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Comment by mixdup | Hacker News Reader

Well, paying for it by a special assessment on banks means the banks aren't going to get a free ride. They, as a group, have to get their shit together otherwise they will pay dearly

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I think (but am honestly not 100% sure here) that the argument is if other banks are going to have to pay for SVB being greedy, it is in some sense punishing banks for not being greedy enough; as while, sure, the SVB investors are getting hit: 1) a lot of them already made a lot of money years ago (and potentially exited), 2) many of the executives apparently literally sold out last month, and 3) they were hoarding a lot of deposits that other banks couldn't get because they weren't being risky enough. But so like, saying banks are paying dearly for this is strange, as it is the wrong banks... and, by extension, the customers at those banks, who are in turn making decisions about what bank to use in the future.

You probably can't hope for better under the US system. Maybe other banks will push hard to not allow more SVBs in the future after seeing this.

Suppose I'm a Utah bank that is mostly lending money to diverse local businesses and home owners, and mostly taking deposits from other businesses, some local and some not, and would-be future home owners. Last week I probably didn't care that SVB wasn't required to be as risk-averse as I was, if they failed what do I care?

Today, seeing this news, I care a great deal, and I don't want to see other banks allowed to take risks I wouldn't have been permitted unless they're paying a lot more than I am for the privilege, because when they fail - and they will fail - I don't want to pay for that.

“Riskier” and more complex banks do have higher FDIC fees: https://www.fdic.gov/resources/deposit-insurance/deposit-ins...

Sure, as far as I understand from that table the maximum fee FDIC charges is $1 for every $200 on deposit, which if we're expecting it to act like full insurance means they're expecting that these riskiest banks won't fail more often than every 200 years on average, which doesn't come anywhere close to how risky these banks actually are.

I’m lost. How does $200 translate into 200 years?

The fees are assessed quarterly. And they change. They go up and down depending on the fund’s needs, credit cycles, etc.

I'm no expert, but that Utah bank sounds pretty risky to me.

At least treasuries and MBS are relatively liquid securities that can be quickly sold at prices that don't deviate much from their marks as long as you're marking to market.

Those loans to local businesses and home owners sound much, much scarier.

Good point, I'm definitely the wrong person to advise on the correct way to capitalise a bank.

Banks won't pay employees (lower salaries or lower increases), shareholders (lower share price or dividends) and/or customers (higher fees or less interest) will.

the economics of the market still prevail. if they lower salaries, people will find jobs elsewhere. if they overcharge for their services, customers will go elsewhere (and there are alternatives--credit unions)

yes, consumers pay all of the taxes and fees that are charged to companies but it does not change the supply/demand equation in the open market for the services the banks offer. the price elasticity of the things you mention is not affected by a new tax on banks

“Banks” are legal fictions, abstraction that serve as tools for shareholders, “Banks won’t pay, but…shareholders…will” is a fundamental misunderstanding of what banks are.

Thanks for letting me know my shares of JPM aren't really paying me a quarterly dividend. Should I just send these fictions back to 270 Park Ave?

No, I’m telling you “JPM” is just an abstraction for you (the shareholders collectively, not just you personally).

That periodically the profits associated with that abstraction are distributed to you is a function of that, not a disproof of it.

“They” as a group then reduce the interest rates they can pay their depositors because they have extra costs to pay for SVB’s depositors gains.

This. “Backstop” thing is to prevent systemic collapse, but otherwise it will spread the losses to other people who “did nothing wrong”. This is really shaping up as bad lesson here for wrongdoers.

Already proven not to work.

" I made a mistake in presuming that the self-interest of organisations, specifically banks, is such that they were best capable of protecting shareholders and equity in the firms ... "

"Greenspan: I was wrong about the economy" - https://youtu.be/XQFq97ljy3k

If they all have to pay for it, none of them do - we do instead.

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