Come for the politics, stay for the snark.

People really shouldn’t expect the government to help after they watched the GOP drown it in a bathtub.

So many bastards, so little time.

Weird. Rome has an American Pope and America has a Russian President.

One lie, alone, tears the fabric of reality.

You don’t get to peddle hatred on saturday and offer condolences on sunday.

America is going up in flames. The NYTimes fawns over MAGA celebrities. No longer a real newspaper.

Anne Laurie is a fucking hero in so many ways. ~ Betty Cracker

Why is it so hard for them to condemn hate?

They love authoritarianism, but only when they get to be the authoritarians.

Incompetence, fear, or corruption? why not all three?

Let’s bury these fuckers at the polls 2 years from now.

The truth is, these are not very bright guys, and things got out of hand.

Something needs to be done about our bogus SCOTUS.

Relentless negativity is not a sign that you are more realistic.

My years-long effort to drive family and friends away has really paid off this year.

We are builders in a constant struggle with destroyers. keep building.

I did not have this on my fuck 2025 bingo card.

Thanks to your bullshit, we are now under siege.

Optimism opens the door to great things.

Michigan is a great lesson for Dems everywhere: when you have power…use it!

Some judge needs to shut this circus down soon.

If you thought you’d already seen people saying the stupidest things possible on the internet, prepare yourselves.

They traffic in fear. it is their only currency. if we are fearful, they are winning.

Marge, god is saying you’re stupid.

You are here: Home / Economics / C.R.E.A.M. / Monday Morning Open Thread: Bring Out the Fire Extinguishers (& Soda Siphons)

Monday Morning Open Thread: Bring Out the Fire Extinguishers (& Soda Siphons)

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(Maybe just a little earlier than Trollope Thackeray’s novel… )


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189Comments

  1. 1.

    Baud

    People calling this a bailout remind me of Republicans calling everything woke or CRT.  It’s lying in pursuit of an agenda.

  8. 8.

    RevRick

    Hating on banks has been an All-American sport since at least the 1830s, but it’s a lot like hating in-laws. Without them, you wouldn’t have your spouse/significant other.

    Banking is, by definition, risky business. In fact, the word risk was coined in the Middle Ages by those who engaged in early banking activities. To make money, banks have to lend money, which usually means that on any given day they only have about 10% of the depositors money on hand. The rest is out working as loans. A run on the bank is what happens when depositors get nervous about how the bank is managing that working capital.

    The history of the 19th century is littered with the casualties of systemic bank failures, which were called Panics back then. They occurred almost like clockwork every twenty years, and led to massive business failures and mass unemployment. We had near-death experiences with the Great Depression and Great Recession. I’m in favor of whatever the Treasury, Fed, and FDIC do to prevent another disaster.

    As for making banksters pay, how do you criminalize stupidity?

  9. 9.

    Victor Matheson

    To be fair here, the “wildly risky” investment SVC was making were generally just long-term US bonds. As far as I can tell here, this isn’t a hookers and blow story here at all,

  10. 10.

    David 🌈 ☘The Establishment☘🌈 Koch

    Grant may have been thinking of the novel or the numerous English screen productions

  11. 11.

    Betty Cracker

    @RevRick: Clawing back assets that were looted as the institution crumbled might be a good start. Banking is inherently risky, but that shouldn’t inoculate irresponsible greed-heads from accountability for their actions. Hopefully the measures put into place the last time these assholes decided to juggle chainsaws will keep their stupidity from blighting the lives of millions who weren’t in on the grift.

  12. 12.

    Baud

    @Victor Matheson:

    Yeah, this seems like a failure of risk management.  It’s interesting that the three bank failures this weekend were all associated with the tech sector.  That can’t be a coincidence.

  14. 14.

    Baud

    @RevRick:

    In fact, the word risk was coined in the Middle Ages by those who engaged in early banking activities

     
    Interesting. I thought it came from the board game.

  18. 18.

    New Deal democrat

     

    @Baud: “People calling this a bailout remind me of Republicans calling everything woke or CRT.  It’s lying in pursuit of an agenda.”

    It’s a bailout.

    Ok, about a quarter-step removed, but close enough. I’ll explain more once my morning coffee allows my brain cells to rack to one another.

  20. 20.

    Chris T.

    This bank thing is a topic I find quite interesting, probably because it involves money. 😀

    To understand what’s going on, we have to define some terms, e.g., “money”: it’s any medium of exchange, i.e., anything where I can give you some “money” and you believe (whether rightly or wrongly) that you can take this “money” to some third person and exchange it for, say, food or shelter or sex or whatever. It’s the belief—not the green paper, or funny-colours plasticky stuff they use in the UK with the Prime Minister Queen King pictured on it—that makes this all work. That belief is partly a matter of faith, but it works because you’ve seen it work, which is because it works, which is because they’ve seen it work, which is because it works. It’s all very circular.

    Now that we know that “money” is any medium of exchange, we can define “bank”. A bank is a place where you can drop off money and they’ll store it for a while and you can come back later and get it back. This would just be a plain old vault (and some extremely boring banks may actually just have one vault and a bunch of storage boxes), but a more practical and modern (since the 1500s if not earlier) invention is a bank that also lends money.

    Weirdly, the practice of lending money—creating a debt—is in turn what creates more money! People borrowing money, from these things we’ve now loosely defined as “banks”, is what creates new money. Many people think of the (US Dollar at least) Fed using the “printing press” to create money, and they can sort of do that, but in fact, almost all actual money creation happens because of lending.

    A “bank run” is really quite simple in the end: it happens when people think that a bank has lent foolishly, so they go to the bank to get their money back, all at once. Since some of the money has been lent out, it’s not all there. The bank runs out of money and that’s a bank run: a panic.

    As noted above, we used to have these things every decade or two. We fixed that in the 1930s by creating a “lender of last resort” and the system of deposit insurance: basically, if there’s a run on some bank, the lender-of-last-resort can ultimately take over the bank and give all the depositors back their cash by—here’s the sticky bit—printing new money if and as necessary.

    It’s this insurance that enables the “moral hazard” whereby bankers (or banksters) deliberately make foolish loans: “heads I win, tails you lose”: if the foolish risky loan works out, they garner the profits, and if not, well, the bank goes under but they get away scot-free. The fix for that is also pretty simple: regulate the crap out of them.

    Our current problem is, to a large extent, under-regulation.

    There is a ton of fine print here, there, and everywhere, but that’s the gist of it.

  21. 21.

    Baud

    @Chris T.:

    It’s this insurance that enables the “moral hazard” whereby bankers (or banksters) deliberately make foolish loans

     
    This is wrong. Banks have been making foolish loans well before deposit insurance became a thing.

  22. 22.

    David 🌈 ☘The Establishment☘🌈 Koch

    Looks like I picked the wrong week to stop laundering money.

  23. 23.

    Chris T.

    @Baud:

    Banks have been making foolish loans well before deposit insurance became a thing.

    Well, yes, but back then they got drawn and quartered, or similar, encouragingly often.

  27. 27.

