Posted on 03/12/2023 7:14:06 PM PDT by Beave Meister
WASHINGTON — Plans announced Sunday to fully reimburse deposits made in the collapsed Silicon Valley Bank and the shuttered Signature Bank will rely on Wall Street and large financial institutions — not taxpayers — to foot the bill, Treasury officials said.
“For the banks that were put into receivership, the FDIC will use funds from the Deposit Insurance Fund to ensure that all of its depositors are made whole,” said a senior Treasury Department official, who spoke to reporters Sunday about the plan on the condition of anonymity.
(Excerpt) Read more at cnbc.com ...
If you consider a business’s auto insurance on their vehicles to be taxpayers’ money, then, yes, the FDIC fund is taxpayers’ money.
Nope, how it will be paid is by printing more money, which will ignite inflation even higher. It’s invisible and the politicians think we think their hands are clean.
Let me think that thru for a minute. SVB gets cash from FDIC. SVB owes nothing on that because it’s insurance that they paid for. The cash from FDIC does not cover accounts over $250k. The Fed can lend cash to SVB. That covers other shortages, but doesn’t fix SVB’s balance sheet. SVB still has junk AFS and there’s an offsetting liability to the Fed. I bet SVB is trading junk AFS for good ASF with BoA and JP Morgan plus cash from the Fed to make BoA and JP Morgan whole. It’s a matter of percentages. SVG just needs to get to a better mix of asset classes. This is about spreading risk between three banks. Even so, there is a systemic problem with junk assets. As long as the Fed raises interest rates, asset values will continue to fall. They are speculating that by diversifying asset types that the weighted average will not drive SVB broke.
I don’t like it. It’s bundling and packaging to reduce risk, a play off of 2008, packaging subprime mortgages, except this time it’s bonds.
As far as I've seen, they play no part.
SVB still has junk AFS
AFAIK, not junk, just Treasuries worth less than what they paid.
I bet SVB is trading junk AFS for good ASF with BoA and JP Morgan plus cash from the Fed to make BoA and JP Morgan whole.
None of that is needed. The bank run is over. The FDIC will look for a buyer.
I need to go to bed and adjust to DST. Good night & talk to you later.
Sure.
We end up paying for everything.
Those 80k+ new IRS agents will be busy searching everyone’s couches for change.
They’re not insolvent. The problem is they don’t have the funds to handle everyone wanting out RIGHT NOW.
Because a lot of their holdings are in US Treasuries which only pay a couple of percent. Those are “guaranteed” — but if they redeem them “right now” they can’t get the full face value for them (why pay the same price for something paying 1.99% as something paying 5% ?)
If people had tried to pull their money out at a slower rate it wouldn’t have been a problem.
Almost an own-goal on SVB’s part: they noticed the issue and quietly tried to raise money through sale of *some*, and also a secondary stock offering. But doing that made some people notice, who put 2 and 2 together, and demanded quick withdrawals, which caused the very thing SVB was trying to avoid.
Lies, lies and more lies from the democrat party’s information warfare wing.
... “Wall Street and large financial institutions — not taxpayers — to foot the bill” ...
So these firms/institutions voluntarily decided to buy garbage? Who negotiated the terms? Exactly who were the final decision makers? What’s guaranteed? Can anyone actually perform due diligence in 5 f’n days?
I got more Q’s than A’s.
You won't have to wait long, they'll be on the list of campaign donors to the DNC and the Biden campaign.
I’m just not sure what moral hazard was involved in THIS situation with SVB. All indications are that a major factor in its collapse was that the bank was too conservative in its reserve investments.
They bought long-term US Treasuries.
Cool your jets.
Insolvent means “broke” in layman’s terms.
Illiquid means, they have it but can’t get to it.
If you treated all their govt. bonds at face value, they have the money.
But if you force them to sell the bonds *right now*, the sudden rise to higher interest rates, mean that if they “liquidate” them, they can’t get full face value right now: who would pay the same price for a bond paying 1.99%, as for a brand new bond paying 4% ?
It wouldn’t have been a problem except too many people showed up wanting to pull all their deposits at the same time.
And ironically, that started because the back became aware of the issue and tried to sell off a *few* bonds quietly, and push a stock offering, to raise cash until new interest rates calmed down / some of their low-price bonds matured...only people saw that, and panicked.
They started the stampede they were trying to avoid.
But two other issues;
1) they weren’t hosting Mom&Pop accounts, but small businesses, who NEED very liquid accounts so they can cut paychecks every two weeks
2) They way overinvested in “safe” govt. securities; and never stopped to think what would happen to their portfolio if the Fed suddenly goosed interest rates.
Which banks are able to meet all their obligations in a few days?
Largest bank in England HSBC brokered a deal over the weekend to buy Silicon Valley Bank and settle the debt.
Breitbart
Do they not know that investors in Wall Street are taxpayers?
The UK division only.
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