6 ms·

Oldie but goodie on what actually happens when a bank is taken over. https://www.npr.org/2009/03/26/102384657/anatomy-of-a-bank-takeover https://www.npr.org/200

by mkmk 4y ago

Oldie but goodie on what actually happens when a bank is taken over. https://www.npr.org/2009/03/26/102384657/anatomy-of-a-bank-takeover https://www.npr.org/2009/03/26/102384657/anatomy-of-a-bank-t...

PascLeRasc 4y ago
That's fascinating. I'd love to watch a documentary about that.
- khuey 4y ago
  This 60 minutes segment from the Great Recession is the closest thing I know of to that. https://www.youtube.com/watch?v=TAE8i40A5uI https://www.youtube.com/watch?v=TAE8i40A5uI
- bgc 4y ago
  60 Minutes followed an FDIC takeover in 2009, including when the agents actually walked into the bank’s headquarters: https://youtu.be/TAE8i40A5uI https://youtu.be/TAE8i40A5uI
  - TremendousJudge 4y ago
    That interview with the chairman (chairwoman?) is just great. She straight up says that maybe they shouldn't bail out the big banks and instead apply a similar process to them.
  - supernova87a 4y ago
    I just watched it -- aside from the very interesting mechanics of the FDIC coming in and taking over a bank, I thought Sheila Bair (the then FDIC chair) came off as very knowledgeable, realistic, and critical of the risks posed by big banks. She went on to become a university president after the recession / banking bailout.
mikece 4y ago
I know a couple bank VPs who have been the representative of the take-over bank in absorbing failed banks. They describe it in terms that most of us would recognize as taking over a failed project and re-architecting/refractoring it so that it can succeed (or making the call to discard all work to date and start over with a workable solution).
FormerBandmate 4y ago
This case is unique because of the sheer volume of non-FDIC insured deposits. Substantial risk of depositors not being made whole for a while, they’ll probably get all their money but it will still be bad
- JumpCrisscross 4y ago
  > Substantial risk of depositors not being made whole for a while Emphasis on for a while. Stock and bond holders (man, did the latter miss the ball) will absorb losses.
  - dannyw 4y ago
    What stock holders? Market cap was 2.5 billion pre-market, a small fraction of the 175b of deposits (as of Dec 31, 2022).
    - JumpCrisscross 4y ago
      > market cap was 2.5 billion pre-market, a small fraction of the 175b of deposits Market cap doesn’t matter. Balance sheet equity.
  - loeg 4y ago
    Possibly forever, if the assets aren't there. A senior claim on $0 is still worth $0. There may be sufficient assets to pay back depositors, but we don't really know at this point.
  - kgwgk 4y ago
    As of Dec 31 the total liabilities were $195bn. Given that they had only $5bn of long-term debt - and $173bn of deposits - it seems that bond holders cannot absorb much (even though it's not very likely that they receive anything).
    - wbl 4y ago
      That's $23 billion of non-deposit liabilities that will be junior to the deposits.
katmannthree 4y ago
Are clawbacks a thing in this case for the people who did get [some] of their money out in time?
- dmoy 4y ago
  no
- pclmulqdq 4y ago
  Clawbacks are only poised to happen for big crypto failures (FTX) because the people who held money in those institutions aren't technically "depositors," and are considered a more generic type of creditor (which has a bankruptcy clawback). Bank deposits are special and there will be no clawback. However, depositors who lost money will be first in line at the bankruptcy court.
  - dmoy 4y ago
    note there is no bankruptcy court here. SVB will go into fdic receivership and almost certainly be sold off to another bank. Depositors are still first in line to get stuff back, but it's not through bankruptcy court. There is no court involved.
mikece 4y ago
From the looks of the news stories, it looks like the FDIC isn't as efficient in taking over a bank as it used to be: https://nypost.com/2023/03/10/nypd-called-to-silicon-valley-bank-branch-as-depositors-attempt-to-pull-cash-report/ https://nypost.com/2023/03/10/nypd-called-to-silicon-valley-...
- ellisv 4y ago
  I wonder if the FDIC is just as efficient but this situation is different.
  - Kye 4y ago
    Possibly a forced rush job after that comment about solvency. I think the FDIC usually prefers to do secret operations under the cover of night to avoid problems. With everyone's eyes on the bank, that wouldn't be an option.
- Animats 4y ago
  When the FDIC takes over a bank, they usually have some local cops around, to deal with crowd control and calm down upset depositors. See the 60 minutes video. There's a police car parked in front of the bank, but the cops are not doing much.
ren_engineer 4y ago
will companies with money in SVB even be able to make payroll? Seems like this could cause huge issues in the short term and long term
- sroussey 4y ago
  Pipe, Clearco, Founderpath, etc, are going to have a busy month. Likely many companies won’t be able to do mid-month payroll. Someone will setup a market for the FDIC warrant on uninsured deposits, but that will take time.
  - martinshen 4y ago
    Who do you think backs those Clearco loans?