    New Deal democrat

    @Baud: “Please let me know which company received taxpayer dollars in their bank account.”

    Every company which takes advantage of the Deposit Insurance Fund, which is funded by a dedicated tax – on banks (but really customers of banks). But this money is the property of the US government and by definition taxpayer money.

    What is your next question?

     

    @Baud:

  28. 28.

    Van Buren

    Very sad to report that Fiona, my Lhasa Apso, passed away yesterday. She was a rescue and never really bonded with any human. She just allowed us to feed her and give her a warm place to sleep. 2 months shy of 15, so a good run.

  32. 32.

    zhena gogolia

    @eclare: There’s a recent miniseries too, which is rather enjoyable. It spurred me to read the book again for the 1000th time.

    Of course, he may have been referring to the original use of the term in Bunyan’s Pilgrim’s Progress (1678).

  34. 34.

    Ken

    U.S. authorities launched emergency measures to shore up confidence in the banking system

    Or, U.S. authorities followed the established statutory processes to transfer the assets and liabilities of an insolvent bank to a healthier one.

    Po-TAY-to, po-TAH-to.

  37. 37.

    Amir Khalid

    So I googled “nonfat tofutti rice dreamsicle”, a fictional dessert dreamed up by The X-Files‘ David Duchovny. And I found a recipe that may actually taste better than the air in Mulder’s mouth.

  39. 39.

    OverTwistWillie

    @Baud:

    Tech is a mature sector masquerading as if it is 1982. Up close you can see the hair plugs and multiple nip and tucks.

    I guess they need a place to set up high risk action for the punters, but casinos and sports books are legal all over the place, and provide better payouts.

  40. 40.

    Matt McIrvin

    @David 🌈 ☘The Establishment☘🌈 Koch: My (limited) understanding is that they put a lot of money into fixed-rate Treasury bonds, but then interest rates went up, which lowered the value of these bonds since bonds with higher rates were now available. Ironically the risky thing was investing in these nominally low-risk/low-reward instruments.

  41. 41.

    Another Scott

    @Chris T.:

    Our current problem is, to a large extent, under-regulation.

    Indeed. Several, including DeLong at his Substack, point to the reduced capital requirements for giant (but not galactic-size) banks enabled by the 2018 changes as the direct enabler of SVB’s demise.

    Cheers,
    Scott.

  42. 42.

    OverTwistWillie

    @Baud:

    Tech is a mature sector masquerading like it is 1982. The hair plugs and nip and tucks are noticeable.

    I guess the investment industry needs roulette tables for the punters.

  43. 43.

    Goku (aka Amerikan Baka)

    @New Deal democrat:

    I noticed that several folks on Twitter yesterday were calling this a “bailout with extra steps” or something or other and that the costs to banks would be passed on to all depositors through higher fees.

    However, a commenter, Fair Economist, explained it to me like this:

    First, banks are generally quite profitable. Some of the fees will come out of their profits.

    Second, to some extent it will be paid by depositors. BUT that will be based on amounts deposited, and will overwhelmingly fall on the extremely wealthy, and not the “rest of us”. Insofar as it does, it will be an (extremely small) wealth tax.

     

    Fees are based on amount deposited. Some have pointed out the fees should be progressive (larger deposits pay a higher percentage) because a larger account creates more risk. You can’t crash a bank by pulling out a thousand bucks. But Peter Thiel can (and just did), by pulling out a hundred million. So he should pay more. But he doesn’t, and I doubt that will change.

    Much of this will be borne by those with higher bank balances if I understand this right

  46. 46.

    Goku (aka Amerikan Baka)

    @Another Scott:

    Why weren’t those requirements put back starting in 2021? Did it require new legislation? Or was it as simple as the Treasury issuing new banking rules?

  48. 48.

    Kay

    As Rupert Murdoch’s Fox Corporation battles to contain the Dominion lawsuit scandal that has engulfed its top executives and stars, another crisis is building in the wings that has the potential to cause further turbulence for the media empire.
    Smartmatic USA Corporation’s lawsuit against Fox News has attracted only a fraction of the attention garnered by the legal action of Dominion Voting Systems. Yet both firms are suing Fox for defamation related to its coverage of Donald Trump’s stolen-election lie, and both pose a serious threat to Fox’s finances and reputation.
    In fact, on paper Smartmatic’s suit appears to be the more dangerous. It’s demanding damages of $2.7bn, compared with Dominion’s $1.6bn.

    Last week the New York state supreme court in Manhattan gave the green light for the case to proceed against Fox News, the Fox Business host Maria Bartiromo, the former business anchor Lou Dobbs and Trump’s former lawyer Rudy Giuliani. Smartmatic, a global election technology company headquartered in London, lodged its defamation suit in February 2021. “The Earth is round,” was the complaint’s striking opening sentence. “Two plus two equals four. Joe Biden and Kamala Harris won the 2020 election … ”
    Smartmatic claims that more than 100 false statements were broadcast by Fox News hosts and guests. Smartmatic was falsely said to have been involved in 2020 election counts in six battleground states – in fact, it was present only at the count in Los Angeles county.

  49. 49.

    prostratedragon

    @Victor Matheson:  They exposed their balance sheet to interest rate risk, because of the long maturities on the bonds and the recent period of unusually low rates, and not capital risk I think you’d call it.

  50. 50.

    Matt McIrvin

    @Goku (aka Amerikan Baka): The key thing is that corporate depositors are not going to have to take any immediate haircut and can access all their money starting today, which reduces the chaos this could have created across the tech industry (companies shutting down, laying people off or not being able to make payroll just because their funds are frozen or have evaporated into the aether).

    There’s been a lot of talk about why a company would put cash way above the FDIC limit into this bank, but my impression is that many of them were essentially ordered to do so by their VC investors, because SVB was an organization they trusted. And more generally I don’t think it’s a widespread practice for a corporation to spread its cash holdings out across a zillion accounts so they can be fully FDIC-insured; it would be very cumbersome.

  51. 51.

    Soprano2

    OMG that TikTok, it was so funny (and accurate) I watched it twice. Thanks for the laugh.

  53. 53.

    Anne Laurie

    @zhena gogolia: Of course, he may have been referring to the original use of the term in Bunyan’s Pilgrim’s Progress.

    Apparently (per the definition I’ve linked) the phrase ‘vanity fair’ has passed into general usage in the UK.

    (Also ‘liberty hall‘, from what I’ve read.)

    Never read Pilgrim’s Progress myself, but I knew about its Vanity Fair from reading Little Women!

  54. 54.

    Princess

    I dont have a huge problem with what the government is doing with svb.

    But if it’s true that the CFO cashed out millions of dollars a few days before, if that isn’t a crime it should be.

  56. 56.

    Goku (aka Amerikan Baka)

    @Matt McIrvin:

    Good points. I think Berkshire Hathaway puts a lot of cash into T-Bills. Do corporations put cash into money market mutual funds? Those are also fairly liquid and safe

  57. 57.

    Ken

    Regarding what’s happening at Silicon Valley Bank, last week someone recommended this explainer by Matt Levine. I found it helpful.

