Riddle me this... So bank deposits are insured for $250k. Some deposits were for $millions.

[3Hotdogs]

Yellen announces that the depositors will be "made whole." This implies that the depositors will get more than $250K, each.


and ----

None of this will come from taxpayers.

[sarcasmo]

1. ROKU lost 500 million. 500 million eggs in one basket is bad finance.

[Enter stage left]

3. "Bad finance"?...

Fucking stupidity. Whoever is responsible is as stupid as TFG & anyone who loaned him money.

CRIMINAL STUPIDITY!

[roamer65]

15. +1000

[allegorical oracle]

37. +++++

[Renew Deal]

6. How many total eggs do they have?

And how many of the eggs are insured outside of FDIC?

[sir pball]

28. They have $1.8B cash reserves. 26% was in SVB

I can't speak as to best corporate finance practices, but that doesn't seem terribly unreasonable to me. Putting all 1,800,000,000 eggs in one basket would be foolish, but it's not really practical to have 7200 $250K accounts either (not to mention there aren't 7200 FDIC-insured banks in the first place).

[Abolishinist]

17. Let's say the total amount of cash ROKU has on hand is $2 billion.

Are you saying, in order to practice 'good' finance, that they should have placed their funds in 8,000 different bank accounts?

[FBaggins]

24. No... they didn't

Depositors over the FDIC limit don’t “lose” everything above that level. They lose access to it until the receiver can figure out the true state of assets/liabilities for the bank.

Depositors (insured or not) have first claim on those assets. Shareholders will probably lose everything and any lenders to SVB will take a bath… but even in the worst bank collapses the uninsured depositors get almost all of their money back.

[we can do it]

25. There's a Lady Gaga song about that

[sl8]

31. You seem very determined to make that aphorism fit this situation:

https://www.democraticunderground.com/100217717186#post8

Why? What percentage of their funds could be invested in something before it becomes "too many eggs" in one basket?

[Deuxcents]

2. It's hard for me to believe the taxpayers

Won’t take a hit from this or the dominoes that we don’t know yet that may fall

[roamer65]

4. Federal Reserve money creation to backstop the DIF and member banks.

So taxpayers will pay for it in higher inflation.

[kelly1mm]

5. So I guess that '250k per bank' FDIC insurance is actually unlimited now. Not that I will

ever have a chance to need it but good to know it is the new normal!

[roamer65]

7. Only if you or your company holds multimillions in deposits.

[Ocelot II]

8. The FDIC isn't funded by the government.

It's an independent agency that insures deposits, examines and supervises banks to make sure they’re healthy, and manages the fallout when they’re not. The FDIC is backed by the full faith and credit of the government, but it is not funded by the government. Member banks pay insurance dues to cover bank failures, and when that isn’t enough money, the FDIC can borrow from the federal government or issue debt. In this case, any losses to uninsured depositors will be recovered by a special assessment on banks.

[onenote]

10. It seems that some DUers know less about the FDIC than they think they know.

Thanks for trying to educate them.

[roamer65]

11. The FDIC's DIF fund is mainly in government bonds.

Those bonds will now have to be monetized. If the purchaser is the Federal Reserve, that is quantitative easing (aka money creation).

[SheltieLover]

12. Ty for explaining

Not an econ major.

[crickets]

40. 👆👆 Concise and informative. Thank you! nt

[spooky3]

9. Buried in this gift WaPo article is an explanation.

https://wapo.st/3TcGS2b

Look for the pgh beginning with reference to Sec. Yellen.

[Maeve]

27. This one, I believe (for those who have trouble clicking thru)

Treasury Secretary Janet L. Yellen said that taxpayers would bear none of the burden of protecting depositors. Their funds will be backstopped by a pool of money that is regularly paid into by U.S. banks, which now holds more than $100 billion.

The new Fed program will enable banks to pledge U.S. Treasuries and other safe government securities as collateral in return for loans of up to one year from the central bank.

[Celerity]

32. more

https://heathercoxrichardson.substack.com/p/march-12-2023

At 6:15 this evening, Secretary of the Treasury Janet L. Yellen, Federal Reserve Board Chair Jerome H. Powell, and Federal Deposit Insurance Corporation (FDIC) Chairman Martin J. Gruenberg announced that Secretary Yellen has signed off on measures to enable the FDIC to fully protect everyone who had money in Silicon Valley Bank, Santa Clara, California, and Signature Bank, New York. They will have access to all of their money starting Monday, March 13. None of the losses associated with this resolution, the statement said, “will be borne by the taxpayer.” But, it continued, “Shareholders and certain unsecured debtholders will not be protected. Senior management has also been removed. Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law.”

snip

It appears that Yellen, Powell, and Gruenberg, in consultation with the president (as required), concluded that the collapse of SVB and Signature Bank was a systemic threat to the nation’s whole financial system, or perhaps they concluded that the panic over that collapse—which is a different thing than the collapse itself—was a threat to the nation’s financial system. They apparently decided to backstop the banks to prevent more damage. But they are eager to remind people that they are not using taxpayer money to shore up a poorly managed bank.

