Nearly half the money — $143 billion — went to holding companies for the two major banks that failed over the past week, Silicon Valley Bank and Signature Bank, triggering widespread alarm in financial markets.
Remember the people on this leftist website who were saying this wasn’t a bailout because that’s what the fed press release said
No, I remember people correctly saying it wasn't a bailout because a bailout entails bailing out shareholders, which didn't happen for any of the failed banks.
The new program of swapping securities to other banks that didn't fail is a bailout, though.
@mkultrawide is correct though. The point they're trying to make is that the FDIC thing isn't a bailout, which is probably why they led with it so that people will jump the gun and call it a bailout when it isn't since billions in bank equity and debt are getting wiped out. The securities swap is a bailout however (its basically backdoor quantitative easing), which came later, and is more technical and less talked about. It undercuts your position to not understand these technical nuances because it makes you look misinformed when you make statements that are factually wrong, even if they might be sound rhetorically. This is how technocrats argue and you're falling into their trap by not understanding these specifics.
I'm not trying to shout at or own anyone here. I'm going to go back and amend some of my posts. I'm mad about all of this. I just want y'all to understand the nuances here because our finance system is complicated as fuck and it doesn't help us if we dont understand it and understand how to communicate what is going on effectively.
I mean I think it's fair to cover the nuances, but saying it's not a bailout when it effectively does the same thing and has the same effects on the rest of us just seems like a bit of pedantry.
So saying "it's not technically a bailout but here why that doesn't really matter" probably would've gotten a less harsh response than glibly posting the same shit that they were in neolib circles
It doesn't do the same thing. If it did the same thing as a bailout, you would be able to go out and buy SVB stock right now. You can't, because the bank is gone and the equity is worthless. SVB Bridge Bank, which published that fucking ridiculous "we are now the safest place to put your money" bullshit is not the same bank. It's an FDIC-adminstered bank that will operate until they can find a buyer or wind down operations.
Whether or not insuring the full value of deposits constitutes a bailout is a different question that I don't have a good answer for, but SVB's depositors are not the same thing as their shareholders, although I am sure there are more than a few idiots who were both.
Please explain how you believe that the effects on the economy of letting SVB fail and go inter receivership are the same as bailing it out and letting it continue as a going concern.
Silicon Valley Bank Bridge Bank is not Silicon Valley Bank. All of the executives were fired, the board was fired, and all of the shareholders (the owners) lost all of their money and don't get shares of the FDIC bridge bank in return. That is not a bailout. Doing the BTFP two weeks ago and letting them dump their shitty treasury portfolio on the Fed in return for liquity would have been a bailout.
Depositors are not shareholders. Unless you are banking with a credit union, you aren't a shareholder in whatever bank you keep your money in. If your bank fails and your money is all gone, does the FDIC kicking mean that you received a bailout?
I don't have an concrete answer as to what the lifting of the cap on deposit insurance should be called. I have already said that I lean towards thinking that the FDIC shouldn't have raised the cap and there should have been some level of payroll protection instead. But that's not SVB getting bailed out, that's SVB's depositors.
Yes, I have seen that, and I agree that it's bullshit. My kindest reading of that is that the message is geared towards existing SVB depositors to have them keep their money in the bank so that there aren't additional liquidity/solvency issues and so that it's more attractive to potential buyers, given that it starts out with "Dear Clients". However, the the FDIC is insuring apparently fully insuring new deposits according to the website, which absolutely fucking bullshit.
I don't think you're wrong or anything, my only real critique concerns the original post which promoted the downplaying of the situation the FDIC was putting out, and now we see just a few days later the corruption is still very much there.
Whether or not this was a bailout doesn't really matter to me. I don't really care who is in control of that bank or whether or not people can buy shares of it.
It continuing immediately with garbage like this means to me that the structure of the SVB has been kept alive and the cost of that life support is going to fall on the rest of us.
You gotta meet people where they're at and that requires understanding their definition and working around it to make your point clear, otherwise you're just talking past each other. I'm not saying you have to concede their definition explicitly, its probably best to ignore what doesn't make your point crystal clear, and by lumping the FDIC and securities swap together you're just making your whole argument easier to attack.
there's a meme about how liberals and fascists don't need to understand anything, they can just say "duh, the thing is bad/good because it's a bad/good thing" and communists have to be experts in history, philosophy, geopolitics, war, law, science and economics.
it sucks but its true.
if youre gonna be able to provide a counterpoint to "itll all be fine, we'll save the hardworking job creators at the wework but for funcopops factory by using the totally normal dif, backstopped by the fed with a little securities swap in the middle" you actually have to understand and engage with those ideas.
