Trading/Investing Thread - Page 127

Banking regulators devised a plan Sunday to backstop depositors with money at Silicon Valley Bank
, a critical step in stemming a feared panic over the collapsed tech-focused institution.

Regulators said depositors at both failed SVB and Signature Bank
in New York, which also has been closed, will have full access to their deposits. Signature had been a popular funding source for cryptocurrency companies.

The Treasury Department said it approved of plans that would unwind both institutions “in a manner that fully protects all depositors.” Those with money at the bank will have full access starting Monday.

The Federal Reserve also said it is creating a new Bank Term Funding Program aimed at safeguarding institutions impacted by the market instability of the SVB failure.

A joint statement also said there would be no bailouts and no taxpayer costs associated with any of the new plans. Shareholders and some unsecured creditors will not be protected and will lose their investments, .

“Today we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system,” said a joint statement from Fed Chair Jerome Powell, Treasury Secretary Janet Yellen and FDIC Chair Martin Gruenberg.

The Fed facility will offer loans of up to one year to banks, saving associations, credit unions and other institutions. Those taking advantage of the facility will be asked to pledge high-quality collateral such as Treasurys, agency debt and mortgage-backed securities.

“This action will bolster the capacity of the banking system to safeguard deposits and ensure the ongoing provision of money and credit to the economy,” the Fed said in a statement. “The Federal Reserve is prepared to address any liquidity pressures that may arise.”

The Treasury Department is providing up to $25 billion from its Exchange Stabilization Fund as a backstop for the funding program. A senior Fed official said the Treasury program likely won’t be needed and will exist as a safeguard.

Along with the facility, the Fed said it will ease conditions at its discount window, which will use the same conditions as the BTFP.

Markets reacted positively to the developments, with futures tied to the Dow Jones Industrial Average leaping more than 250 points in early trading. Cryptocurrency prices also rallied strongly, with bitcoin up more than 7%.

The news came after Treasury Secretary Janet Yellen said Sunday morning that there would be no SVB bailout.

“We’re not going to do that again. But we are concerned about depositors and are focused on trying to meet their needs,” Yellen said on CBS’ “Face the Nation.”

The SVB failure was the nation’s largest collapse of a financial institution since Washington Mutual went under in 2008.

The dramatic moves come just days after SVB, a key financing hub for tech companies, reported that it was struggling, triggering a run on the bank’s deposits.

Authorities had spent the weekend looking for a larger institution to buy SVB, but came up short. PNC was one interested buyer but backed out, a source told CNBC’s Sara Eisen.

A senior Treasury official said a sale is still possible for Silicon Valley Bank. The initiatives Sunday were done to head off further potential problems.

The scenario harkened back to the Sept. 15, 2008 of investment banking giant Lehman Brothers, which also found itself insolvent and in search of a buyer. The government also was unsuccessful in that case following a weekend of wrangling, triggering the worst of the crisis.

U.S. regulators on Sunday shut down New York-based Signature Bank
in a bid to prevent the spreading banking crisis.

“We are also announcing a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state chartering authority,” Treasury, Federal Reserve, and FDIC said in a joint statement Sunday evening.

Treasury Secretary Janet Yellen on Sunday instructed the Federal Deposit Insurance Corporation to guarantee Silicon Valley Bank customers will have access to all of their money starting Monday.

By guaranteeing all deposits – even the uninsured money customers kept with the failed bank – the government can ensure public confidence in America’s banking system, Yellen, Federal Reserve Chair Jerome Powell and FDIC Chairman Martin J. Gruenberg said in a joint statement.

The Fed also said Signature Bank was closed Sunday and that a similar system will be put in place for customers of that bank – all depositors will be made whole. And the Fed will make additional funding available for eligible financial institutions to prevent runs on similar banks Monday.

On March 13 2023 08:42 BlackJack wrote:
and here comes the bailout

https://www.cnn.com/2023/03/12/investing/svb-customer-bailout/index.html

On March 13 2023 09:08 micronesia wrote:
Is bailing out the customers the same thing as bailing out the bank?

On March 13 2023 11:05 {CC}StealthBlue wrote:
Wall St is hoping that this will be the end or at least slow the rate hikes. Only problem is that nobody knows what Powell thinks about all this, also Biden is set to speak in the morning about the Banking system.

On March 13 2023 11:47 GreenHorizons wrote:

It's not necessarily "the same thing" but it is still a problematic bailout imo.

It basically means the $250,000 FDIC "cap" doesn't apply if the loss of your money would present too much systemic risk.

So essentially if you're a businesses that regularly has over $250k FDIC cap guideline in a small community bank, not only does your bank (and therefor you) have to chip in to fix this, you and your bank won't get the luxury of getting bailed out if they go belly-up because you/them losing your money/business doesn't put the system at sufficient risk to justify bailing out the bank or you and your workers.

The people most imagine as "customers" with under $250,000 in a bank account (the overwhelming majority of people in the US) would have had their deposits covered without the bailout.

On March 13 2023 19:09 Gorsameth wrote:
The saddest part to me is that the chance of there finally being a large scale reform of the entire financial sector to better secure everything is basically 0. So this will just keep happening every decade or 2.

In 2015, SVB President Greg Becker submitted a statement to a Senate panel pushing legislators to exempt more banks – including his own – from new regulations passed in the wake of the 2008 financial crisis. Despite warnings from some senators, Becker’s lobbying effort was ultimately successful.

Touting “SVB’s deep understanding of the markets it serves, our strong risk management practices”, Becker argued that his bank would soon reach $50bn in assets, which under the law would trigger “enhanced prudential standards”, including more stringent regulations, stress tests and capital requirements for his and other similarly sized banks.

Becker insisted that $250bn was a more appropriate threshold.

On March 13 2023 21:11 Jealous wrote:

What about those bonuses they awarded themselves just before shit hit the fan? Or the CEO or whatever who sold $4 million of the stock?

I'm fine with workers and companies not being punished for a bank's mistakes. However, these fucking people need to be tried in court and if jailed, they will serve as a deterrent to others doing the same thing. Even if they weren't playing fast and loose with money, there are others that are, and if they know that the government will just sweep everything under the rug and that they can give themselves a $4 million exit package on the way out, what incentive is there for them not to gamble recklessly with people's money? Fuck.

On March 13 2023 21:11 Jealous wrote:

What about those bonuses they awarded themselves just before shit hit the fan? Or the CEO or whatever who sold $4 million of the stock?

I'm fine with workers and companies not being punished for a bank's mistakes. However, these fucking people need to be tried in court and if jailed, they will serve as a deterrent to others doing the same thing. Even if they weren't playing fast and loose with money, there are others that are, and if they know that the government will just sweep everything under the rug and that they can give themselves a $4 million exit package on the way out, what incentive is there for them not to gamble recklessly with people's money? Fuck.