Right now, this appears to leave us with two takeaways. The Biden administration had been considering tightening the banking regulations that were loosened under Trump, and it seems likely that the need for the federal government to step in to protect the depositors at SVB and Signature Bank will make it much harder for those opposed to regulation to keep that from happening. There will likely be increased pressure on the Biden administration to guard against helping out the wealthy and corporations rather than ordinary Americans.

And, perhaps even more important, the weekend of panic and fear over the collapse of just one major bank should make it clear that the Republicans’ threat to default on the U.S. debt, thus pulling the rug out from under the entire U.S. economy unless they get their way, is simply unthinkable.

[roamer65]

13. TARP 2, the sequel.

Coming to a financial market near you, soon.



Another clean up of a Repuke originated financial mess.

[Amishman]

41. TARP was a huge success overall

Saved American jobs and eventually turned a small profit.

[W_HAMILTON]

14. For starters, the government seized the bank's assets...

...which is apparently enough to cover most of the bank's deposits as is (I heard around 80%-90%).

Here is the FDIC's official announcement (including asset/deposit information as of the end of 2022): https://www.fdic.gov/news/press-releases/2023/pr23016.html

[Igel]

33. Which is a Big Deal.

Most assume the bank had no assets.

Another estimate I heard put the assets as sufficient to cover 95% of deposits.

Meaning the FDIC will cover 5-20%. But then you have to wonder what the new additional bank fee that'll be paid by investors and tax payers will be used for.

[LetMyPeopleVote]

16. There is a fund that comes from other banks

There will be assessments to cover all amounts that will be from Wall Street and not the tax payers

[Model35mech]

20. I expect that cost will be passed along to banking consumers

There are no free lunches when it comes to Capitalists spending money.

[Bucky]

23. To be honest, I see nothing but free lunches in this deal

but just not for us

[Model35mech]

39. Yes, because we end-up buying lunch for the elite corpricrats

[Stargazer99]

18. I think the rich and well to do are just beginning to understand

Joe Taxpayer is getting fed up

[applegrove]

19. Yes. Heather Cox Richardson said it best:

https://heathercoxrichardson.substack.com/p/march-12-2023

[LetMyPeopleVote]

21. HSBC to acquire Silicon Valley Bank in deal to protect deposits

Link to tweet

[muriel_volestrangler]

26. That's only about the smaller UK arm - not relevant to the deposits with the US parent (nt)

[Bucky]

22. Well, they're clearly setting up another bank bailout

And the heads that need to roll will not roll.

Capitalism without consequences for failure is really socialism for billionaires.

[Johnny2X2X]

29. Did you even read the thread?

This is not a bank bailout at all! The bank shareholders are losing their money. The FDIC is taking measures to protect depositors only, which they normally do when a bank goes under.

[inthewind21]

36. SMH

I was wondering the same thing. It's painfully obvious just how little citizens of this country actually know about how their own government and country works.

[mathematic]

30. What's the riddle?

FDIC insurance money comes from banks not taxpayers. Fed providing liquidity (cash loans) fully collateralized with government bonds makes the Fed money, not costs it.

[LetMyPeopleVote]

34. Here is President Biden's statement

Link to tweet

[moonshinegnomie]

35. the FDIC makes all the other banks pay for it

The FDIC imposes a fee of all the other banks to cover any FDIC losses. no taxpayer money is needed

[Zeitghost]

38. The bank is insolvant

Not completely broke. It still has assets, worth hundreds of millions. It just doesn't have enough to cover all of the deposits. TheFDIC will cover some, the liquidation will cover much of the rest.

[Xolodno]

42. The first 250k is covered by insurance premiums...

...that all banks pay into.

The bank likely still has significant assets (unlike the mortgage meltdown of 2008 where assets were pennies on the dollar). If there are shortfalls, the Federal Government could probably lend the money to whoever is purchasing the assets, if need be. But in the end, the government will get its money back, with interest.

Banks falling apart is nothing new and small local banks get folded into larger ones all the time.