It’s literally turn on the news, see what they’re saying, read the faq about swaps on your banks website and say “this is a back end bailout”.
Which there is no response to because it’s 100% accurate.
When someone says “the nazis were socialist” you don’t have to throw up your hands and storm away, you can quote hitler in his own words and then cite the things that happened directly afterward (he said we’re not socialists, in fact we’re gonna kill them and then persecuted the socialists).
Amending my comment in the spirit of not trying to get into a slap fight with other leftists. My apologies. See my responses below for my explanation of thoughts. I also have screenshotted what I originally commented, in case anyone wishes to see it.
Amending my comment in the spirit of not trying to get into a slap fight with other leftists. My apologies. See my responses below for my explanation of thoughts. I also have screenshotted what I originally commented, in case anyone wishes to see it.
$45B wasn't conjured out of thin air to cover deposits. It came from the ~$100B Deposit Insurance Fund administered by the FDIC.
This new program of swapping long term securities with low interest rates with ones at higher rates is a different story. That's coming out of thin air.
No, that's not accounting fiction. The DIF exists and it's assets were valued at ~$100B last week.
Whether or not the FDIC ceiling should have been raised is again a different question, and one in which I lean toward "No":
I’ve been going back and forth on this. I’m starting to lean towards that they shouldn’t have insured depositors and should have guaranteed payroll up to a certain amount instead. These companies put all of their eggs into one basket because it paid a higher return, which means higher risk. Not only the bank, but many of their customers have fought against regulation or stayed quiet while the banking industry and SVB pushed to be exempted from regulation. If they want their cash fully insured, then depositories should, at the very least, be regulated like public utilities.
https://hexbear.net/post/256772/comment/3313649
The definition of a bailout is the government stepping in to save a company from collapse. That did not happen for any of the three banks. Their shareholder equity and the creditors claims have been wiped out. Whether or not insuring deposits counts as bailing out depositors is up for debate, I can see that going both ways. The other banks that are getting to participate in this security swap program are getting bailed out.
Why are you saying they’re being drawn from one place and not the other when it does not matter?
Because it does matter. The DIF is funded by premiums assessed to banks by the FDIC. The FDIC is separate from the Fed and doesn't have money printer capabilities the same way the Fed or Treasury do with this new securities swap program.
If capitalists wanted to cover their counterparty risk a mechanism exists for that, which we all became familiar with after 2008: credit-default swaps.
Credit-default swaps are for bonds, not bank deposits. They could have used CDARS or ICS up to a certain amount to have their deposits fully insured, which again goes back to the point in my quote that they put all their eggs into one basket in return for higher interest rates on their deposits.
There is no compelling argument against calling this a bailout
This new program of swapping long term securities with low interest rates with ones at higher rates is a different story. That’s coming out of thin air.
If you still have any patience for this conversation, what do you mean by this? Are you talking about the expanded discount window, or is there something in addition to it that developed after the BTFP was set in place through the something or other systemic exception?
I'm talking about both, but the BTFP is more egregious in my opinion than the changes to the discount window. This discount window serves a purpose that I can at least understand in terms of providing short term liquidity. Allowing the banks to basically dump their bonds with the BTFP for a year is a way to keep their profits high instead of letting them rightfully take a bath on their poor asset management. They say it's about liquidity, but I suspect that it's much more about actual solvency, in how SVB "technically" had a liquidity problem, in that their assets weren't capable of generating enough revenue to cover deposits, and that is because if their assets would have been marked to market, they would have also been (and did end up being) insolvent.
What is more egregious is that they are allowing collateral in both the discount window and the BTFP to be valued at par (the face value of the bonds) instead of marked to market, meaning that collateral will be worth less and less as the Fed continues doing the Volker summoning ritual to kill labor gains. The discount window has been around for a long time, but valuing collateral at par is new.
Sure, the only way Marx was able to be as insightful as he was, was because he totally immersed himself in all the economic data and theory available to him at the time. Things that could easily be called insignificant pedantic arguments, following your argument.
If we refuse to do the same and just stick our heads in the sand about these things, then we have no hope of changing the society we live in.
And about the old understandings part. While many things in Marx are still relevant, they are at best incomplete.