    One thing that struck me is that they set themselves up as banking for startups, and it got to the point that the venture capitalists* funding startups insisted the companies use SVB. So they had a weird customer base that wanted to deposit lots of money into the bank, but didn’t want or need to borrow from the bank, and for a bank it’s kind of necessary to have both. That’s why they ended up with over half their assets in long-term fixed-rate securities — they had nothing better to do with their funds.

    * Quote: “Also, I am sorry to be rude, but there is another reason that it is maybe not great to be the Bank of Startups, which is that nobody on Earth is more of a herd animal than Silicon Valley venture capitalists.”

  59. 59.

    lowtechcyclist

    @New Deal democrat:

    @Baud: “People calling this a bailout remind me of Republicans calling everything woke or CRT.  It’s lying in pursuit of an agenda.”

    It’s a bailout.

    Here’s what the FDIC says it does in situations like this:

    COVERAGE LIMITS
    The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category.

    The FDIC provides separate coverage for deposits held in different account ownership categories. Depositors may qualify for coverage over $250,000 if they have funds in different ownership categories and all FDIC requirements are met.

    All deposits that an accountholder has in the same ownership category at the same bank are added together and insured up to the standard insurance amount.

    WHEN A BANK FAILS

    A bank failure is the closing of a bank by a federal or state banking regulatory agency, generally resulting from a bank’s inability to meet its obligations to depositors and others. In the unlikely event of a bank failure, the FDIC acts quickly to ensure depositors get prompt access to their insured deposits.

    FDIC deposit insurance covers the balance of each depositor’s account, dollar-for-dollar, up to the insurance limit, including principal and any accrued interest through the date of the insured bank’s closing.

    The FDIC acts in two capacities following a bank failure:

    1. As the “Insurer” of the bank’s deposits, the FDIC pays deposit insurance to the depositors up to the insurance limit.

    2. As the “Receiver” of the failed bank, the FDIC assumes the task of collecting and selling the assets of the failed bank and settling its debts, including claims for deposits in excess of the insured limit.

    I’m good with the depositors being bailed out to the tune of up to $250K each, because that’s what the FDIC says it will do. And if the FDIC takes over the bank, and it turns out that after selling the bank’s assets and paying its debts, there’s some money left over to partially reimburse depositors for their excess over $250K, then that’s fine too.

    And as long as the persons with ownership interests in the bank are not bailed out, and not a nickel of any compensation owed to bank execs is paid, then that’s the important thing. They’re the ones who fucked up, they’re the ones who should get to find out.

  60. 60.

    trnc

    @New Deal democrat: ​
     

    Every company which takes advantage of the Deposit Insurance Fund, which is funded by a dedicated tax – on banks (but really customers of banks). But this money is the property of the US government and by definition taxpayer money.

    I don’t know whether it’s really “taxpayer money” just because it’s held by the fed when it has collected for this specific purpose, but it’s preposterous to think it’s just another pile of money sitting in the US Treasury that you can tell your rep what you want it spent on. The money collected from the banks and held by the FDIC has a specific use, which is deposit insurance. It can’t be used to expand SNAP or build roads.

  61. 61.

    Baud

    @lowtechcyclist:

    I’m good with the depositors being bailed out to the tune of up to $250K

    That’s covered by the insurance, so it’s not a bail out.  Your car insurance doesn’t bail you out when you make a claim.

    And if the FDIC takes over the bank, and it turns out that after selling the bank’s assets and paying its debts, there’s some money left over to partially reimburse depositors for their excess over $250K, then that’s fine too.

    In this case, I believe the banks have more assets than liabilities.  Their problem was with cash flow and liquidity in light of reserve requirements.

     

    And as long as the persons with ownership interests in the bank are not bailed out, and not a nickel of any compensation owed to bank execs is paid, then that’s the important thing.

    I believe that’s the case with ownership interests.  They are wiped out.  I’m not sure about what’s going on with compensation, and what the Feds can do there legally.

  62. 62.

    trnc

    @lowtechcyclist: I’m good with the depositors being bailed out to the tune of up to $250K each, because that’s what the FDIC says it will do.

    Me, too, except it’s not a bailout any more than an insurance company is “bailing you out” if your house burns down. You pay a premium (or fee), you get the protection.

    ETA: Baud beat me to it, as usual.

  63. 63.

    Anyway

    I wondered why Hugh Grant was even there – actors  usually attend only because of contractual obligations to plug their projects.

     

    He is a good interviewee – but sometimes you gotta play the game, bro…

  64. 64.

    Matt McIrvin

    @lowtechcyclist: Right now, I’m pretty sure they’re saying that depositors will be bailed out for 100% of their deposits, not just the fraction under the insurance limit. Funds are also accessible starting today

    And that this is not coming out of taxpayers’ pockets.

  65. 65.

    Baud

    @Ken: I’m curious about the bank’s ratio of insured to uninsured deposits.  Also, the extent to which its deposits were concentrated among very few players.  Those seem to be risk factors that should have been taken into account.

  67. 67.

    Betty Cracker

    It’s that time of year again: Limpkins are pairing up, a process that involves dramatic flying chases and nonstop screeching on the riverbank and in trees 24/7. They’re as loud as peacocks!

    The Yearling author Marjorie Kinnan Rawlings, who lived not far from here, included a recipe for roast Limpkin in her cookbook.

  68. 68.

    trnc

    @Baud:

    And as long as the persons with ownership interests in the bank are not bailed out, and not a nickel of any compensation owed to bank execs is paid, then that’s the important thing.

    ….

    I believe that’s the case with ownership interests.  They are wiped out.  I’m not sure about what’s going on with compensation, and what the Feds can do there legally.

    And, of course, this is the difference between this federal action and the 2008 bailout, in which owners and shareholders received money, not just the customers.

  70. 70.

    Citizen Alan

    @Matt McIrvin: My mind simply reels at the thought of keeping money in any bank beyond the amount that is FDIC secured. I just can’t fathom it. It’s like going without health insurance simply because you’re “young” or buying a house in a flood plain.

  71. 71.

    trnc

    @Dorothy A. Winsor: Mr DAW just came in here and said a UK bank bought SVC for one pound.

    What are they getting for that, a bush from the parking lot? The feds took control and are planning to liquidate to recover what they can, right?

  73. 73.

    Ken

    @Baud: Those seem to be risk factors that should have been taken into account.

    Do you mean by the banking regulators?  That is, treat these numbers as warning flags, and intervene sooner?  I have no idea what options they’d have for such intervention.

    If you mean by investors in the bank — due diligence is so twentieth century.

  74. 74.

    MattF

    And bankers aren’t geniuses. There’s an old saying among con artists— “If you can’t fool a banker, you should find another line of work.” Consider, e.g., that TFG was kept afloat by many different bankers from many different countries, lending him money for many years.

  75. 75.

    tobie

    @Matt McIrvin: My understanding is similar. The bank lent money at a low rate but then Jerome Powell jacked up interest rates, and the bank found itself with liabilities because the borrowing rates it was facing were higher than the rates of the loans it had previously made.