by mkmk 4y ago

PascLeRasc 4y ago

That's fascinating. I'd love to watch a documentary about that.

khuey 4y ago
This 60 minutes segment from the Great Recession is the closest thing I know of to that. https://www.youtube.com/watch?v=TAE8i40A5uI https://www.youtube.com/watch?v=TAE8i40A5uI
bgc 4y ago
60 Minutes followed an FDIC takeover in 2009, including when the agents actually walked into the bank’s headquarters: https://youtu.be/TAE8i40A5uI https://youtu.be/TAE8i40A5uI
- TremendousJudge 4y ago
  That interview with the chairman (chairwoman?) is just great. She straight up says that maybe they shouldn't bail out the big banks and instead apply a similar process to them.
- supernova87a 4y ago
  I just watched it -- aside from the very interesting mechanics of the FDIC coming in and taking over a bank, I thought Sheila Bair (the then FDIC chair) came off as very knowledgeable, realistic, and critical of the risks posed by big banks. She went on to become a university president after the recession / banking bailout.

mikece 4y ago

I know a couple bank VPs who have been the representative of the take-over bank in absorbing failed banks. They describe it in terms that most of us would recognize as taking over a failed project and re-architecting/refractoring it so that it can succeed (or making the call to discard all work to date and start over with a workable solution).

FormerBandmate 4y ago

This case is unique because of the sheer volume of non-FDIC insured deposits. Substantial risk of depositors not being made whole for a while, they’ll probably get all their money but it will still be bad

JumpCrisscross 4y ago
> Substantial risk of depositors not being made whole for a while Emphasis on for a while. Stock and bond holders (man, did the latter miss the ball) will absorb losses.
- dannyw 4y ago
  What stock holders? Market cap was 2.5 billion pre-market, a small fraction of the 175b of deposits (as of Dec 31, 2022).
  - JumpCrisscross 4y ago
    > market cap was 2.5 billion pre-market, a small fraction of the 175b of deposits Market cap doesn’t matter. Balance sheet equity.
- loeg 4y ago
  Possibly forever, if the assets aren't there. A senior claim on $0 is still worth $0. There may be sufficient assets to pay back depositors, but we don't really know at this point.
- kgwgk 4y ago
  As of Dec 31 the total liabilities were $195bn. Given that they had only $5bn of long-term debt - and $173bn of deposits - it seems that bond holders cannot absorb much (even though it's not very likely that they receive anything).
  - wbl 4y ago
    That's $23 billion of non-deposit liabilities that will be junior to the deposits.

katmannthree 4y ago

Are clawbacks a thing in this case for the people who did get [some] of their money out in time?

dmoy 4y ago
no
pclmulqdq 4y ago
Clawbacks are only poised to happen for big crypto failures (FTX) because the people who held money in those institutions aren't technically "depositors," and are considered a more generic type of creditor (which has a bankruptcy clawback). Bank deposits are special and there will be no clawback. However, depositors who lost money will be first in line at the bankruptcy court.
- dmoy 4y ago
  note there is no bankruptcy court here. SVB will go into fdic receivership and almost certainly be sold off to another bank. Depositors are still first in line to get stuff back, but it's not through bankruptcy court. There is no court involved.

mikece 4y ago

From the looks of the news stories, it looks like the FDIC isn't as efficient in taking over a bank as it used to be: https://nypost.com/2023/03/10/nypd-called-to-silicon-valley-bank-branch-as-depositors-attempt-to-pull-cash-report/ https://nypost.com/2023/03/10/nypd-called-to-silicon-valley-...

ellisv 4y ago
I wonder if the FDIC is just as efficient but this situation is different.
- Kye 4y ago
  Possibly a forced rush job after that comment about solvency. I think the FDIC usually prefers to do secret operations under the cover of night to avoid problems. With everyone's eyes on the bank, that wouldn't be an option.
Animats 4y ago
When the FDIC takes over a bank, they usually have some local cops around, to deal with crowd control and calm down upset depositors. See the 60 minutes video. There's a police car parked in front of the bank, but the cops are not doing much.

ren_engineer 4y ago

will companies with money in SVB even be able to make payroll? Seems like this could cause huge issues in the short term and long term

sroussey 4y ago
Pipe, Clearco, Founderpath, etc, are going to have a busy month. Likely many companies won’t be able to do mid-month payroll. Someone will setup a market for the FDIC warrant on uninsured deposits, but that will take time.
- martinshen 4y ago
  Who do you think backs those Clearco loans?