You are misquoting me, I didn’t say that talking about anything was a crime, What I was saying is that if Trump dismantles it, than that is a crime. Which further up the stream you actually said also.
We have to be careful hear on what we call a crime. They setup a bridge bank and yes they did assess banks to cover it but it was completely legal under the Federal Deposit Insurance Act which was passed by congress and signed into law by the President.
Again you are pointing to useless technical point. FDIC increasing the insurance amount without congressional approval is a crime. Remember the $250K limit was done temporarily during GFC, subsequently congress as part of Dodd-Frank act made it permanent. At least that time congress was very much involved as part of the temporary increase. This time FDIC just increased it with Janet Yellen’s consultation, under systemic risk exception.
As much as you argue against one branch, Janet Yellen is part of the executive not part of the legislature. Basically the federal reserve, treasury secretary and FDIC has decided to increase the limit. It is not by an act of congress, and congress is not involved at all.
Another important point that was completely ignored is no one except SVB shareholders paid the price. Only one stakeholder paid the price and the reset of the cost is borne by the entire banking system customers but not by immediate stakeholders of the SVB.
Post GFC many institutions have grown in power beyond their original mandate. Likewise, executive is acquiring power steadily. All these need to be reset. It may not happen all at once, but welcome wherever it happens, within reason.
Still a lot cheaper than having a catastrophic bank run and crashing the economy the way we saw in 2008. I’m generally against bending the rules, but there have been a few times when it’s been kind of OK. Thomas Jefferson didn’t have authorization to buy the Louisiana Territories from Napoleon, but he did it anyway. (Curious for someone so wedded to the Constitutionality of things, eh?)
Woodrow Wilson, Andrew Jackson, even FDR took some minor liberties, and of course Lincoln suspended Habeus Corpus, a power which appears nowhere in the Constitution. That said, Trump is taking it to a whole new level in both quantity and speed.
Banks only allow 6 people per account. That makes for some interesting banking for corporations which rely on banks to pay workers. SVB, for example, had multiple Silicon Valley firms’ deposits on hand for payroll and for other purposes. Imagine being Facebook and having to distribute your cash into ten thousand different accounts so they would be protected from default. (I don’t know what the answer to that is, but surely there should be some mechanism to provide some measure of protection to corporations with larger banking needs.)
No it didn’t. With the system in place the only way to punish them is to punish the entire country. Somehow that seems out of whack; here I am in Tennessee minding my own business, and I’m thrown into a depression because of a single bank in Silicon Valley?
Sure, I’d love to string up the miscreants. I don’t know how to do that without shooting myself in the head. Twice.
I am not an expert by any stretch, some of the things in the past done like making bondholders take a haircut, big deposit holders lose some money like 1%, 2%, 3% (not entire deposit, you get bulk of your money, but will lose 1% of your deposit), the VC firm (Peter Thiel’s founders fund) that started the bank run, should have been held accountable. Also, the SF tech industry went on full throttled lobbying to protect all deposits, not necessarily to prevent contagion but many still had money trapped inside SVB.
From Dodd-Frank, the financial system regulation actually encourages big banks, too big to fail and subsequent regulation actually made big banks, systemically secure. It is literally “goaliath is winning”
It’s only useless if you can’t comprehend it. Which is obvious. Under the Federal deposit insurance Act. (1950) they invoked the systemic risk exception which allowed them to set up a bridge bank and insure all deposits. They do that to stop a broader run on the banks.
That is not at all what they did or we all would have had our insurance increased. You really need to understand their powers under systemic risk.
That all depends on the bank. Some banks only allow 2 but Citi will allow at least 10.
One could make it in the best interests of bank executives to keep their bank solvent and in good standing.
Perhaps we add a rule that when an FDIC insured bank fails, the top executives are banned from the banking industry for some significant period of time (perhaps somewhere between 10 years and life). And that those same executives have to disgorge all forms of compensation to them in excess of some figure - I’ll toss out compensation in excess of $5 million per year over the three years preceeding the bail out, mostly as an example of what I am thinking, but also something I could agree with.
I’d also ban the board of directors from serving on any BOD of any public company. Ever again.
So not exactly stringing up, but some significant consequences fitting the failure.
–Peter
One of the problems with the Silicone bank was they were loaning money to all the Entrepreneurs and some of them were companies that Peter Thiel was working with. The Bank President told him in confidentiality that they were having a short term money problem that would be fixed soon and he went to all his people and told them to pull their money out which started a run on the bank. So maybe if the President would have kept his mouth shut that wouldn’t have happened. Who knows, Maybe Peter made a ton of money of the default.
I don’t know if he did or not, but he almost certainly kept himself from LOSING a ton of money. Insider trading isn’t always about hearing good news before everyone else - it can also involve bad news.
In my book, the bank president failed in his duties to keep confidential information confidential. And Thiel is guilty of insider trading by acting on that non-public information.
Both should suffer some consequences.
Why? Money markets do not have FDIC protection anyway. So if FDIC goes away there will not be a run on those accounts. And as far as being concerned with Treasuries, I understand, but again those will not be impacted by FDIC going away.
None of that changes the amount of money insured per person, which is $250K, unless of course FDIC changes the rules illegally and insures all the amount. No the bridge bank doesn’t let them have that power, setting up the bridge bank is a technicality.
