CreditSlips

It's Not Just an SVB Problem: the Systemic Nature of the Bank Regulation Failure

03/27/23

A mid-sized regional bank specializing in lending to tech start-ups, crypto companies, or law firms hardly seems of systemic importance, even if its failure would have caused disruption in some industries regionally and might have triggered a cascade of corporate bankruptcies because of large uninsured deposit balances. That sort of collateral damage from a bank failure is unfortunate and painful for those involved, but that's the nature of market discipline.

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FDIC's Poor Track Record in Holdco Bankruptcies

03/25/23

Last week I did a post about how the FDIC as receiver for Silicon Valley Bank probably doesn't have a claim against SVB Financial Group, the holdco of the bank. I got some pushback on that (including from a former student!), but I'm sticking to my guns here. It's a result that seems wrong and surprising, but if you look at the three most recent big bank holdco bankruptcies (this takes some digging in old bankruptcy court dockets), the FDIC has ended up with little or no claim.

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SVB Financial Group's Manhattan Venue

03/23/23

As I have previously blogged, SVB Financial Group seems to be trying to do venue by declaration. Consider the grounds for venue under 28 USC 1408 and how they apply to SVBFG:  

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The Death of Dodd-Frank: Banking Law's Dobbs Moment

03/23/23

Last year, I savored a bit of schadenfreude watching my con law scholar colleagues despair about their field after cases like Dobbs v. Women's Health Organization or West Virginia v. EPA. Con law scholars see themselves as the royalty of the legal academy, far above those folks who do blue collar law like bankruptcy and commercial law or grubby stuff like banking and money.

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SDNY: EFTA Applies to Crypto

03/22/23

I'm teaching cryptocurrency today in my Payment Systems class, and I'd been puzzling about why no one has applied the Electronic Fund Transfers Act and Reg E thereunder to crypto: after all, if you have a crypto account with an exchange, it would seem to be an "account" at a "financial institution" that is primarily for personal, family, or household purposes and is used for electronic transfe

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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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