Banks Failing: Is It 2008 Again?

[Alexsei]

The story of the Chatatzker Rebbe goes like this: Once, the people in the village came crying to the Rebbe that the military was coming to draft the young boys. However, the Rebbe responded very calmly and confidently, "they're not coming." After a while, the people came back crying again, telling the Rebbe that the military was already in the next big city. Again, the Rebbe responded with the same confidence, "they're not coming." A little while later, they came crying again, this time sobbing that the military was at the entrance of their village. The Rebbe, still calm, responded once again, "they're not taking anyone."

However, a short while later, the people burst into the Rebbe's door, sobbing in the highest tone, barely able to speak, "Rebbe!!! They're taking our boys!!!!!" This time, the Rebbe responded differently, saying, "Yes, now they are."

[WayBackMachine]

 

[AsherO]

Thank God for the Fed saving the heimishe economy on Signature Bank.

Their money is safe, but with further regulation coming they’re gonna have to play by the banking book.

[AsherO]

Any chance there will be a bank taking over SVB and/or Signature branches/workforces like what happened when regulators sold WaMu to Chase? Or does the FDIC/Fed news from today mean that certainly won’t happen?

[Moshe123]

Any chance there will be a bank taking over SVB and/or Signature branches/workforces like what happened when regulators sold WaMu to Chase? Or does the FDIC/Fed news from today mean that certainly won’t happen?

Everything will be normal tomorrow.

https://www.fdic.gov/news/press-releases/2023/pr23018.html

[zale]

Call it what you want, but this is 100% a bailout.

This basically makes the whole writeup on the DDMS pointless. The Feds will just bail you out. No need to split up your money between different accounts.

And while you are at it, feel free to get in to debt at your leisure. If you are feeling like taking that pointless four-year college degree for $60,000, then go for it! The Feds own infinite forests of money trees.

[Moshe123]

Call it what you want, but this is 100% a bailout.

This basically makes the whole writeup on the DDMS pointless. The Feds will just bail you out. No need to split up your money between different accounts.

And while you are at it, feel free to get in to debt at your leisure. If you are feeling like taking that pointless four-year college degree for $60,000, then go for it! The Feds own infinite forests of money trees.

Who was bailed out?
The bank's unsecured holders might have lost everything.
The money for all the depositers still exists. The banks were fully solvent. This was an old fashioned stupid bank run, which hopefully won't happen again to solvent banks, due to this action.

[zale]

Who was bailed out?
The bank's unsecured holders might have lost everything.
The money for all the depositers still exists. The banks were fully solvent. This was an old fashioned stupid bank run, which hopefully won't happen again to solvent banks, due to this action.

Let me simplify this for you:

The bank does NOT have the $200B to pay out the depositors. The vast majority of the money is tied up in various bonds and loans, which NOBODY wants to pay face-value for. The Feds are stepping in and providing the cash to pay out the depositors.

Let me say that again: big daddy government is paying the depositors, NOT the bank.

[Moshe123]

Let me simplify this for you:

The bank does NOT have the $200B to pay out the depositors. The vast majority of the money is tied up in various bonds and loans, which NOBODY wants to pay face-value for. The Feds are stepping in and providing the cash to pay out the depositors.

Let me say that again: big daddy government is paying the depositors, NOT the bank.

Basically, a loan to allow them to sell the assets in a fashion that doesn't bankrupt them. They are fully solvent with this loan. No money was lost and the government will probably even make a profit.

[Moshe123]

לכאורה האט סיגניטשער פשוט נישט פארשטאנען אז היינט איז זונטאג און דער עולם האט ארויסגענומען געלד צו גיין "סאנדעי שאפינג" פאר פסח, האבן זיי צום ערשט פארמאכט די בענק...

[aygart]

Let me say that again: big daddy government is paying the depositors, NOT the bank.

Considering how it would be impossible to run a business within the guidelines of FDIC guarantees, I have no problem with a bailout of depositors in these cases. Part of the creation of the FDIC was that depositors should not need to do a complete due diligence for their deposits since that would cripple the economy.

[zale]

Considering how it would be impossible to run a business within the guidelines of FDIC guarantees, I have no problem with a bailout of depositors in these cases. Part of the creation of the FDIC was that depositors should not need to do a complete due diligence for their deposits since that would cripple the economy.

Why should the FDIC guaranty all business funds? They've never done this before, why should they do it now?

But more importantly, HOW should the FDIC guaranty all business funds? Money is not made from thin air. Government can't just guaranty unlimited money. $250,000 is a number that covers most middle-class depositors.

Are banks now going to write "FDIC INSURED TO INFINITY"?

[cgr]

Why should the FDIC guaranty all business funds? They've never done this before, why should they do it now?

But more importantly, HOW should the FDIC guaranty all business funds? Money is not made from thin air. Government can't just guaranty unlimited money. $250,000 is a number that covers most middle-class depositors.

Are banks now going to write "FDIC INSURED TO INFINITY"?

When the issue is liquidity rather than insolvency then insuring all the way is sensible.

[CountValentine]

Basically, a loan to allow them to sell the assets in a fashion that doesn't bankrupt them. They are fully solvent with this loan. No money was lost and the government will probably even make a profit.

So why don't they just loan them the money instead of taking them over? According to you the bank was in good shape and profitable. Why didn't another bank step up and takeover this profitable bank?

[zale]

Basically, a loan to allow them to sell the assets in a fashion that doesn't bankrupt them. They are fully solvent with this loan. No money was lost and the government will probably even make a profit.

A "loan" that no bank or investor would in their right mind give to SVB, because the loan makes absolutely no sense.

Would you like to give me a loan against my portfolio of negative assets, so that I have enough time to wait ten years until I can sell them at market value?

[WayBackMachine]

Why should the FDIC guaranty all business funds? They've never done this before, why should they do it now?

But more importantly, HOW should the FDIC guaranty all business funds? Money is not made from thin air. Government can't just guaranty unlimited money. $250,000 is a number that covers most middle-class depositors.

Are banks now going to write "FDIC INSURED TO INFINITY"?

Areivim was first to double their funds, at some point you need to adjust with inflation

[zale]

When the issue is liquidity rather than insolvency then insuring all the way is sensible.

They became insolvent, plain and simple. They are holding assets that have devalued and people want their money now.

The issue always ends up being liquidity.

[zale]

Areivim was first to double their funds, at some point you need to adjust with inflation

What number would that be today? 500 million per account? I mean ROKU had around 500 million in SVB.

[aygart]

Why should the FDIC guaranty all business funds? They've never done this before, why should they do it now?

But more importantly, HOW should the FDIC guaranty all business funds? Money is not made from thin air. Government can't just guaranty unlimited money. $250,000 is a number that covers most middle-class depositors.

Are banks now going to write "FDIC INSURED TO INFINITY"?

They did in 2008

Would you be prepared to have thousands of businesses insolvent over this bank?

[aygart]

So why don't they just loan them the money instead of taking them over? According to you the bank was in good shape and profitable. Why didn't another bank step up and takeover this profitable bank?

The shut down was by the state. That may yet happen.