So we have 3 banks that have big money depositors whining that they need to be made whole. Mostly VC funds, and of course the startups they gave money to. Silicon Valley Bnak, Silverlake, and Signature. Literally demanding the treasury and FDIC make them whole…or else “economic collapse”.
All these clowns knew the max deposit guarantee was $250k. They chose to foolishly put all their eggs in one basket. And SVP, which had a meteoric rise in their assets since the pandemic made the classic ALM error of duration mismatch. Funding demand deposits with medium term treasuries is nuts. A speculation that interest rates would be near zero forever. It didn’t pan out that way. Fools, that the market should rightly punish
.
Signature is a NY bank that held accounts for real estate and legal settlements. Not sure what they did wrong, and I don’t care. Let email, shareholders and any depositors too lazy to diversify their large deposits across multiple banks deserve to feel the pain. Just plain lazy.
Then there is Silverlake - which decided to hitch its wagon to crypto. Bad choice of wagons. I’d just tell them, " and the horse ya rode in on."
The problem is way too much debt in the system. You can send cash to depositors, but don’t think for even one minute that is a solution to the problem. It reminds me so much of the situation with beach front homes washing out sea and having the owners demand relief. You build a house on stilts at the high tide mark and then wonder what went wrong. Heck, you don’t even believe in climate change, so what’s the problem?
We are sitting on a financial system awash in debt. Total debt is way more than total real assets. Like multiples. That can’t be OK. It is bound to result in crisis after crisis.
They’ll tell you that taxpayers won’t foot the bill. Yeah, right. It’s not the taxpayers, it’s the middle class banking customers who will pay. As if those are two entirely different groups of people.
The interview is saw with Yellen made my shoulders sag. A complete toad. Afraid to upset the donor class and parroting “we must protect the financial system”. Total crap. If you don’t let the financial system flush down the turds, expect the bathroom to smell. It’s not rocket surgery.
or, OR you have regulations in place that prevent this from happening. Failures are then a problem with the regulators failing to maintain.
Pretty sure that in Canada, if we had a bank failure, that consumers would be calling for the blood of regulators.
I mean, I luv me some capitalism, but there’s got to be limits, and when it comes to the financial sector, that’s as good a spot for limits using gov’t regulations as any.
In the short term I am sure a lot of people would say no, but if you let them fail, I am willing to bet my non-existent family farm that next go around startups will be more careful as to where they park their money.
I agree with the latter half of this sentiment. Irresponsible banks, as well as their stock and bond holders, deserve their punishment that the market is doling out. Let them fail.
I somewhat disagree with the sentiment on depositors. I wrote this in another thread:
If you are a small tech company, working capital can easily exceed 250k, even for just making payroll.
The bank product you are looking for is not a deposit account, you want a line of credit. To do so, you may have to post collateral and sign some papers saying that the bank can foreclose if you fail to maintain that collateral. Banks (should) be encouraged to secure their loans to avoid…well avoid a bank failure.
If the start up peeps don’t know how to get an LOC, then I’m certain the VC that funded all that cash can be a resource.
In any event, it’s seems irrational to fail at enforcing the established and known limit of $250k while indicating that the regulators need to be more vigilant. Change the rules if you want, but let’s stop with the “in this case, let’s not apply them.”
I’m glad we have brokerages and stock exchanges so I don’t have to face the person who just lost a big portion of his nest egg while I buy it up on the cheap.
Right. If it has to be done face-to-face, then you need to keep building rapport until you have an irrevocable deal.
I have to draw the line somewhere, though. When the police finally started confiscating the vehicles of nocturnal urban street racers and exhibitors, I decided not to buy one of those unique, flashy sports cars at police auction and park it on the street outside my house at night in the same neighborhood as the racing.
