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Comment by rglover | Hacker News Reader

At the expense of anyone holding dollars worldwide.

it's paid for by auctioning off SVB's assets and raising FDIC fees on other banks

I'm worried that "other banks" constitute a large enough body that they could just let SVB fail. Instead they're looking around nervously and acquiesce to a bailout because they might be just as vulnerable.

the fees are not voluntary and other banks have no reason to want their customers to see examples of people getting wiped out by bank failures

Your neighbor sets off fireworks in his living room and burns his house down. Everybody in your neighborhood with the same insurance policy immediately gets hit by a new fee that was not previously contracted, the neighbor walks away without a house, but also with his mortgage payed off.

In what world do we live in that a government agency can demand a new mandatory fee over the course of a weekend. This whole thing is bonkers.

“The ultimate result of shielding men from the effects of folly, is to fill the world with fools.”

people seeing a bank fail will worry that their own bank could fail, which could lead them to withdraw en masse which will cause their own banks to fail, and so forth. this scenario is bad for everyone.

We just lived through this 15 years ago, and that’s not what happened at the time in a situation where many, many more banks were exposed to significantly higher risk.

SVB had a short-term liquidity crisis, followed by botching a funding round to solve the crisis (along with some internal issues). They were a relatively small bank whose assets likely would have been gifted to another bank in exchange for covering the liabilities.

Which is likely to be passed on to consumers via increased costs; in an already unfavorable economic climate for lower end of the income gradient.

the fees are proportional to the size of the account and benefit banks and customers by eliminating the possibility of losses due to bank failures

IDK what banks you've used, but all the banks I've used the fee proportionality is regressive.

I also don't agree that the most prudent and responsible banks bailing out disproportionately depositors at failed banks is beneficial for them or their depositors. It also creates a moral hazard for customers to chase banks with the highest yield risk profile knowing they'll be bailed out by the other actors.

maybe other fees they tack on, but not the FDIC fee.

The bank doesn't have to pass fees down using the same algorithm with which they were assessed, and they usually don't. The small guy gets fucked with regressive fee structure.

>people seeing a bank fail will worry that their own bank could fai

I feel more confident in my bank as it is compared to my bank minus a "special assessment" to backstop depositors at irresponsible banks.

if they charge you a random fee and call it an FDIC fee then they are committing fraud

Where are those banks getting the additional cash to pay higher fees?

banks have access to a lot of cash

From the Fed. At the expense of anyone holding dollars worldwide.

the fed only loans money to banks with a term of like 12-72 hours

You and me

I've not seen any reporting or anything in the announcement that indicated an increase in fees for the FDIC insurance fund would be necessary, but I absolutely admit I may have missed that detail. Do you have a reference for this claim?

"Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law."

https://www.fdic.gov/news/press-releases/2023/pr23019.html

Thank you!

> Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law.

https://www.federalreserve.gov/newsevents/pressreleases/mone...

Ahh, yup, I absolutely missed that when I read the announcement. Thank you!

It's worth noting it's still unclear if that'll be necessary (it all depends on the level of recovery they can get out of SVB's assets), but the potential is there, and it's hard to deny that, if that is necessary, those costs will ultimately be born by everyone as the banks pass those costs along.

Uh... "fees on other banks" seems like a pretty good proxy for "anyone holding dollars worldwide", though. I don't think you disagree.

The idea that there won't be losses here is a little laughable. If their assets were so solid then some other bank would happily have written a loan with them as collateral. SVB transparently couldn't get financing, so they had to sell a bunch of stuff last week and booked a $1.8B loss (which is the proximate cause of the bank run).

No, this will end up being a bailout. It'll be obscured enough that people will be able to claim it wasn't. But it is.

the FDIC only has jurisdiction over US retail banks, not everywhere dollars are held worldwide, of course

the deficit left after auctioning off SVB's assets will be raised from other banks. the FDIC/treasury/Fed are not going to just pay for it out of pocket.

And who ultimately pays for raised costs at banks? I’m guessing it’s less like the C-class, and more like the individual depositor/personal-loan-class.

HN readers should be acutely aware of this as being entrepreneur-savvy. If your costs go up (unexpected FDIC assessment) you either are immediately less profitable, or you raise prices and past the cost to your customer. Banks are the Chris Paul of passing costs on to their customers.

tl:dr new fees for banks is increased fees for customers.

it's proportional to account size

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