    As someone who refinanced a mortgage when interest rates were at 2.25%, I kind of get that.

  77. 77.

    Baud

    @Ken: Both the regulators and the bank’s internal compliance people.  If the bank is publicly traded, I believe the bank needs to disclose the risk.  Curious to learn what SVB disclosed here.

  78. 78.

    Matt McIrvin

    @Citizen Alan: Suppose you’re a corporation that needs $10 million in liquid cash just to manage your day-to-day operations. Do you keep shuffling that around between 40 different banks just to keep it insured?

    FDIC insurance was designed to protect individuals–the little people. But the way things shake out, there’s a lot of risk to individuals inherent in these corporate problems. Something needs to change but it needs to make sense.

  79. 79.

    Chris T.

    @tobie: Yes, and there are a ton of additional complications. For instance, SVB insisted that if a client used SVB, they had to put everything into SVB. The emergency analysis done over the weekend, however, suggests that after wiping out shareholders, SVB’s assets are probably worth $1.30 per $1, so whoever buys them and fixes up the mess should make out pretty nicely, if they can do it in a reasonable time frame.

  81. 81.

    trnc

    @Citizen Alan: My mind simply reels at the thought of keeping money in any bank beyond the amount that is FDIC secured.

    It’s per account per insured bank, so you should be spreading your millions around.

  82. 82.

    Chris T.

    @Matt McIrvin:

    Suppose you’re a corporation that needs $10 million in liquid cash just to manage your day-to-day operations. Do you keep shuffling that around between 40 different banks just to keep it insured?

    There are companies that do this for other companies (for a fee of course). It gets a lot more difficult if it’s $10B rather than $10 million though.

  84. 84.

    NotMax

    Many moons ago when was existing on extremely modest means, dumped what paltry sums I had in a local bank which did not belong to FDIC. Because they paid interest on accounts (both checking and savings) up to 2½ times what FDIC-member banks at that period did. No fly by night operation, it pre-dated the Depression and had a stellar rep in the geographic area surrounding their single outlet.
    ;)

  85. 85.

    PST

    I found Krugman’s analysis pretty persuasive. He says that the people behind SVB were part of a clubby little venture capital/startup/crypto world that VC investors encouraged the startups they were backing to use because it was their kind of bank. He compares it to a kind of affinity fraud a la Madoff, not because it was an actual Ponzi scheme, but because it attracted depositors who had confidence that they were dealing with the right sort of guys. These guys then failed because they weren’t actually very good bankers and held too many of their assets in long-term treasury securities that have zero default risk but substantial interest rate risk. Rates went up, present value went down, and the actual smart guys realized that SVB was no longer liquid enough to cash everyone out.

  86. 86.

    tobie

    A 30% ROI would be a big chunk of change.

    I need to read up on this story…both about what SVB did and what the potential ripple effects were. The whole story is complicated and the outrage about bailouts doesn’t scratch the surface.

  87. 87.

    trnc

    @Matt McIrvin: Suppose you’re a corporation that needs $10 million in liquid cash just to manage your day-to-day operations. Do you keep shuffling that around between 40 different banks just to keep it insured?

    Banks are for long term holding, so your day to day ops are probably mostly funded by your revenue stream, right? But there are apparently accounting firms who specialize in keeping your vast wealth spread around to multiple banks according to something I read yesterday.

  88. 88.

    Chris T.

    Too late to edit, but: CNN article suggests that the HSBC-buys-UK-segment-of-SVB offer did get taken. Perhaps the Bank of England’s enforcers sent in the goons. 😀

  89. 89.

    RevRick

    @Baud: Exactly. But the thing about foolish loans is that they seemed quite wise until the very moment they weren’t.

    I have fond memories of debates we had on Moneybox in Slate magazine back in the mid 2000s about when the housing bubble would burst. By 2006, it was obvious to everyone paying attention that the market was entering the Wile Coyote running off a cliff phase with their NInja (no income, no job/assets) loans and balloon payment mortgages that could only be made to work where housing prices constantly rose. Would Bear Stearns do it? How about the Amaranth fund? Then Lehman brothers happened and our economy went into free fall.
    Two things about that experience:

    First, the speculative bubble was driven by both greed and fear, and the latter was as important as the former. Bank executives saw what us rank amateurs saw, but what executive would dare say, “Let’s let everyone else make profits off this insanity, while our stockholders demand our heads, because of the lousy returns we’re getting?”

    Second, we often misremember 2008 as a bank bailout, but it wasn’t. Paulson demanded that the banks take loans from the Treasury in exchange for warrants, but the major banks didn’t want them! Those loans were really meant as a display of government force that the Treasury would open a firehouse of capital. What the vast majority of TARP funds went to was AIG, the insurance giant that insured these loans, and the quasi public/private entities known as Ginny Mae and Fanny Mae. Obama later used a huge chunk to bailout the auto industry.

  91. 91.

    Chris T.

    @trnc:

    Banks are for long term holding, so your day to day ops are probably mostly funded by your revenue stream, right? But there are apparently accounting firms who specialize in keeping your vast wealth spread around to multiple banks according to something I read yesterday.

    Yes, the details get hairy (and hazy, known only to the various Smooth Operators) but it’s basically the money market system. It froze up temporarily right after the Lehman collapse, and that scared the crap out of everyone who knows this stuff.

  92. 92.

    Matt McIrvin

    @NotMax: There also used to be a separate FSLIC that just insured savings-and-loan companies, but it got rolled into the FDIC following the 1980s savings-and-loan crisis.

    (That was initially sparked by rises in interest rates, much like this SVB situation, except that it was rising rates on fixed-rate mortgage loans rather than rising bond rates. But then the S&Ls started doing risky speculative things to fill the gap.)

  94. 94.

    satby

    @PST: This is the BEST PART OF Krugman’s thread:

    The good news is that the FDIC has seized the bank, so the stockholders have been cleaned out. Unfortunately, there seems likely to be enough systemic spillover that the Feds will probably have to backstop some although maybe not all the uninsured deposits

  96. 96.

    Matt McIrvin

    @RevRick: Here in the Northeast, the housing bubble burst in 2006. I remember it well because we had a new baby and were trying to move through all this mishegas.

    It took a little while for that to percolate to the rest of the country. But you could see the developing problem pretty easily if you had your eyes open.

  98. 98.

    Another Scott

    @Matt McIrvin: My recollection is that the politically-connected banksters saw all the money sitting in S&Ls making so little on the vig and saw a huge opportunity to leverage them and make bazillions.  So they bought them up, lobbied for more freedom to do risky loans, did so, and then the whole scheme imploded when interest rates started rising rapidly.

    Wikipedia’s article has the timeline and cause-and-effect kinda mixed up together, but Keating and Milken and all the rest were active in the early 1980s.

    Cheers,
    Scott.

  99. 99.

    Lapassionara

    @Citizen Alan: It is my understanding that some businesses were required to use the bank, and they had funds in the bank to meet payroll obligations and the like. I can imagine a tech company’s payroll being more than $250,000

    ETA I also read that the Bank’s execs were paid a regularly-scheduled bonus just before the difficulties started. I assume those will be clawed back.

