71 Comments

Profits are for us, losses are for you.

-- Banks

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Privatize the profits, socialize the losses.

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No bank should be allowed to charge someone $12 A MONTH if your checking account balance drops below $500. That's Truist, the bank that advertises how human their bank and employees are. And that's on a no-interest bearing account! How the hell does it cost $12 a month to service a checking account?

No bank should be allowed to charge $35 or more for NSF.

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That type of behavior is predatory, and hurts the most vulnerable. Most banks make more than enough money to subsidize small accounts, and should.

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It is important to be accurate here, though ... SVB, the bank is gone. These are losses of account holders (and yes some of the account holders are companies and VCs, but still, they didn't make the stupid investment decisions). This is like your bank (and I assume you use a bank) making risky bets, resulting in them having a liquidity issue which results in rumors to start that the bank will be insolvent, which will result in a bank run and by the time you are trying to move your money out (and perhaps you have more than $250,000 with the bank in a savings account to buy a house) but you are too late, others were faster and by the time you try to get your money out the bank has run out of cash. So at that point, let's say you have $500,000 in the bank and have $250,000 that are not insured would you call it "socializing losses" if the government said you would get the full $500,000 back"?

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You're right, it's obviously a complicated issue and I was being flippant in my comment. I don't actually think the companies should lose their deposits because the whole point of a bank is that you can trust your money will be there when you need it. The companies trusted SVB, and they got hosed. While they definitely should've spread their deposits around to additional banks as a financial hedge, I don't think they should get wiped out.

I'm glad regulators are liquidating SVB to cover deposits, and wiping out bondholders and shareholders in the process. Theoretically, if they generate enough money to cover deposits, and impose a "special assessment" on the banking industry to bridge the gap, no "taxpayer" money will be required to cover the losses.

But, like Judd mentioned, I worry any increased "costs" from "regulations" or "special assessments" will be passed along to consumers to maintain profitability. And this process only inceases confidence among the banks that the government will step in and save them if they screw up. If a huge "systemically important" institution like JPM or BofA gets in trouble, I doubt the rescue/seizure will be this neat and clean.

It's the popular talking point right now, but there is a moral hazard issue created by this. I hope the markets and banks get a little scared, and a little defensive in response, not the other way around.

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I totally agree. but I think the alternative would lead to further centralization and even more power of the JPMs and BofAs which then would lead to both increased rates due to monopolization and even bigger tax payer bail outs (because banks at the end of the day are nearly by design fairly unstable).

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founding

Thank you for your explanation. I don't follow or understand the dynamics of this industry, and appreciate learning more. (And, YIKES!)

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Glad it was helpful! I don't think half the people who work in financial services understand the dynamics either. Making things intentionally confusing is part of the scam.

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Could bailouts for the “pull yourself up by the bootstraps but always make sure you have plenty of other people’s money and political power at the ready in case you need it” awaken any of the misguided souls who bathe daily in right wing paranoia anger stew long enough to see who is really swiping the butter from their bread? Dare to hope. Much as I like President Biden and appreciate the political pressure he must be under, increasing FDIC coverage beyond the (agreed upon by every account holder) $250,000 misses the moment, destructively so. We continue to favor “innovators” who love risk (as long as it’s not their money, and it’s not real risk, and they are ultimately not responsible for any downside), while we make the poor beg for scraps. This is not how a great, or decent country acts. I understand those with money and influence are powerful and have many ways to put uncanny amounts of pressure on any President so they would cave to full bailout/systemic risk pressure campaign, but it’s a real political miss for the Democratic Party.

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In 2008, the government could have bailed out the banks by paying off all those home mortgages, perhaps at an appropriate fraction of their face value. Instead of giving the money directly to the banks and stiffing home owners, the money could have gone to the banks on behalf of the home owners. All those people who lost their homes, could instead have become safely owners of them. If that's too generous for ordinary folks, they could have been given modest, affordable replacement mortgages payable to the federal government. I never have understood why that approach was never even discussed.

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Because the little people don't fund campaigns. Sorry to say, Obama's actions were a moral failure. He was way too cozy with Wall Street.

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founding

That's exactly what I thought at the time. We focus on those who need protection from those who only focus on "getting" more money. Then, those who can't survive in this cutthroat game become collateral damage.

