Bankruptcy Blogs

The Regressive Cross-Subsidy of Uncapping Deposit Insurance

03/21/23

There's talk about removing the FDIC deposit insurance caps in response to the "Panic of 2023"®.  There's a refreshing realism about such a move. But let's also be clear about the distributional impact of such a move:  it's a huge cross-subsidy from average Joes to wealthy individuals and businesses.

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The Financial Regulatory Credibility Problem

03/21/23

Financial regulation has a credibility problem. Actually, it's got two credibility problems.

It's not credible any more to think that financial regulators will shut down troubled institutions until they are forced to do so. And it's no longer credible that financial regulators will allow depositors to incur losses. Both are really problematic.

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Oops. How the FDIC Guaranteed the Deposits of SVB Financial Group

03/17/23

When President Biden announced the rescue of Silicon Valley Bank depositors, he emphasized that "investors in the banks will not be protected.  They knowingly took a risk and when the risk didn’t pay off, investors lose their money.  That’s how capitalism works." Unfortunately, that's not how US law works. 

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Who Knew Silicon Valley Was in Manhattan?

03/17/23

Silicon Valley Bank's holding company, SVB Financial Group, filed for Chapter 11 bankruptcy this morning...in the Southern District of New York. Who knew that Park Avenue South was in the heart of Silicon Valley?

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What's Going on with First Republic Bank?

03/15/23

Following the failure of Silicon Valley Bank, a lot of other regionals have experienced depositor runs and serious pressure on their stock prices. But there's actually a lot of variation among regionals, and the solutions to SVB's problems don't necessarily fit the other regionals' problems, as the case of First Republic Bank shows.

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Was SVB's problem a lack of membership?

03/11/23

If the bank is a Fed member, doesn't it take its USTs to the discount window instead of selling them for big losses? Does this suggest that all large banks (however defined) should be Fed members, regardless of their charter status?

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Why Weren't Silicon Valley Bank Depositors Using CDARS?

03/11/23

Silicon Valley Bank seems to have had large amounts of uninsured deposits from businesses and high net worth individuals. And those uninsured deposits are likely to be impaired in the receivership, meaning that they will not get paid 100 cents on the dollar whenever they do get paid.

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What Could Go Wrong When a DIP Maintains a Large, Uninsured Deposit Account at Silicon Valley Bank?

03/10/23

You gotta feel for BlockFi customers. First, they find themselves creditors in BlockFi's bankruptcy. And now they've found out that BlockFi had a large, uninsured deposit...at Silicon Valley Bank. Yup, it seems that BlockFi had $227 million in a money market deposit account at SVB.

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Ten Years Out of School and Still Struggling with Student Loans?

03/08/23

Are You Ten Years Out of School and Still Struggling with Student Loans? Recent student loan policy changes by the Biden Administration can help people still struggling with student loans. These are new rules making it possible to discharge your student loans in bankruptcy.  In bankruptcy, you can clear your federal student loans if you […]

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I Just Renewed My Membership in Consumer Advocates

03/03/23

Why I’m a Member of the National Association of Consumer Advocates I’m a bankruptcy lawyer.  When I first started I said “All I do is Bankruptcy.”  What I found out is that people in financial trouble are magnates for illegal stuff being done to them.  A lot of that is fair credit reporting violations and […]

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