  100. 100.

    New Deal democrat

    Here is a somewhat truncated version of what i have written elsewhere.

    Because SVB concededly only had a liquidity issue and not a solvency issue, backstopping the depositors did not bail them out; it merely gave them access to all of their money now rather than later.

    But on the other hand, the law is, bank depositors have FDIC insurance up to $250,000. Everyone knew this going in. Had this been The Bank of Depositors With No Political Clout, you can bet that the limit would have been enforced, and depositors would have to wait for their money. An exception was made because the depositors at SVB had enough political clout that they could have exacted major damage on the financial system. As the old saying goes (accounting for inflation), “If you owe the bank $1 million, the bank owns you. If you owe the bank $100 million, you own the bank.”

    In short, the depositors at SVB had the risk that by law they assumed when they put their money in the bank in excess of $250k, removed. They got access to their money this morning, rather than in a few days or weeks. To that extent they received a bailout.

    Beyond the issue of whether the rescue plan announced Sunday is or is not a “bailout“ of SVB (and Signature Bank of NY, and probably other banks in the near future), there is a much more important problem.

    That problem is, the $250,000 FDIC limit on deposit insurance has effectively been removed, in total. That’s because the actions taken Sunday by regulators essentially assure that all future depositors for the duration of the plan will receive similar treatment.

    The precedent has been set. If Wall Street can put a gun to the head of the US financial system due to depositors’ foolish acts, and has successfully just done so, then every banker and large customer knows that the same thing will happen in the future.

    And the next bank that does under may indeed be insolvent, not just illiquid.

    In other words, we now have a banking system vulnerable to systemic risk where certain bankers and large clients know they can take reckless risks, but the FDIC can be coerced into making their customers whole if the risks blow up, well beyond the $250,000 official limits of FDIC insurance.

    One way or another, if the $250,000 FDIC limit has gone away – and effectively it has – the risk to taxpayers to have to bail out those bank depositors with uninsured deposits, must be minimized. Until then, we’re in trouble.

    If you want to read the long(er)-form version of the above, you can do so here:
    https://bonddad.blogspot.com/2023/03/thoughts-on-silicon-valley-bank-why.html

  101. 101.

    Another Scott

    @New Deal democrat: OTOH, DeLong and Baker and others argue that if all deposits are insured for everyone, then the risk of a bank run vanishes.  That would seem to be a big advantage, wouldn’t it?

    Of course, the devil’s in the details (like someone with $500M in deposits at a bank should have to pay much, much more for deposit insurance than someone with $500 at the bank – withdrawing $500 won’t kill a bank, but withdrawing $500M will…).

    Cheers,
    Scott.

  102. 102.

    Baud

    @New Deal democrat: Thanks for that.  I still disagree with being imprecise about what a “bailout” is, but I agree with the rest, particularly about having to re-think the $250K limit and how do deal with corporate depositors with large deposits.

  106. 106.

    Ken

    @Another Scott: the whole scheme imploded when interest rates started rising rapidly

    “When the tide goes out you learn who’s been swimming naked.”  — Warren Buffett

    I wonder what would happen if every seven years the Fed jacked interest rates to 5% for six months, just to shake out the dubious schemes. I vaguely recall a science-fiction story along those lines, where the world government deliberately put people with various psychiatric conditions in charge. The financial leader was always a manic-depressive, since his ups and downs drove the business cycle predictably.

  107. 107.

    Baud

    The point here is that if you want to keep millions of dollars in insured deposits, it’s entirely possible to do, but might come with some liquidity costs and (unavoidably) lower investment returns. This is the sort of thing that any corporate treasury professional ought to know about, which raises the question of why so many businesses apparently had large, uninsured deposits at SVB.

    I do not know if SVB participated in CDARS (they aren’t listed on the IntraFi network, but I don’t know if that’s a post-receivership change or not), but it’s been drawn to my attention that SVB did in fact offer reciprocal deposit services. SVB’s 12/31/22 call report (p.33) lists $469 million in reciprocal deposits. That’s a small fraction of the uninsured deposit balances. Why SVB wasn’t pushing this offering more, or why clients weren’t taking it isn’t clear. But the mere possibility of a reciprocal deposit brokerage service makes the businesses that got trapped at SVB look a bit less sympathetic.

  108. 108.

    Matt McIrvin

    @tobie:

    The bank lent money at a low rate but then Jerome Powell jacked up interest rates, and the bank found itself with liabilities because the borrowing rates it was facing were higher than the rates of the loans it had previously made.

    I don’t think they even had to do much borrowing. It was more that because rates went up, the market value of the lower-rate bonds they held went down, to the point that they started publicly worrying about the ability of their current holdings to cover withdrawals from depositors, and that caused a bank run.

    The root cause was partly that they were operating too close to the edge in the first place–their fractional reserve was lower than it should have been, giving them less cushion to work with.

  109. 109.

    Redshift

    @Anyway:

    I wondered why Hugh Grant was even there – actors usually attend only because of contractual obligations to plug their projects.

    He was a presenter, along with Andie McDowell, and made a rather amusing joke at his own expense (which was just risque enough that I suspect it was an ad lib.)

  110. 110.

    Chris T.

    @New Deal democrat:

    That problem is, the $250,000 FDIC limit on deposit insurance has effectively been removed, in total.

    They’ll pinky-swear, like the Supremely Political Court did, that this one decision is a special case that sets no precedent.

    Practically speaking, though, it’s time for more / better regulation.

  111. 111.

    different-church-lady

    I’m just glad we’re now passing around disinformation about banking instead of a deadly virus.​

  113. 113.

    eclare

    @Redshift:   That joke was hilarious!  As for why he was there, he presented with Andie McDowell, so maybe some anniversary of Four Weddings and a Funeral is coming up.

    ETA>  Thirty year anniversary next year.

  116. 116.

    Matt McIrvin

    @Ken:

    I wonder what would happen if every seven years the Fed jacked interest rates to 5% for six months, just to shake out the dubious schemes.

    If it’s predictable, institutions and practices will just evolve such that you move some money around and keep your head down for those six months and keep doing what you’re doing after.

  118. 118.

    Matt McIrvin

    @different-church-lady: One thing I do remember about the 2008 crisis is that it gave a lot of people who were really far-right cranks (goldbugs, austerity maniacs, antisemites who go on about the International Jewish Banking Conspiracy) a sudden burst of left-wing cred because they were attacking the banksters, leading to associations that bit us in the butt later.

  119. 119.

    lowtechcyclist

    @Lapassionara:

    It is my understanding that some businesses were required to use the bank

    By whom?

    [curses the existence of the passive voice]

    Maybe those businesses should sue whoever forced them to do that.  Or maybe they should sue themselves for signing a contract in the first place with people who’d put conditions like that on the deal.

    At some point, people have to be responsible for their own bad decisions, even if they looked like good ones at the time.

  121. 121.