He also incorporated other ideas from the sciences of his time which many Marxists have categorically refused to do since Marxism became a primarily academic project, at least in the west.
Now to be fair, this has been changing, especially since 2008. But most people stick to old theory which, while it can still be insightful, is not up to the task of bringing about revolution as it currently stands.
Well yeah that was my point, I disagree. It's not so much about the policy itself that is insightful but what it can tell us about the system as a whole.
For example, this round of propping up the financial sector is turning out quite different than the last. Whether it ends up becoming a new thing to supplant neoliberalism or just a modification of it is yet to be seen.
The cause is also interesting, the end of QE and the rate hikes which were intentional. Not sure how much I believe it was to curb inflation but how they explain their actions can be insightful in its own way.
This also triggered a series of sovereign debt crises in the third world, like Sri Lanka and others.
But anyway my point is that what might seem like useless information in isolation can be very useful when looking at the system as a whole due to the integrated nature of the world financial system.
the depositors are capitalists. they took on risk in exchange for lower rates on loans. the government has bailed them out. when people say they bailed the bank out they mean the only surviving entity that was once the bank - the depositor base.
I'll make sure to tell all the nurses I worked with at my last job that actually they are capitalists, which is why they deserved to have their payroll missed last Friday.
Any other time the FDIC steps in to "bail out" depositors at a bank, I will remember to call them capitalists, too. Just like you would be a capitalist for choosing a bank with higher interest rates.
no mate I'm being literal. the people with deposits at SVB are literally capitalists - they own capital. I'm not being hyperbolic. 97% of deposits weren't insured because they were over the cap - because the people making the deposits literally owned corporations. your nurse friends don't own capital and I'll be deeply, pleasantly surprised if they have single bank accounts over the FDIC insurance limit.
No, I remember people correctly saying it wasn't a bailout because a bailout entails bailing out shareholders, which didn't happen for any of the failed banks.
The new program of swapping securities to other banks that didn't fail is a bailout, though.
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@mkultrawide is correct though. The point they're trying to make is that the FDIC thing isn't a bailout, which is probably why they led with it so that people will jump the gun and call it a bailout when it isn't since billions in bank equity and debt are getting wiped out. The securities swap is a bailout however (its basically backdoor quantitative easing), which came later, and is more technical and less talked about. It undercuts your position to not understand these technical nuances because it makes you look misinformed when you make statements that are factually wrong, even if they might be sound rhetorically. This is how technocrats argue and you're falling into their trap by not understanding these specifics.
I'm not trying to shout at or own anyone here. I'm going to go back and amend some of my posts. I'm mad about all of this. I just want y'all to understand the nuances here because our finance system is complicated as fuck and it doesn't help us if we dont understand it and understand how to communicate what is going on effectively.
I mean I think it's fair to cover the nuances, but saying it's not a bailout when it effectively does the same thing and has the same effects on the rest of us just seems like a bit of pedantry.
So saying "it's not technically a bailout but here why that doesn't really matter" probably would've gotten a less harsh response than glibly posting the same shit that they were in neolib circles
It doesn't do the same thing. If it did the same thing as a bailout, you would be able to go out and buy SVB stock right now. You can't, because the bank is gone and the equity is worthless. SVB Bridge Bank, which published that fucking ridiculous "we are now the safest place to put your money" bullshit is not the same bank. It's an FDIC-adminstered bank that will operate until they can find a buyer or wind down operations.
Whether or not insuring the full value of deposits constitutes a bailout is a different question that I don't have a good answer for, but SVB's depositors are not the same thing as their shareholders, although I am sure there are more than a few idiots who were both.
Effectively doing the same thing in the sense of its effects on the economy and the rest of us.
Whether or not I can buy stocks of SVB wasn't exactly the main concern being brought up
Please explain how you believe that the effects on the economy of letting SVB fail and go inter receivership are the same as bailing it out and letting it continue as a going concern.
The vast majority of everyone involved is getting bailed out and the bank continues to operate just under new management
Silicon Valley Bank Bridge Bank is not Silicon Valley Bank. All of the executives were fired, the board was fired, and all of the shareholders (the owners) lost all of their money and don't get shares of the FDIC bridge bank in return. That is not a bailout. Doing the BTFP two weeks ago and letting them dump their shitty treasury portfolio on the Fed in return for liquity would have been a bailout.
