re: Is FDIC insurance now unlimited for depositors?

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This isn't the first time this type of "special insurance assessment" has been used to replenish the FDIC reserve fund.

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Same as QE, just means Treasury turned on the printing machine.

I’d say we have been enduring a “behavioral sink” for 2 years, in the express lane.

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The thing is, SVB actually has all of the value of the accounts and more. The issue was fundamentally different than 2008.

The money is there, so if taxpayers contribute anything someone is getting a cut beforehand.

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While this is true, the rules were changed mid-game. That has its own consequences...

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Same as QE, just means Treasury turned on the printing machine.

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No, it's totally different from QE, which, btw, was NOT a function of the U.S. Treasury but was instead a bond-buying program by the Federal Reserve Bank intended to increase liquidity in the banking system thereby reducing interest rates all along the yield curve.

This "special insurance assessment" has no effect on the banking system's liquidity.

If you want to compare the special insurance assessment on banks to something, it's more like when Entergy charges a monthly hurricane damage fee on its customers to pay for repairing infrastructure damages following a destructive storm.

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So I suppose the mave here is to stem a regional bank "contagion." Is that a valid concern?

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Possibly, although from the limited information I can find on SVB and Signature Bank it seems to me their problems were caused by management making very poor decisions as to creating a highly non-diversified and risky customer base.

For SVB it was a high concentration of loans and deposits to and from venture capital firms, which by their very nature are considered speculative risk, hence the word "venture."

Plus, SVB thought they could arbitrage their net interest income by borrowing short at 0.25% and lending long at 3.0% on 5-10 year Treasury securities. But now they're borrowing short at 4.5-4.75%% and they're still earning 3.0% on the securities they hold.

For Signature Bank, their management seemed to believe they could specialize in being the bank for crypto currency firms and ventures. Probably not the best risk profile for a bank these days.

As far as I can tell not many "regional banks" are heavily involved in either of those activities.

So I believe the Fed, FDIC and Treasury are doing what they're doing to prevent a loss of confidence in the banking system.

So they are allowing shareholders in SVB and Signature Bank to lose all of their investment, force out the management of those banks never to be hired again by another bank, and make all the other banks foot the bill for cleaning up those managements' mess.

The biggest problem with our society today is fear of consequences

We as a society continue to make bad decisions because we don’t have to face the consequences. We just get bailed out

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No shite I thought you died. You are missed on the MB.

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Nah. That just stemmed from his pic crossing Abbey Road barefooted.

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No cost to taxpayers explain how that works, Janet!

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I'm not Janet but that was explained in the news release posted in the OP.

Funds will be advanced by the Federal Reserve/FDIC to make whole all uninsured depositors. Then a special deposit insurance assessment will be charged to all the other FDIC covered banks until the full amount of the amount advanced is recovered.

That means the shareholders (not taxpayers) of all the other banks will be paying via decreased profits by their banks to cover the full amount advanced to make all depositors whole in the Silicon Valley Bank and Signature Bank.

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Russian, first off, great to see you again.

Second, don't you think that banks will simply pass the assessment or increased insurance premiums on to customers via fees, lower deposit interest rates (now that rates are actually rising a bit) and possibly higher loan rates (if competition allows)?

I don't see the boards or shareholders of these banks voluntarily eating the assessment and lowering earnings.

Third, isn't this a recipe for moral hazard?

So they are allowing shareholders in SVB and Signature Bank to lose all of their investment, force out the management of those banks never to be hired again by another bank, and make all the other banks foot the bill for cleaning up those managements' mess.


Exactly. What isn’t getting enough attention is this next round of special assessments that will be shoved down the throats of well managed banks that didn’t go to sleep at the switch. In the process sending the message to the VC and start up crowd that there are no consequences for their piss poor money management. The haircut shouldn’t be large but the fact that well managed banks will end up footing the bill is straight up bullshite when, in this particular case, the large depositors new the risk and just simply failed to mitigate it.