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A country for and by Wealthy White Male “Christian” Oligarchs. “How the South Won the Civil War.”

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It should be pointed out that Bill Clinton worked with Republicans to remove the last of the guardrails of the New Deal. Gramm-Leech-Blighly and NAFTA were both a bipartisan effort, and both have had devastating effect on income inequality.

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So was McCain Feingold. What’s your point?

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That corruption isn't the sole province of The South, old white men. The only word that you mentioned that matters is "oligarchs".

We need to stop fighting the culture war and start fighting the class war.

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This was an allusion to the book by Heather Cox Richardson.

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To be fair, the Biden administration acted correctly here. Bank runs are contagious and left unchecked can completely wreck the economy for everyone, not just Silicon Valley tech bros. That said, there needs to be a solid investigation of just what went on at SVB, because nothing about that situation smells normal. (And lets not even get started on that mess in New York). Regardless of your feeling about the wealthy, nobody should want banks to fail without protecting their customers. (Unless you're one of those accelerationist idiots who believes the only way to fix the system is to completely smash it first, in which case let me remind you that revolutions ALWAYS eat their own and rarely end up where you want them to.)

Helping out poor families will, unfortunately, always be a tougher sell because the economic benefits are harder to see. Which means you end up appealing to basic humanity and empathy, traits noticeably in short supply in large swathes of the public.

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founding

Maybe we need powerful analogies...like "would you ever not help your sick child because such help requires extra time and money from you?" People like Peter Theil seem remote when it comes to families and children--they seem not to relate.

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Those poor kids just should've wanted it more, am I right?

(No, I am not. It was sarcasm and it's disappointing to see that we've learned absolutely nothing from the crash of the 2000s and the ensuing fallout.)

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Mar 15, 2023·edited Mar 15, 2023

That is the scary thing Joseph. I work for an attorney and I know for a fact that the majority of the foreclosed homes on the south side of Chicago will never be owned by individuals again.

Why? Banks targeted the communities, hiring locals from the neighborhood to sell their toxic loans. (I know because I was looking for work at the time and went to a Chase bank seminar where they were hiring these locals to go door to door selling loans and I walked out shaking my head, knowing that the people there seeking work were even more desperate than I). Each loan rep received a $1,000 bonus for each loan closed successfully. Then 2008 hit, the banks foreclosed, then eventually sold the properties to investors from the ME and China, who then hire management companies to run them. (I know because in my capacity, I set up appeals for their properties, as they were legitimate property owners and thus eligible to file.)

Now that the banks have hold of these properties, they will never again be classified as "available housing stock" for sale. The profits generated by a home sale are dwarfed by those generated by a rental property requiring little more investiture than a coat of paint!

This comment may seem like a non sequitur but the point is, profit above all else is wrong and we need to take measures of an appropriate kind. I don't know what they would be but dammit. The greed just gets worse and we are definitely in a period that is like an alternate version of those "roaring 20's." In my opinion at least.

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It's still going on. In many parts of the country, it's becoming hard to buy a single family home because you're bidding against corporate investors snapping up everything in sight.

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Then there's the market segment controlled by people who want to use these properties for AirBNB.

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This deserves a column all its own. I'm vaguely familiar with the South Side because a family member lives in Chicago, but I have to wonder how many places suffered a similar fate.

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Thank you for putting this in such a clear perspective. Yes, this message needs to be heard by many others. When will we straighten out our priorities?

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Probably the minute people from both parties realize that their loyalties are misplaced, which I despair will never happen.

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founding

I bet Thiel shorted SVB before he called the alarm.

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This article sums up EVERYTHING that is wrong with the U.S.. And I’m sure Peter Thiel is profiting off of this somehow and will gleefully buy another island or citizenship in some other country with it

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The banks in 2008 should have been forced to accept the lowered value of the homes they wrote mortgages for so no one got foreclosed on. I say this as someone who didn't get sucked into the interest only BS that many did. I used to think, hey, if you were stupid enough to think that while working as a cleaning maid, you could afford a $350k home, too bad. But why should the predators get rewarded and the marks penalized? Every bank executive whose bank got a bail out should have paid a penalty: loss of job, ban from banking for a year. Many should have sat in jail. As to SVB, their executives, who blithely ignored the implications of Fed interest rate hikes for months: they too should be banned from working in the banking industry for at least 2 years, with their names widely publicized. There needs to be moral hazard for these predators, because that's what they are.

