Silicon Valley Bank Failure

Looks like it might get ugly.

"The only bank failure larger than this one in American history was Washington Mutual, which had roughly $300 billion in customer deposits before the 2008 financial crisis."

"But more than 85% of the bank’s deposits were uninsured, according to estimates in a recent regulatory filing. That’s because FDIC deposit insurance is meant for everyday bank customers and maxes out at $250,000. Many Silicon Valley startups had millions, or even hundreds of millions of dollars deposited at the bank—money they used to run their companies and pay employees. Right now, nobody’s sure how much of that cash is left."

https://time.com/6262009/silicon-valley-bank-deposit-insurance/

Predictably the usual banking establishment types like Larry Summers are saying that uninsured big depositors should get bailed out by Uncle Sam. Should they?

The Right is blaming this failure on "wokeness"

Well, the uninsured depositors in SVB and Signature Bank (which failed yesterday) are going to be bailed out, but Treasury, the Fed and the FDIC say it won't cost taxpayers a penny:

"Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law."

https://www.federalreserve.gov/newsevents/pressreleases/monetary20230312b.htm

Wonder how that works.

@no1marauder said
Well, the uninsured depositors in SVB and Signature Bank (which failed yesterday) are going to be bailed out, but Treasury, the Fed and the FDIC say it won't cost taxpayers a penny:

"Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law."

https://www.federalreserve.gov/newsevents/pressreleases/monetary20230312b.htm

Wonder how that works.

That bank failed because of drag queens.

@shavixmir said
That bank failed because of drag queens.

@athousandyoung said
The Right is blaming this failure on "wokeness"

@no1marauder said
Looks like it might get ugly.

"The only bank failure larger than this one in American history was Washington Mutual, which had roughly $300 billion in customer deposits before the 2008 financial crisis."

"But more than 85% of the bank’s deposits were uninsured, according to estimates in a recent regulatory filing. That’s because FDIC deposit insurance is meant for ...[text shortened]... ry Summers are saying that uninsured big depositors should get bailed out by Uncle Sam. Should they?

@athousandyoung said
The Right is blaming this failure on "wokeness"

@no1marauder said
Well, the uninsured depositors in SVB and Signature Bank (which failed yesterday) are going to be bailed out, but Treasury, the Fed and the FDIC say it won't cost taxpayers a penny:

"Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law."

https://www.federalreserve.gov/newsevents/pressreleases/monetary20230312b.htm

Wonder how that works.

@averagejoe1 said
Well any bank who has to chip in has to have agreed to this arrangement before going into business, or signed on to it if they already existed. Or, the safety net you mention could have just been a law created by legislators at any time.
Either way, this would certainly work. A form of insurance, losses shared by all participants. I have never heard of that one.

This article is informative: https://www.msn.com/en-us/money/other/with-svb-and-signature-the-us-is-making-a-systemic-risk-exception-for-systemically-unimportant-banks/ar-AA18xF0O

Apparently, "the systemic risk exception" is being invoked for these two banks even though they don't qualify as "systemically important banks" BECAUSE of a change in the law at least one of them lobbied for in 2018 that raised the threshold from $50 billion in deposits to $250 billion. "Systemically important banks" were subject to closer regulation and regular "stress tests" to insure they could not fail.

So, SVB got what they wanted for more than four years, bungled their business and now others have to cover their rich depositors who exceed the limits of FDIC insurance.

@averagejoe1 said
Of course not. And why don't depositors use the tried and true banks? Further, if I picked Alpha Bank last year and it just went under, (I lost my money), should my neighbor who has his money safely in Wells Fargo reimburse me for my loss (through the taxes he pays)??
My questions are so simple, yet go unanswered.

@athousandyoung said
The Right is blaming this failure on "wokeness"

@earl-of-trumps said
yup, that's what I read, WOKE VC's stumping WOKE startups. *VC=venture capitalist)

go WOKE, go broke.