    RevRick

    @PST: What happened at SVB is symptomatic of a larger global problem, and that is a credit glut. We have more money than we know what to do with. And the source of that problem is us – the good old U S of A!
    Prior to the 70s we were the world’s largest creditor nation, but then oil, automotive and home electronics imports turned our balance sheet to the red. Now, what ordinarily happens is a country that runs a trade deficit has to raise interest rates to make imports more expensive and their exports more desirable to halt the capital outflow. The United States was in a weird place economically during the 70s. The oil shocks of 73 and 79 triggered inflation and stagnation, which placed enormous pressure on our banks and led to a series of credit crunches. And thus began the outsourcing of jobs. Carter’s appointment of Paul Volker tamed inflation, but it failed to halt our trade deficit. And here’s when things get really weird. The rest of the world fell in love with T-bills, basically paying us to hold their money. We spend hundreds of billions more each month on imports than on exports, which ought to drag us down and cause the other nations to demand stuff in return, but instead they’re saying, “ No, we’re good. Carry on.” Hence a worldwide credit glut of too much money chasing after too few worthwhile investment opportunities.

  122. 122.

    Ken

    @Matt McIrvin: Hmm, good point.  OK, tie it to a dice roll; if 2d6 comes up boxcars, bump up by 4 percentage points. Though for all I can tell, that’s already Fed procedure.

  123. 123.

    lowtechcyclist

    @Baud:

    I agree with the rest, particularly about having to re-think the $250K limit and how do deal with corporate depositors with large deposits.

    Those people should just go to somewhere like Morgan Stanley that will set up an investment account for them in a way that they’ve got bonds maturing at regular, frequent intervals so that they’ll have money when they need it.

    Sure, they’ll charge a fee for managing your money, but it’ll still be there and be working for you.

  124. 124.

    Victor Matheson

    @Betty Cracker: Here’s the problem – there weren’t really any irresponsible greed-heads here. They weren’t betting on Crypto. They were investing in 30-year Treasury bonds paying 2% interest.

  125. 125.

    Matt McIrvin

    @Victor Matheson: Though that in itself was a bet that interest rates would remain low, and since they catered to startups, a lot of their business depended on interest rates remaining low too.

  127. 127.

    Ken

    @RevRick: SVB shows another aspect of that. With lots of customer deposits, where does the “bank for startups” invest the money? Not with startups! They have all the money they need from the venture capitalists. So the bank shoves the cash into US treasuries.

  128. 128.

    Sanjeevs

    The top job at the National Institutes of Health, a prestigious role that has attracted a Nobel Prize winner and other leading scientists, is going unfilled as candidates back out.
    At least two potential choices for the job have walked away, and the White House has struggled finding qualified candidates willing to fill a job that would probably force them to take a substantial pay cut and face popular attacks on scientists, people familiar with the search said.

    https://www.wsj.com/articles/nih-top-job-still-empty-as-candidates-back-out-ffecd0cd?mod=hp_lead_pos4

    Thanks Fox News.

  130. 130.

    Chris T.

    @Sanjeevs:

    [It seems to be hard to] find… qualified candidates willing to fill a job that would probably force them to take a substantial pay cut and face popular attacks on scientists

    Hoocoodanode?

    (Molly Ivans, we miss you!)

  131. 131.

    Victor Matheson

    @Ken: Wait, so you are mad at SBV for not engaging in risky loans to tech startups with depositors’ money and instead putting the money in safe Treasuries?

  132. 132.

    Goku (aka Amerikan Baka)

    @Matt McIrvin:

    Also, depending on where interest rates are at prior to the increase and other factors, a recession could be triggered unnecessarily

  133. 133.

    Baud

    @Victor Matheson:

    “Safe Treasuries” is misleading.  They’re “safe” in that they will always pay (subject to House Republicans) but not “safe” when it comes to holding their value.  Poor risk management by the bank.

  134. 134.

    New Deal democrat

    @Another Scott: “DeLong and Baker and others argue that if all deposits are insured for everyone, then the risk of a bank run vanishes.  That would seem to be a big advantage, wouldn’t it?”

    Yes, that is one way of dealing with the issue. Won’t happen with GOP control of the House, but worth putting on the table as one long term solution.

  137. 137.

    Victor Matheson

    @Lapassionara: All employees were paid their promised bonuses just before things went south. These were all contractual payments made for work done in 2022. It’s not obvious why workers wouldn’t have a claim for work that they have done.

  140. 140.

    Victor Matheson

    @Baud: Agreed, there was obviously a interest-rate risk issue that was not managed properly (and one that literally every single bank in the country is currently facing, hopefully to a much lower extent.)

    But, I think it is super important for people to understand that this a completely different beast than something like FTX or even the entire 2018 financial meltdown. This was basically a conservative bank engaging in basically conservative investments that went wrong for them when the Fed raised rates. Obviously the bank needed to better plan for this sort of thing, but this isn’t at all the evil banker story.

  141. 141.

    phdesmond

    @RevRick:

    from etymonline.com :

    risk (n.)

    1660s, risque, “hazard, danger, peril, exposure to mischance or harm,” from French risque (16c.), from Italian risco, riscio (modern rischio), from riscare “run into danger,” a word of uncertain origin.

    The Englished spelling is recorded by 1728. Spanish riesgo and German Risiko are Italian loan-words. The commercial sense of “hazard of the loss of a ship, goods, or other properties” is by 1719; hence the extension to “chance taken in an economic enterprise.”

    Paired with run (v.) from 1660s. Risk aversion is recorded from 1942; risk factor from 1906; risk management from 1963; risk-taker from 1892.

  143. 143.

    lowtechcyclist

    @Victor Matheson:

    Just to be clear, investing in 30-year US Treasuries at 2% interest is typically not considered a “dubious scheme.”

    But putting all your eggs in one basket is not wise investing, no matter what the basket is.  Because doing that was in fact a bet that interest rates would stay low, which is a weird bet to take when the Fed has spent the past year at least talking about raising them.

    this isn’t at all the evil banker story.

    OK then, it’s the oblivious banker story.

  145. 145.

    eclare

    @Victor Matheson:   For income tax purposes bonuses must be paid within two and one half months of year end to be deductible on the prior year tax return, or by March 15.  So the timing looks hinky, but for tax purposes it’s normal.

  149. 149.

    Goku (aka Amerikan Baka)

    @Baud:

    Peter Thiel? I don’t like the guy, but I read that he and his Founder’s Funds may have pulled their money out of SVB because of the earlier failure of Silvergate

  150. 150.

    gvg

    @Baud: One thing I heard, which has not been followed up on or repeated, and might be incorrect, is that the startups were required to keep their payrolls in this one bank instead of spreading them around as standard practice. This may have been a way for the bank to increase it’s profit but also would increase the risk to the bank and the companies plus it’s monopolistic. Someone else said their are companies that specialize in spreading accounts around so they aren’t over the FDIC insured limit and that is what should have been done.