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Correct Chris, consequences are important. Precisely why the orange monster should be sitting in prison. There were crazy lending schemes back then…anything to make the loan and qualify fir the bonus. A poor way to play with money.

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Peter Thiel’s Founders Fund pulls all of its money out of SVB and tells its minions to do the same. Who’s at fault?

The CEO of SVB both lobbied for looser regulations in 2018 and sat on the board of the SF fed that is supposed to provide oversight of the banks in their jurisdiction.

Marc Andreessen reportedly required anyone to whom they provided VC funds to bank with SVB.

The Silicon Valley Libertarians spent the weekend freaking out on Twitter and begging for intervention. Did this add to the crisis?

There are going to be a million of these *anecdotes* that will come out in the coming weeks and months. Who will ultimately be held responsible is anyones guess. But, personally, I’m really tired of the*tech bros* (because they’re pretty much ALL “bros”!) and the “we are masters of the universe” mentality. How many of these companies are now just going to be shows for what they always were, LIRPs? (“Low interest rate phenomenons”)

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Them thats gots, gets but what if there had been no paychecks for months? Peter Theil and Bank Execs would suffer less than employees. It would have negative effects to more middle class and on the edge of poverty workers than the 1%. The roll backs in the industry under Trump had play in this as well. Lastly. How would it play out if a domino effect occurred in the industry? 2008 or worse? Surely that had more play than Y tweet with the Biden Admin.

As for children in Poverty.

Yesterday I read a Minnesota state GOP legislator's words that there are no hungry children in the state. It is this mentality disproven by facts, that carries the day among 43 states run by Republican legislatures.

As for Silicon Bank depositors.

I heard on NPR that Roku had over 400 million in Silicon Bank. What the hell. Had they never heard about diversify your assets? Another fav. A 3rd party payroll company couldn' t make payroll for client due to depositing the company's money in Silicon. Bet the company wished they had kept or formed their accounting depts. It's one thing if you have 10 employees for a 3rd party payroll provider, another if you have250- 500 employees. IMHO, those accounting employee benefits couldn't have been more costly. No one looks after your company better from the outside except at Silicon where they fumbled in their own end zone at the end of a tied game. The Federal gov't recovered it for the depositors and won the day. You can't make this crap up in America, today. We are swinging over a gorge hoping not to fall into the abyss.

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And since the White House keeps telling us that "no taxpayer money" is used for the bailout, most people shrug it off.

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Just because Roku had $400 million at SVB doesn't mean they didn't diversify their assets. They could have held those $400 million in a diverse set of assets, but all managed by SVB. After all how many banks do you bank with? To help Roku here they would have had to diversify their banking partners $100 million with JPM, $100 million with Goldman, $100 million with SVB, and maybe $100 million with FTX for good diversification measure. But most people don't do that because that is complicated and complex.

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This article needs to be broadcast from the rooftops and the streets, but that’s probably what the oligarchs want so they can get their minions in Congress to demand full Orban-Putin rules…

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Please send this to the editorial board at the WSJ, so that all of my Republican friends (who believe in bootstrap-pulling economics) will read it.

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"save innovation in the American economy."

Translation: "As long as you keep the grift going, we will shower you in campaign contributions."

After all, our beloved representatives are deeply invested and profiting handsomely from the same grift.

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Innovation: GrubHub destroys small Mom and Pop restaurants with their ridiculous fees and even listing restaurants that don't participate. Uber destroys immigrant cabbies who invested all their money for a medallion. Facebook, fomenting right wing nut jobs. Yep, innovation.

The zero interest rates years enables all these "innovators" to form companies that never actually had to make a profit. Just grow and destroy the local ecosystem. Like cancer.

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"If you aren't growing, you're dying."

- Cancer

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Yes, here in corporate America we PRIVATIZE our profits and SOCIALIZE our risk/debt.

It's just good business and we SAVE MONEY!!!

It's the American Way!!!

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