Depositors are not shareholders. Unless you are banking with a credit union, you aren't a shareholder in whatever bank you keep your money in. If your bank fails and your money is all gone, does the FDIC kicking mean that you received a bailout?
I don't have an concrete answer as to what the lifting of the cap on deposit insurance should be called. I have already said that I lean towards thinking that the FDIC shouldn't have raised the cap and there should have been some level of payroll protection instead. But that's not SVB getting bailed out, that's SVB's depositors.
Here's how the new team is advertising
https://twitter.com/charliebilello/status/1635982686111121408?s=20
Just fully taking advantage of the limitless insurance now.
Yes, I have seen that, and I agree that it's bullshit. My kindest reading of that is that the message is geared towards existing SVB depositors to have them keep their money in the bank so that there aren't additional liquidity/solvency issues and so that it's more attractive to potential buyers, given that it starts out with "Dear Clients". However, the the FDIC is insuring apparently fully insuring new deposits according to the website, which absolutely fucking bullshit.
I don't think you're wrong or anything, my only real critique concerns the original post which promoted the downplaying of the situation the FDIC was putting out, and now we see just a few days later the corruption is still very much there.
Whether or not this was a bailout doesn't really matter to me. I don't really care who is in control of that bank or whether or not people can buy shares of it.
It continuing immediately with garbage like this means to me that the structure of the SVB has been kept alive and the cost of that life support is going to fall on the rest of us.
Removed by mod
Norway is a socialist country because of social safety nets. Fuck the nuances.
Here's my "fed posting", since you are so interested.
Yes understanding and regurgitating fed double speak will for sure give us a upper hand in over throwing the system.
deleted by creator
You gotta meet people where they're at and that requires understanding their definition and working around it to make your point clear, otherwise you're just talking past each other. I'm not saying you have to concede their definition explicitly, its probably best to ignore what doesn't make your point crystal clear, and by lumping the FDIC and securities swap together you're just making your whole argument easier to attack.
deleted by creator
there's a meme about how liberals and fascists don't need to understand anything, they can just say "duh, the thing is bad/good because it's a bad/good thing" and communists have to be experts in history, philosophy, geopolitics, war, law, science and economics.
it sucks but its true.
if youre gonna be able to provide a counterpoint to "itll all be fine, we'll save the hardworking job creators at the wework but for funcopops factory by using the totally normal dif, backstopped by the fed with a little securities swap in the middle" you actually have to understand and engage with those ideas.
deleted by creator
It’s not a semantics or knowledge test though.
It’s literally turn on the news, see what they’re saying, read the faq about swaps on your banks website and say “this is a back end bailout”.
Which there is no response to because it’s 100% accurate.
When someone says “the nazis were socialist” you don’t have to throw up your hands and storm away, you can quote hitler in his own words and then cite the things that happened directly afterward (he said we’re not socialists, in fact we’re gonna kill them and then persecuted the socialists).
They seem very similar worldviews? Wouldn't the capitalist losses refer to shareholders?
Though the depositors are also capitalists, their risky behavior was keeping money in a bank
deleted by creator
the depositors in a commercial bank are capital-holders.
Amending my comment in the spirit of not trying to get into a slap fight with other leftists. My apologies. See my responses below for my explanation of thoughts. I also have screenshotted what I originally commented, in case anyone wishes to see it.
deleted by creator
Amending my comment in the spirit of not trying to get into a slap fight with other leftists. My apologies. See my responses below for my explanation of thoughts. I also have screenshotted what I originally commented, in case anyone wishes to see it.
deleted by creator
$45B wasn't conjured out of thin air to cover deposits. It came from the ~$100B Deposit Insurance Fund administered by the FDIC.
This new program of swapping long term securities with low interest rates with ones at higher rates is a different story. That's coming out of thin air.
deleted by creator
No, that's not accounting fiction. The DIF exists and it's assets were valued at ~$100B last week.
Whether or not the FDIC ceiling should have been raised is again a different question, and one in which I lean toward "No":
https://hexbear.net/post/256772/comment/3313649
The definition of a bailout is the government stepping in to save a company from collapse. That did not happen for any of the three banks. Their shareholder equity and the creditors claims have been wiped out. Whether or not insuring deposits counts as bailing out depositors is up for debate, I can see that going both ways. The other banks that are getting to participate in this security swap program are getting bailed out.
deleted by creator
Because it does matter. The DIF is funded by premiums assessed to banks by the FDIC. The FDIC is separate from the Fed and doesn't have money printer capabilities the same way the Fed or Treasury do with this new securities swap program.