The FDIC stated that any permanent increase in the coverage limit was a decision by Congress but that the FDIC should be allowed to account for any increase in setting insurance premiums
Let me repeat like a broken record, FDIC cannot increase the limit without the approval of congress. They did at SVB bank, which is illegal.
Now, we are okay with some bureaucrats breaking their mandate, and ignoring congressional authority, but the real danger is, when someone like Trump will eventually arrive and when that person breaks the rule and ignores congressional authority, our hairs are on fire.
You cannot selectively get upset. Then you are not upset against the actions, but upset because of who did it.
This is what you don’t understand. I wasn’t for what they did at Silicon Bank, in fact I was against it. But they had the right to do it under the act I have already given you. Just because you do not like it, or I do not like it, does not mean it isn’t legal.
That is what the rule of law means.
Accepting things under the law that you disagree with.
Now if you take it to court and the courts rule that it is not legal, than I will accept that also. I have no dog in this fight other than the rule of law. I didn’t have any money in Silicon bank, None of my friends had money in Silicon bank. I would have liked to see it go under because then I may have been able to make some money on the other banks that would have gotten cheap.
Well, I’ll admit it. I can get selectively upset. The “who” is exactly what worries me.
So far, all the actions I’ve seen from this administration have been haphazard, executed by unqualified individuals, and the repercussions have not been thought through. Ready, Fire, Aim!
It’s my money. So forgive me, but if this moves forward, I’ll watch from the sidelines.
A bridge bank is a chartered national bank that operates under a board appointed by the FDIC. It assumes the deposits and certain other liabilities and purchases certain assets of a failed bank. The bridge bank structure is designed to “bridge” the gap between the failure of a bank and the time when the FDIC can stabilize the institution and implement an orderly resolution.
Nowhere under bridge bank FDIC has the authority to increase the insurance limit. The systemic risk exception has a very high threshold. Of course they invoked it arguing the bank failure of these two banks will result in “bank runs” and many other banks will fail.
See below study done by FDIC. Nowhere in this you will see the mention of the role of Fed in keeping the rates low far too long and then raising it at torrid pace, creating systemic risk. SVB is the first victim of that systemic risk and by bailing out SVB depositors they avoided contagion but reinforced the system to continue its bad behavior.
The system needs shakeup’s. We are bailing out too many people, too often. If you want to run a capitalist system, accept failures are part of the system, it is a feature not a bug.
That’s your choice. I understand people wish the administration followed a “smooth” process and avoid “haphazard” actions. Merely playing devil’s advocate..
If you want to disrupt the status quo and drive significant change, there is no such thing as a “smooth” process. You break things, move fast, and then determine what is essential to restore.
For example: You fire people, then realize you need nuclear inspectors, so you chase them down and rehire them. It’s not a seamless transition—nor can it be. The goal is to push through rapid actions upfront and then spend the remainder of the term fixing and refining them. By the time this administration’s term ends, the changes will be in place and functioning as intended.
Will it be “smooth”? Absolutely not.
Is it haphazard? Yes, by design.
Have all repercussions been considered? No—it’s “Ready, Fire, Aim!” by intent.
Is it being executed by unqualified individuals? No.
I’m not endorsing every decision, but I want critics to recognize the underlying approach: Change must be swift. A slow, gradual process allows the system to resist, push back, and ultimately prevent meaningful transformation. Those who benefit from the status quo will not allow changes to happen.
Now, we may not like it, but Trump is elected by people and he spelled out all these actions as campaign promise, nothing is new or a surprise. Let it sink, people voted for this.
Now, not all actions are going to be correct, or even what the administration wanted. There will be mistakes.
The real question is will the changes be sufficient? in 2019 the federal budget is $4.45 T by 2024 it is $6.9 T. More than 50% increase in mere 5 years. How did we get here from 2019? How can we go back to trendline?
Democrats, their supporters and most importantly citizens should ask the question, is this kind of federal budget growth, and deficit sustainable? Don’t just complain about the actions, what were your alternatives?
We are going to have to agree to disagree. Until a court rules on it than the only thing we have is each others opinion. But without a courts opinion it sounds like you are being selectively outraged. Because they have done nothing wrong as far as I have seen and if they had somebody would have brought up a lawsuit as I suspect will happen if and when Trump abolishes a department.
To take it to congress where it belongs. Because as we all know is that what they are doing is not going to fix any deficit. It is like licking the frosting off the cake but leaving everything else behind. We all know that Social Security, Medicare, and the Defense is where the real problem is and until they get that fixed the rest of this is just plain mean spirited.
Mungofitch composed some posts that convinced me that the closest thing to cash was Treasuries, not money markets - that was where Warren Buffett put his cash. That was good enough for me.
First you have to find the real causes of the rising debt. Start here:
https://www.americanprogress.org/article/tax-cuts-are-primarily-responsible-for-the-increasing-debt-ratio/Causes
I predict that the deficits will continue to rise at an accelerating rate primarily due to the combined effect of three rounds of tax cuts by W and T1 and T2. We are going to slash spending, cut services to those who need it most, and increase the deficits at an accelerating rate because we bought the lie that it was a spending problem.eb
Bridge bank is a standard operating procedure, a new entity for FDIC to take over assets and liabilities. Nothing to argue. It is a routine administrative step. I will stop this discussion here.