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The Biden Administration and All Things Politics

"No losses will be — and this is an important point — no losses will be borne by the taxpayers; let me repeat that, no losses will be borne by the taxpayer" - Joe Biden

I'm telling you right now that this is a lie. Joe Biden is lying to you. Our economy is in a lot of trouble right now. The powers that be will throw everything they have at the problem and that includes actions financed by taxpayers. It also includes lying to people to provide false assurance as panicking will make the problems exponentially worse.
 
Come on, a politician wouldn't lie
 
SVB was not really in bad shape. What happened was a bit of an anomaly. They invested some of their assists in ultra safe bonds, which isn't a stupid or risky thing to do per se. The problem they ran into was that they bought bonds with a 4% yield and with a longer than average maturity timeline. Then there was a run on depositor funds. In most cases they would have been able to sell their bonds and make those payouts. However, bond rates have come up about 3X what they were so no one wants a long-term bond with a 4% yield when they could just buy brand new bonds with an 11% yield on shorter maturity timelines, so SVB had no liquidity on their bond holdings.

We are not at significant risk of a general bank failure situation like in 2008.

Also, because SVB actually has assets that can cover their deposits, just not ones they can liquidate, for the government to step in, make all depositors whole immediately and then collect on the bonds when they mature they will not need taxpayer money to fix this.

Keep in mind that the auto-industry bailouts ultimately brought in more money then they sent out. I'm not talking about indirectly by allowing people to keep their jobs and keep paying income tax, and for the businesses to keep the doors open and them paying taxes, but those bailouts were loans and they got paid back with interest.

It is possible for the government to help protect the overall economy without just handing a bill to the middle class.
 
Gameface said:
SVB was not really in bad shape. What happened was a bit of an anomaly. They invested some of their assists in ultra safe bonds, which isn't a stupid or risky thing to do per se. The problem they ran into was that they bought bonds with a 4% yield and with a longer than average maturity timeline. Then there was a run on depositor funds. In most cases they would have been able to sell their bonds and make those payouts. However, bond rates have come up about 3X what they were so no one wants a long-term bond with a 4% yield when they could just buy brand new bonds with an 11% yield on shorter maturity timelines, so SVB had no liquidity on their bond holdings.

We are not at significant risk of a general bank failure situation like in 2008.

Also, because SVB actually has assets that can cover their deposits, just not ones they can liquidate, for the government to step in, make all depositors whole immediately and then collect on the bonds when they mature they will not need taxpayer money to fix this.

Keep in mind that the auto-industry bailouts ultimately brought in more money then they sent out. I'm not talking about indirectly by allowing people to keep their jobs and keep paying income tax, and for the businesses to keep the doors open and them paying taxes, but those bailouts were loans and they got paid back with interest.

It is possible for the government to help protect the overall economy without just handing a bill to the middle class.
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What about the other one, Signature? Do you believe Barney Frank, that they were just shut down to send a message to banks not to get involved with crypto?
 
gandalfe said:
What about the other one, Signature? Do you believe Barney Frank, that they were just shut down to send a message to banks not to get involved with crypto?
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I haven't really heard anything about that one. Also, take anything I say on this topic with big grains of salt, I'm not especially knowledgeable or anything, I'm just repeating stuff I've heard from various sources.
 
Gameface said:
I haven't really heard anything about that one. Also, take anything I say on this topic with big grains of salt, I'm not especially knowledgeable or anything, I'm just repeating stuff I've heard from various sources.
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Yeah, this stuff is so far outside my realm of expertise I feel like even quoting experts is beyond what I should be doing.
 
Al-O-Meter said:
"No losses will be — and this is an important point — no losses will be borne by the taxpayers; let me repeat that, no losses will be borne by the taxpayer" - Joe Biden

I'm telling you right now that this is a lie. Joe Biden is lying to you. Our economy is in a lot of trouble right now. The powers that be will throw everything they have at the problem and that includes actions financed by taxpayers. It also includes lying to people to provide false assurance as panicking will make the problems exponentially worse.
Click to expand...
The losses are being covered by the FDIC, which is a bank-supported institution, and the Fed.

 
Gameface said:
The problem they ran into was that they bought bonds with a 4% yield and with a longer than average maturity timeline. Then there was a run on depositor funds. In most cases they would have been able to sell their bonds and make those payouts. However, bond rates have come up about 3X what they were so no one wants a long-term bond with a 4% yield when they could just buy brand new bonds with an 11% yield on shorter maturity timelines, so SVB had no liquidity on their bond holdings.
Click to expand...
That is the narrative being pushed. In reality the bonds are not worth what SVB needed them to be worth to remain solvent. It wasn't an issue of liquidity but of a bank run forcing unrealized losses to become realized losses. SVB didn't have the assets to cover deposits. If SVB sold every asset they had for what it is worth, they could not make everyone whole.

The government is going to step in and make all SVB depositors whole. Biden says the FDIC payments will cover that cost but the FDIC payment are insufficient because they were set up to only have enough to cover $250k per depositor. The government has no choice. They have to make everyone whole and taxpayers will cover the gap.

The interest rate of government bonds is a problem but it is not *THE* problem. How many mortgages do you think are fixed at an interest rate below 4%? Nearly every bank in the country is sitting on a massive pile of loans with fixed interest rates lower than the current rate of inflation, and they lose money on those loan every day but so long as they don't sell the loan off, the loss is considered "unrealized". Nearly every bank is in the SVB boat and a run anywhere could crash any of them. So we get a lot of comforting happy talk.
 
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