Silicon Valley Bank Disaster - Should Gov't Bail Out Banks?

[≈Vanuckle 2,134]

With SVB failing due to a liquidity crisis (different than the FTX bank failing due to insolvency), there has been some panic amongst investors, bankers, the gov't and of course, average citizens. 

 

It has raised an interesting question from all - at one point does the gov't step in to insure banks to prevent them from failing (primarily from insuring the biggest clients don't go bankrupt).

 

Silicon Valley Bank (SVB) had many large accounts, Circle, Roku, BlockFi, Roblox, all over $150m. This includes their investments, portfolios, staff wages, retirement funds, etc. Gov't usually only protects up to a maximum of $250k per acc. This is typically fine for personal accounts but obviously doesn't help when a corporation makes a bank run.

 

So all of these companies would have been in serious trouble had SVB failed. But, that being said, SVB CEO lobied for less regulation from the gov't, then cashed out two weeks ago. A few days later, his bank fails, and now we need more gov't intervention -- a classic case of wanting it both ways (de-regulation when you're trying to grow, regulation when you fail).

 

So what is the proper step to take? Should we let these big banks (Goldman Sachs, JP Morgan, Chase, etc) be bailed out by the govt? Or let them fail?

[Wee Man 1,345]

Commercial banks should never be bailed out.

[≈Vanuckle 2,134]

Just now, Wee Man said:

Commercial banks should never be bailed out.

What happens to all the employees of the companies I listed then?

[Wee Man 1,345]

Just now, Vanuckle said:

What happens to all the employees of the companies I listed then?

In a word they're:

fucked.

[Pietru 1,230]

Hmm

[Kai 288]

Probably not but rhe people who financially suffer due to the mistakes of the bank should be bailed out

[Adam_ 1,032]

Generally against it but think its likely to happen in this case

 

Crypto exchanges failing are a bit different and the answer for those is absolutely not lol

[Isndar 227]

I believe that the American Govt should do whatever they can do to avoid any plausible crisis towards their citizen and nation.

[Felted 36]

Thought this was an interesting watch, the world is fucked. 

[Req 227]

The US has too many small banks.  Let them fail and the uninsured depositors (mostly companies) who chose to put their money there above the FDIC insurance amount should be the ones who lose out for making a poor decision.

 

Probably a good opportunity to buy stocks of better banks for cheap though.  If a bank has a more diversified client base (i.e. retail clients and not just concentrated in one industry of commercial clients) then its much less likely that everybody will withdraw their money all at once and they need to take losses on securities to get the funds.  Are retail clients that get their pay cheques deposited, pays bills, etc, really going to spend time withdrawing their couple thousands of dollars and move it to a new bank, setting up all of that when your funds their funds will be insured anyway.   

 

 

[≈Flukejiver 1,182]

I think it depends on the circumstances, but generally I'd be against it. Can't save everyone.

[IMK 489]

Privatize profits, socialize losses!

 

Let the banks fail. 

[IMK 489]

Every single one of their executives and board members should be hung.

[Howl 945]

Need to crack down on these people more and have harsher punishments. The fact that we still see this happen in 2023 is unacceptable.

 

Kudos to the Trump Administration for loosening regulations and aiding these banks in their quest for profits.

[Ace 632]

They might have to. Can't let the dominos fall like that unfortunately. Bring in the good old chants of "Too big to fail." 

 

Either way the government is at fault regardless. This happened under their watch and this happened because they allowed it to with loose regulations. We could really use a modern write up of the Glass-Steagall Act put in place, but that likely won't ever happen.