    Second, managing risk means you spread your investments around. You do not hold all your loans in one area, you do not hold all your loans as risky. You want an assortment, some tech, some construction, some agriculture and then a small high risk high return, a fairly large medium risk medium return and a medium amount of very low risk low return and so on.  Even if you specialize in making high risk high return loans, you sell off the majority to other lenders and buy their loans.  This is how banks move mortgages around so that they don’t go under if a local region has a downturn. This bank would also be selling those loans based on their own reputation for being able to judge and manage for the other banks that specific kind of loan, and charge a management fee for it.

    Evidently, they were not able to judge how to balance risk products OR maybe nobody else was willing to buy shares in their product. that seems unlikely though if they really were that big. I think they got too greedy and kept too much of the product because they wanted the returns on the high return products which would be a lot higher than most stocks.

     

    All speculation on my part though.

  151. 151.

    SFAW

    @Baud:

    I prefer to think of them as bad “jokes.”

    That said, I’m heading over to Newport, maybe spend some time on my yacht, see ya later.

  153. 153.

    Anyway

    @RevRick:

     What happened at SVB is symptomatic of a larger global problem, and that is a credit glut. We have more money than we know what to do with.

    . . .

    Hence a worldwide credit glut of too much money chasing after too few worthwhile investment opportunities.

    Yes, this is my soapbox too – too much capital nd not enough investments opportunities. Tax the HedgeFunders…

  154. 154.

    Bill Arnold

    Did this get covered yet?
    George Santos masterminded 2017 ATM fraud, former roommate tells feds – “Santos taught me how to skim card information and how to clone cards,” Gustavo Ribeiro Trelha, who was convicted of felony access device fraud, said Wednesday in a sworn declaration submitted to the FBI. (JACQUELINE SWEET, 03/09/2023)

    “I am coming forward today to declare that the person in charge of the crime of credit card fraud when I was arrested was George Santos / Anthony Devolder,” Gustavo Ribeiro Trelha wrote in the declaration. It was sent by express mail and email to the FBI, the U.S. Secret Service New York office and the U.S. Attorney’s Office in the Eastern District of New York, according to a copy of the receipt from the United States Postal Service.
    Telha decided to contact law enforcement officials after seeing the newly minted congressman on television, he said in the declaration.

    I am rather negative about people involved in card skimming. Like “life in prison” negative.
    Similarly negative about those in the GOP who support him because he is a key support for their precarious, precious House majority.

  156. 156.

    Sure Lurkalot

    @lowtechcyclist: Yeah. Mr. Big funds startup that “pencils out” in 5 years but only if the funds are deposited in a One And Only Bank? Seems fishy too me.

  158. 158.

    stinger

    @Van Buren: So sorry to hear about your Fiona.

    I’ve had rescues that became family, and one that remained fairly mistrustful of humans even after 8 years with me. She lived to age 16!  I loved her dearly and miss her.

  160. 160.

    eclare

    @Baud:   Friend said Thiel’s peons were on CNBC all day Thursday talking about withdrawing the money, adding to panic.  I don’t know why any bank would service him, he is a systemic risk.

  161. 161.

    cain

    @Van Buren: So sorry to hear that – at least she knew she was loved even if she never bonded with a human. Good on you and everyone who was in her life.

  164. 164.

    gvg

    @Bill Arnold: Credibility problem of person reporting it. Criminals make poor prosecution witnesses and have motives for blaming others, especially if they want lighter sentences. So he needs to provide proof. Santos is in the news and is a popular target of opportunity right now. We do have evidence about him already.

  166. 166.

    catothedog

    @Victor Matheson:

    This is not an evil banker story. The rush to demonize all plutocrats and   the desire to see everything burn is clouding peoples judgement.

    SVB had a liquidity problem. They had to do a fire sale of bonds  to meet their withdrawals, and bond prices have gone down because of interest rate hikes.   However these bonds will get their full price if held to maturity.

    Raising additional capital would have certainly made SVB an ongoing   but middling business.

    They had a bank run.  I do not think many banks would survive a run of the magnitude SVB faced, despite the stress tests, Dodd Frank  and all.

    SVB situation was known  a month ago, about what would happened if SVB had a run

    https://twitter.com/ByrneHobart/status/1628779894183272452

    Barring a run, they would have continued. It was the run that broke them.

    As to why a run happened, here is an interesting perspective that there are many folks with vested interests who want to destroy banking. The tech-finance crowd (anti-Fed  crypto and gold bugs,  anti-dollar  Russia, and all the private money aficionados pining for the old days  before the  1930s –  all the rulers of the world who have been deprived of their rightful power)

    https://twitter.com/davetroy/status/1634853362494746626?cxt=HHwWhMDRtZWelbAtAAAA

    SVB has sufficient balance sheet assets to cover.

    No other banks have the same degree of exposure as this one to disinformation-based attacks by Thiel and his colleagues.

    They are behaving like financial terrorists, and they are at large. They should be widely mocked and pilloried by government and press for what they are attempting here. • This is part of a longstanding beef over the gold standard and general disgust at the Federal Reserve.

    Read the whole thread.

    SVB Management botched the effort to raise additional capital.  That is all.

  167. 167.

    SFAW

    @Baud: ​ More than one person has asked whether Thiel shorted SVB’s stock. If he did, it would lead one to wonder whether he “helped things along.”​
     
    ETA: I have no idea if he did, but it’s semi-fun to speculate about less-than-honorable behavior by Thiel.

  169. 169.

    Ceci n est pas mon nym

    @Bill Arnold: He gets around in the crime world, doesn’t he? Quite an amazing number and variety of scams for such a young guy.

    Prediction how this all ends. There’s finally enough dirt on him that he has to resign Congress, but he’s immediately snatched up by the RNC as Director of Dirty Tricks for a 7-figure salary, plus he gets a side gig as a Fox commentator.

  170. 170.

    Wapiti

    @RevRick: As for making banksters pay, how do you criminalize stupidity?

    Apparently, when someone dies while on Medicaid, the government can hold up estates and claw back gifts made within 5 years. Which makes sense, as some will gift away their funds to family and then go on Medicaid and let the government (ie, the rest of us) cover their hospitalization.

    Maybe the government should likewise claw back bonuses and excessive salaries, stock options, etc., made by a company prior to bankruptcy, or in this case, a bank failure. Five years might be a bit much, but I wager investors like Mitt Romney could figure out how to take maximum money from a company and then let it languish for 5 years.

  173. 173.

    kindness

    We see Peter Theil helped push the run on SVB.  He pulled all his money Thursday and then proceeded to tell everyone he knew to do the same.  I have to wonder if he also then shorted the stock.  If that were the case, wouldn’t that mean he pantsed himself as that stock is now worthless?

  174. 174.

    Kosh III

    “And as long as the persons with ownership interests in the bank are not bailed out, and not a nickel of any compensation owed to bank execs is paid, then that’s the important thing.”

    Ina fair world, they, along with Jamie Dimon, Larry summers, GoldmanSachs and probably half of Wall Street would be dangling from the end of a rope.

    Since it’s not a fair world, I’ll be happy if they end up a homeless camp somewhere, trying to get SNAP.

  175. 175.