Credit-default swaps are for bonds, not bank deposits. They could have used CDARS or ICS up to a certain amount to have their deposits fully insured, which again goes back to the point in my quote that they put all their eggs into one basket in return for higher interest rates on their deposits.
What's SVB's current stock price?
deleted by creator
deleted by creator
No, it's how capitalists value owning one share of equity in SVB. What's the current price?
Which can be answer by answering my above question.
deleted by creator
Are you talking about the accounting scandal that sent executives to jail and turned the Big 5 in the Big 4?
deleted by creator
21 people were convicted over Enron.
If you still have any patience for this conversation, what do you mean by this? Are you talking about the expanded discount window, or is there something in addition to it that developed after the BTFP was set in place through the something or other systemic exception?
I'm talking about both, but the BTFP is more egregious in my opinion than the changes to the discount window. This discount window serves a purpose that I can at least understand in terms of providing short term liquidity. Allowing the banks to basically dump their bonds with the BTFP for a year is a way to keep their profits high instead of letting them rightfully take a bath on their poor asset management. They say it's about liquidity, but I suspect that it's much more about actual solvency, in how SVB "technically" had a liquidity problem, in that their assets weren't capable of generating enough revenue to cover deposits, and that is because if their assets would have been marked to market, they would have also been (and did end up being) insolvent.
What is more egregious is that they are allowing collateral in both the discount window and the BTFP to be valued at par (the face value of the bonds) instead of marked to market, meaning that collateral will be worth less and less as the Fed continues doing the Volker summoning ritual to kill labor gains. The discount window has been around for a long time, but valuing collateral at par is new.
Nah dude, it's ineffectual cus it refuses to engage with material reality and clings to 19th/20th century understandings of the world as gospel.
deleted by creator
Sure, the only way Marx was able to be as insightful as he was, was because he totally immersed himself in all the economic data and theory available to him at the time. Things that could easily be called insignificant pedantic arguments, following your argument. If we refuse to do the same and just stick our heads in the sand about these things, then we have no hope of changing the society we live in.
And about the old understandings part. While many things in Marx are still relevant, they are at best incomplete. He also incorporated other ideas from the sciences of his time which many Marxists have categorically refused to do since Marxism became a primarily academic project, at least in the west. Now to be fair, this has been changing, especially since 2008. But most people stick to old theory which, while it can still be insightful, is not up to the task of bringing about revolution as it currently stands.
deleted by creator
Well yeah that was my point, I disagree. It's not so much about the policy itself that is insightful but what it can tell us about the system as a whole.
For example, this round of propping up the financial sector is turning out quite different than the last. Whether it ends up becoming a new thing to supplant neoliberalism or just a modification of it is yet to be seen. The cause is also interesting, the end of QE and the rate hikes which were intentional. Not sure how much I believe it was to curb inflation but how they explain their actions can be insightful in its own way. This also triggered a series of sovereign debt crises in the third world, like Sri Lanka and others.
But anyway my point is that what might seem like useless information in isolation can be very useful when looking at the system as a whole due to the integrated nature of the world financial system.
deleted by creator
Whats the current price of SVB stock?
the depositors are capitalists. they took on risk in exchange for lower rates on loans. the government has bailed them out. when people say they bailed the bank out they mean the only surviving entity that was once the bank - the depositor base.
So if your bank fails and you lose your money, are you also a capitalist if you chose a bank that offers higher interest rates?
what? it's a commercial bank. they're literally capitalists - they're the owners of the SV startups that are slowly going bust this cycle.
I'll make sure to tell all the nurses I worked with at my last job that actually they are capitalists, which is why they deserved to have their payroll missed last Friday.
Any other time the FDIC steps in to "bail out" depositors at a bank, I will remember to call them capitalists, too. Just like you would be a capitalist for choosing a bank with higher interest rates.
no mate I'm being literal. the people with deposits at SVB are literally capitalists - they own capital. I'm not being hyperbolic. 97% of deposits weren't insured because they were over the cap - because the people making the deposits literally owned corporations. your nurse friends don't own capital and I'll be deeply, pleasantly surprised if they have single bank accounts over the FDIC insurance limit.
Where do you think those nurses paychecks come from?
Exactly its not a bailout because non orange man good.