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Reply to "SVB Bank Run: Fed Calling Emergency Meeting "
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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]We should have done with Iceland did in '08. Let the banks fail, bail out the consumers, and prosecute the bankers.[/quote] This is a lot easier in a country with less than 400,000 people. [/quote] +1 Also, most of the country is uninhabited, and it has restrictive immigration policies.[/quote] And has a robust fishing industry [/quote] Plus cheap thermal energy.[/quote] The Icelandic crisis was due to “hot money” deposit flows, similar to SVB. UK citizens were putting their deposits in Icelandic banks, which paid significantly higher rates of interest than banks in the UK. When the financial crisis happened, UK and other foreign depositors quickly withdrew their money from Icelandic banks and those banks had to try to try to sell long dated mortgage backed securities that were suddenly worth a lot less than their par value. It’s a similar situation as SVB - it was a liquidity issue that led to bank run. [/quote] The proximate cause of almost every bank failure is lack of liquidity. (Barings come to mind as a large exception.) The story of why liquidity dried up at particular failed banks varies.[/quote] SVB suffered from a uniquely narrow set of depositors, their fickle behavior is the proximate liquidity issues.[/quote] Fickle behavior, egged on by Peter Thiel and a few others. Why isn't he being held accountable for the banks' losses? Why does everyone keep making lame excuses for billionaires and big banks?[/quote] Because the Fed/FDIC failed at bank supervision first. Whether or not it was Thiel (there’s a whole host of smaller, but still quite noxious fish, that were almost certainly involved), the concentration of economic interests at SVB should *never* have been allowed to happen. The people who matter learned nothing from 2008 and this isn’t the first time that’s been made apparent.[/quote] Actually, the issue of risk from uninsured depositors never came up in 2008. In fact, with the exception with Indy Mac, there were no runs. One of the lessons of 2008 is how sticky deposits can be even at very troubled banks. Clear now that can no longer be assumed.[/quote] Income inequality has increased since then. SVB had less than 40,000 depositors. It was high net worth individuals that did this run and Credit Suisses. All of our regulations are built around defending against risks from the poors. But it's not the poors that threaten the system today.[/quote]
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