarketcrash is trending while the market is up.  
 

Wonder how that could happen?  

[Spaceman Spiff]

Just now, TradeTheBeal! said:

Amusing how #stockmarketcrash is trending while the market is up.  
 

Wonder how that could happen?  

 

It's like they're hoping for a crash...or tweeting it into existence or something.  Like, they'd cut their nose to spite their face.  It's ****ing unbelievable.  

 

And by that I mean, totally believable.  

[Destino]

1 minute ago, TradeTheBeal! said:

Amusing how #stockmarketcrash is trending while the market is up.  
 

Wonder how that could happen?  

I wouldn’t be surprised if many think there is a stock market crash, despite it being up, because actually checking the stock market isn’t a source of information they trust.  

[Corcaigh]

Aside from the incompetence of the bank’s leadership, their downfall was entirely triggered by the run initiated by VCs the bank has worked closely with and supported over the last 40 years.

 

It’s such a relationship business and yet certain VCs decided to pull the plug on their parents life support just because they could as a flex.

[PokerPacker]

 

[Fergasun]

I have a few issues: 

 

First, they just unilaterally decided that FDIC insurance now is unlimited. This can be done without Congress?  Doing it one time for one bank.... 

 

Second, if the Federal Reserve is backstopping this by printing money, does it not contribute to inflation?  

 

Third, the executives will not have their pay and bonuses clawed back.  They won't get hurt by this either.

[CjSuAvE22]

24 minutes ago, Fergasun said:

 

 

Second, if the Federal Reserve is backstopping this by printing money, does it not contribute to inflation?  

 

100 percent it will. I don't care what ppl say its unavoidable 

[TradeTheBeal!]

LULLZZZ

 

 

[The Evil Genius]

 

Just making sure everyone knows it was the WSJ and not that random dude who tweeted the message. 

[GoCommiesGo]

Maybe hiring the CFO of Lehman Brothers as the CEO was not a prudent move. Hopefully that man can fail upwards again, and take down a hedge fund next. 

[Fergasun]

Stock price was $280 last week.  Let that sink in... efficient market?

[bearrock]

39 minutes ago, Fergasun said:

I have a few issues: 

 

First, they just unilaterally decided that FDIC insurance now is unlimited. This can be done without Congress?  Doing it one time for one bank.... 

 

FDIC law already allows FDIC to cover more than the insured amount in case where there's concern of systemic fallout (requires I believe 2/3 vote of the Fed reserve, FDIC board, and consent of the Treasury Secretary)

 

Quote

Second, if the Federal Reserve is backstopping this by printing money, does it not contribute to inflation?  

 

It is not backstopped by printing money.  FDIC has an insurance pool.  It will cover the deposits upfront using the pool.  It will sell SVB's assets to replenish the pool.  The shortfall (estimated to be 10-15% of deposits, so 14 to 21 billion I think) will be made up by special assessment on banks on their FDIC insurance premiums.  There is no federal funds being used here other than the fact that FDIC will cover the initial pay out to depositors.

 

The backstop is on the loans, not bailouts, loans, to banks who need immediate liquidity.  But those loans will be collateralized with high security assets at par value.  That's not printing money either.

 

In any event, even if this were to theoretically contribute to inflation (again, I dont see how it would), infusion of several tens of billions at most to stabilize banks would be worth the inflationary effect of that infusion imo.

 

Quote

Third, the executives will not have their pay and bonuses clawed back.  They won't get hurt by this either.

 

We'll see what the current law allows and how that's utilized.  Increasing the regulatory authority  certainly should be on the table moving forward.  Some of those executives may have criminal investigation to be concerned with though.

[China]

How Biden saved Silicon Valley startups: Inside the 72 hours that transformed U.S. banking

 

On Sunday afternoon, an exhausted group of Biden administration officials gathered to put the finishing touches on a hastily composed plan to stave off a nationwide banking crisis.

Just a little more than 72 hours had passed since Silicon Valley Bank suddenly collapsed, rocking the tech industry and igniting fears that the U.S. was on the verge of a financial meltdown.

 

The bank’s demise had come as just as much of a surprise to the White House as it did to the public, triggering a weekend sprint to contain the fallout that spanned several agencies and all hours of the day and night.

 

The result, announced just minutes before financial markets in Asia reopened, was sweeping: The federal government would provide SVB’s depositors with access to all their funds, effectively averting painful financial uncertainty — and the threat of heavy losses — for thousands of venture-backed startups. Signature Bank, which had followed SVB into insolvency, would receive the same guarantee.

 

Even more critically, the Federal Reserve would provide a massive lifeline to the nation’s banks: It would singlehandedly give all other similar lenders access to funds designed to keep them afloat and quell the panic brewing across the country.

 

The swift and forceful action to rescue depositors at the two failed midsize lenders rewrote crucial banking guardrails in ways that could reverberate for years. It put the Biden administration’s stamp — for good or ill — on the sector’s future financial stability, while sending a message about the government’s willingness to rescue private businesses in new ways. It also was done without passing a single new act of Congress or holding hearings among elected officials in recent days.

 

Click on the link for the full article

[The Evil Genius]

 

[GoCommiesGo]

One thing I've heard of recently, that I'm not sure why these cash large accounts didn't use is a commercial sweep account. Its entire purpose is in case a bank goes under it keeps your cash in accounts less than 250k. 