    Ruckus

    @Baud:

    This shows how the people that loan the money often have really not much of a clue how that money they loan does anything positive. It isn’t just loan more money. At some point they have to do due diligence but greed gets in the way of that – and because due diligence actually takes effort, decision making, and risk no matter how well one does the first two. When the entire premise is make me very wealthy without a lot of effort, me is very likely going to make a few very expensive mistakes in process. That seems to be the case here.

  176. 176.

    OverTwistWillie

    I’d hazard the VC deposit requirements are about transparency. I know, vampire squids, stonks, banksters, blah, blah, blah, but it helps to avoid questions like where has the payroll been going, and who bought all these fucking foosball tables!?!

  177. 177.

    StringOnAStick

    @lowtechcyclist: The bank should have been “laddering” their treasury purchases, and the Fed has been very clear from the beginning of this rate hike series that would continue to raise rates and what economic criteria they were using to do so.

    On the other hand (required, since we’re talking economics here), these higher rates are great for people with retirement funds to invest in safe interest bearing instruments.  Annuities in A rated firms have had 5% rates available for months now.

  178. 178.

    Ruckus

    @Citizen Alan:

    When you have something like say $250 million, just a tad more than $250 thousand to put into numerous banks it gets a tad difficult to actually use in large amounts, which is rather likely in a large corporation. When I owned a corporation I once spent just over a 1/4 of a mil in about 5 minutes. It wasn’t cash out the door in one go, and the purchase was the collateral so worse case neither the seller nor the buyer were taking the level of risk it sounds like. Also the purchase earned/could earn far more than it’s cost. But still, the purchase was more than the bank insurance level and both the buyer and the seller were OK with that.

    My point is that even small businesses can make purchases larger than the Federal coverage level, all in one go. A bigger business is likely to make them far more often, the payroll may be bigger than 1/4 mill per month or even per week.

  179. 179.

    ErikaF

    @Citizen Alan: Long time lurker, probably first time commenter. There was a policy at SVB that once you open an account with them, you can’t open other accounts. For startups and the company stage of “transitioning from being regarded as startup to a small/medium size company” there aren’t a lot of banks that will work with them. The company I work for is one of these – and they shifted to another bank over the weekend now that they have enough money and size to be able to do so.

  181. 181.

    Ruckus

    @Chris T.:

    Seems to me it might be time for a slight revamp of the FDIC. As wealth builds it often does so over a relatively few humans. But as we are seeing now as wealth grows so does the number of people with more of it. I know it’s not a huge indicator of who/where the money is but the Forbes wealthiest 400 are ALL billionaires now. Not long ago that department wasn’t nearly that big. It means that the money is not just swimming upstream it is flooding upstream. It means that the system needs to adjust to the new reality of bigger numbers. Hell I bought a house in 1984 for $150K, sold it 10 yrs later for over twice as much. It’s now worth over twice that much. Yes it’s not like that in many places but it is in places with a higher density. This may be why the FDIC made the decisions they did, because the legislature is always going to lag monetary progress.

  182. 182.

    RevRick

    @phdesmond: I’ve been watching the Medieval Legacy on Wondrium, and Carol Symes, the presenter, noted the word entered the lexicon from the Arabic, and specifically with regards to long distance trade.

  183. 183.

    lowtechcyclist

    @Ruckus:

    the legislature is always going to lag monetary progress.

    Or regress.  We really need drastically higher tax rates on rich people, but here we are.

  184. 184.

    RevRick

    @Wapiti: what you’re describing is Medicare fraud. Banking aspires to be boring af, but bad decisions are a feature, not a bug of the business. All sorts of exogenous factors can throw a monkey wrench in the operation.
    During the 70s, for example, commercial banking in the US was in horrible shape. Regulation Q (part of Glass-Steagel) capped the %on interest that banks could pay on accounts, and with inflation soaring they were bleeding capital to non-bank institutions. (In 1950, US commercial banks owned 75% of global assets; by 1980, no U.S. commercial bank was ranked in the top 25!).

  185. 185.

    Ruckus

    @lowtechcyclist:

    As long as there are dipshits in congress on the other side, the no taxation for the people that can easily afford it side, there will always be that problem. And the people with money can easily afford to pay more, they just have the money to payoff people to make sure that they don’t have to pay more. I bet it’s cheaper to buy off the NO TAX INCREASES FOR THE WEALTHY asswipes than to pay a dime more in taxes. That’s snark BTW….. OK somewhat snark…..

  186. 186.

    azlib

    @Baud: I agree. The depositers will be paid from the bank assets and if that is not enough from  a fund with money from banks. I agree the VCs are ridiculous in their faux libertarianism. But getting workers paid and bills paid on time reduces a lot of uncertainty. Hopefully, one result will be strengthening bank regulation.

  187. 187.

    phdesmond

    @RevRick:

    i’ll be darned!

    rischio:
    Variante di risico, dal gr. biz. rhizikó, dall’arabo rizq •sec. XII.

    wiktionary:
    Etymology[edit]
    From earlier risque, from Middle French risque, from Old Italian risco (“risk”) (modern Italian rischio) and rischiare (“to run into danger”). Displaced native Old English pleoh (“risk”) and plēon (“to risk”).

    hide ▲speculation on earlier roots

    Most dictionaries consider the etymology of these Italian terms uncertain, but some suggest they perhaps come from Vulgar Latin *resicum (“that which cuts, rock, crag”) (> Medieval Latin resicu), from Latin resecō (“cut off, loose, curtail”, verb), in the sense of that which is a danger to boating or shipping; or from Ancient Greek ῥιζικόν (rhizikón, “root, radical, hazard”).

    A few dictionaries express more certainty. Collins says the Italian risco comes from Ancient Greek ῥίζα (rhíza, “cliff”) due to the hazards of sailing along rocky coasts. The American Heritage says it probably comes from Byzantine Greek ῥιζικό, ριζικό (rhizikó, rizikó, “sustenance obtained by a soldier through his own initiative, fortune”), from Arabic رِزْق‎ (rizq, “sustenance, that which God allots”), from Classical Syriac ܪܘܙܝܩܐ ,ܪܙܩܐ‎ (rezqā, rōzīqā, “daily ration”), from Middle Persian [script needed] (rōčig), from Middle Persian [script needed] (rōč, “day”), from Old Persian [script needed] (*raučah-), from Proto-Indo-European *lewk-.

    Cognate with Spanish riesgo, Portuguese risco

  188. 188.

    Bill Arnold

    @gvg:

    Credibility problem of person reporting it.

    What’s interesting in this case is that the accused has even worse credibility problems; he lies all the time and some of those lies have been proven. (or “proved” for those who care.)
    That makes “DeSantos” vulnerable in ways that ordinary people are not.

  189. 189.

    Subsole

     

     

    @Kosh III: Given that’s where they’re trying to put all of us, I have to say you are a much, much nicer person than me…

     

    @Ruckus: I don’t think it’s the money/cost. It’s power games. It may be more expensive for me to buy off a politician to keep my taxes low, but that’s me pushing my will on you. Paying the taxes might be cheaper, but it’s you telling me, your better, what to do.

    Past a certain point, it ain’t about the money. Past a certain point, being an asshole becomes its own reward.

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