 

You bank with one bank as your primary, once your balance gets to a certain threshold the money is then swept to a different bank and account, so on and so on. If your primary account drops below a predetermined number money is, then transferred back from your other accounts to your primary. This keeps your deposits under the 250k in case the bank goes under, and so you don't lose the protection of FDIC. 

 

I'm sure the fees or chargers were deemed to be too high by some folks. Maybe SVB didn't offer the tool and wanted to keep all the cash in house, either way I learned something new. 

[bearrock]

2 hours ago, GoCommiesGo said:

One thing I've heard of recently, that I'm not sure why these cash large accounts didn't use is a commercial sweep account. Its entire purpose is in case a bank goes under it keeps your cash in accounts less than 250k. 

 

You bank with one bank as your primary, once your balance gets to a certain threshold the money is then swept to a different bank and account, so on and so on. If your primary account drops below a predetermined number money is, then transferred back from your other accounts to your primary. This keeps your deposits under the 250k in case the bank goes under, and so you don't lose the protection of FDIC. 

 

I'm sure the fees or chargers were deemed to be too high by some folks. Maybe SVB didn't offer the tool and wanted to keep all the cash in house, either way I learned something new. 

 

May make sense for smaller companies, but for big deposit accounts, there's a limit to how much you can diversify.  There's something like 4000 commercial banks in the US.  Even having an account in every bank gets you only up to 100 mil.  Roku apparently had like 500 mil of their cash in SVB.

 

Also, some banks (SVB did this too) requires you to exclusively bank with them to get loans from them.  I think this practice should be stopped.

[PleaseBlitz]

11 minutes ago, bearrock said:

 

May make sense for smaller companies, but for big deposit accounts, there's a limit to how much you can diversify.  There's something like 4000 commercial banks in the US.  Even having an account in every bank gets you only up to 100 mil.  Roku apparently had like 500 mil of their cash in SVB.

 

Also, some banks (SVB did this too) requires you to exclusively bank with them to get loans from them.  I think this practice should be stopped.

 

And some, let's call them communities, are very judgmental and if you bank at the wrong places or not entirely with the "right" bank for your community, you may not be viewed as "cool" or otherwise face social backlash.  It's stupid, but it's a real thing. 

 

Also, a lot of people in startups know a lot about the business their startup is in, but don't know a damn thing about the blocking and tackling of "running a business."  

Edited March 14 by PleaseBlitz

[GoCommiesGo]

12 minutes ago, bearrock said:

 

May make sense for smaller companies, but for big deposit accounts, there's a limit to how much you can diversify.  There's something like 4000 commercial banks in the US.  Even having an account in every bank gets you only up to 100 mil.  Roku apparently had like 500 mil of their cash in SVB.

 

Also, some banks (SVB did this too) requires you to exclusively bank with them to get loans from them.  I think this practice should be stopped.

There is definitely a limit in what you can do. But, there is a reason to use short term securities that have a cash equivalent. I don’t know a ton about how large corps carry cash, just seems crazy to carry that much in a single bank let alone account. 

Edited March 14 by GoCommiesGo

[Cooked Crack]

 

 

[China]

Markets Tumble as Bank Fears Go Global

 

Stock markets tumbled on Wednesday, as investors’ fears over the health of the banking industry resurfaced and spread around the world, undoing a rally on Tuesday when the panic appeared to pause.

 

On Wall Street, the S&P 500 fell 1.6 percent at the open of trading, reversing all of the previous day’s gains. European markets were also hard hit, with stocks of many of the region’s biggest banks falling sharply, as anxiety persists about the fallout from the collapse of Silicon Valley Bank and Signature Bank, which were seized by regulators after suffering devastating runs on deposits.

 

The catalyst for the day’s turmoil appeared to be Credit Suisse, the mistake-prone Swiss bank that has struggled for years to turn around its fortunes, with customers steadily shifting their assets to rival banks. It recorded the most eye-catching decline, with its shares losing roughly 30 percent, setting yet another record low. On Wednesday, the bank’s largest shareholder, Saudi National Bank, ruled out providing more money for Credit Suisse as it struggles with its latest turnaround plan.

 

Click on the link for the full article

[PleaseBlitz]

Starting to think we shouldn't let banks be publicly traded. 

[tshile]

Or maybe isolate savings type banks from

banks that engage in risky loans or investments. 
 

🤔

[mcsluggo]

On 3/12/2023 at 1:09 PM, GoCommiesGo said:

I feel bad that they may lose money in excess of 250k, but why would you keep that much in an account, as individual?

 

its not usually individuals, its firms.  and it is needed to fund day to day operations like payroll and accounts, etc....   it is not an "investment" per se, just the basic clearinghouse function of the banking industry.     a regular account at a regular bank should be insured much higher to account for those needs

 

and to support the broad idea of a stable predictable banking sector, Dodd/Frank and other laws required banks to keep more capital and reduce risk and concentration--- but of course the second that the GOP controlled the house/senate/whitehouse in 2017/2018 they watered down both the laws and the regulatory authorities......       

 

 

 

 

and now, of course, they are all yelling, "see what Biden did!!??"