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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

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.
nostromo 4y ago
All their money? I doubt it. SVB owned a bunch of mortgage backed securities and treasuries - both of which are down 30-50% from their peaks, which coincides with our last venture capital boom. SVB was buying at the top because they had so much capital to deploy. Maybe instead of cashing it out, depositors could be given a treasury worth 30% less than SVB paid for it, that pays out 1% a year in interest, redeemable at face value in just 20 short years.
- FormerBandmate 4y ago
  They weren’t insolvent yesterday, they just had a rush of withdrawals. It will probably be upwards of 90 cents on the dollar, but that amount of money locked up in a possible credit crunch coupled with a loss of confidence in banks and the current startup environment is very bad
  - nostromo 4y ago
    They weren’t insolvent because banks are allowed to pretend treasuries haven’t lost value so long as they intend to hold them to maturity. Across all banks, there are over $600b in such losses. If they can hold those securities until they mature, all is good. If they need to sell them earlier, the losses become real. https://twitter.com/grdecter/status/1634091448743219201?s=46&t=Rzfz7ma1VEMxiFDXLqgb3Q https://twitter.com/grdecter/status/1634091448743219201?s=46...
    - khuey 4y ago
      In SVB's case I believe they are mostly mortgage backed securities (ironic, eh) rather than treasuries but yes. I wonder if this will spur any reflection on the accounting rules for HTM securities.
      - dehrmann 4y ago
        I bet they bought mortgage-backed securities because returns on everything safer were essentially zero. Crazy-low interest rates for too long created this problem.
dmoy 4y ago
It's a little unique because it's a top 20 bank failing. As far as I can tell, it's not super unique in terms of % of fdic insured deposits. As a whole it's like <30% FDIC insured in the whole US banking industry. > they’ll probably get all their money but it will still be bad They may not. Even for banks where most assets are FDIC insured, you'll see that not 100% of deposits are returned. Selecting a random recent one: https://closedbanks.fdic.gov/dividends/bankfind/Dividendindex?fin=10534 https://closedbanks.fdic.gov/dividends/bankfind/Dividendinde... ~95%.
- mwarkentin 4y ago
  Looks like 2.7% of their deposits were > 250k. So yes, it seems relatively unique (there are only 5 banks on this list with <15%). https://twitter.com/GRDecter/status/1634208652595699713?s=20 https://twitter.com/GRDecter/status/1634208652595699713?s=20
  - MR4D 4y ago
    You've got that backwards. Reread the tweet you linked to: "Only 2.7% of SVB deposits are less than $250,000. Meaning, 97.3% aren't FDIC insured." Not a good situation at all.
    - dllthomas 4y ago
      Aren't fully FDIC insured, yes?
      - lobochrome 4y ago
        Yes - if you have 5M$ in the bank, you'll have 250k$ of that insured. Not that comforting.
        dllthomas 4y ago
        But if you put in $250k because you're responsibly splitting things across banks, and the interest you've made on it raised you to $252k, you're counted amongst the 97.3% and it's not a big deal. I'm sure some people are out meaningful amounts of money, but I'm not sure what a typical account looks like.
hindsightbias 4y ago
SBF was a piker.
gnopgnip 4y ago
Have there been any cases in modern times, in the last 25 year or so where depositors lost money because they had more than the fdic covered ?
- pirate787 4y ago
  50 cents on the dollar at IndyMac in 2008 https://www.depositaccounts.com/blog/indymac-depositors-are-still-out-of.html https://www.depositaccounts.com/blog/indymac-depositors-are-...
- dmoy 4y ago
  Yes it happens literally every year. It's not usually a huge %, like it might end up being in this case.

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.

nostromo 4y ago

All their money? I doubt it. SVB owned a bunch of mortgage backed securities and treasuries - both of which are down 30-50% from their peaks, which coincides with our last venture capital boom. SVB was buying at the top because they had so much capital to deploy. Maybe instead of cashing it out, depositors could be given a treasury worth 30% less than SVB paid for it, that pays out 1% a year in interest, redeemable at face value in just 20 short years.

FormerBandmate 4y ago
They weren’t insolvent yesterday, they just had a rush of withdrawals. It will probably be upwards of 90 cents on the dollar, but that amount of money locked up in a possible credit crunch coupled with a loss of confidence in banks and the current startup environment is very bad
- nostromo 4y ago
  They weren’t insolvent because banks are allowed to pretend treasuries haven’t lost value so long as they intend to hold them to maturity. Across all banks, there are over $600b in such losses. If they can hold those securities until they mature, all is good. If they need to sell them earlier, the losses become real. https://twitter.com/grdecter/status/1634091448743219201?s=46&t=Rzfz7ma1VEMxiFDXLqgb3Q https://twitter.com/grdecter/status/1634091448743219201?s=46...
  - khuey 4y ago
    In SVB's case I believe they are mostly mortgage backed securities (ironic, eh) rather than treasuries but yes. I wonder if this will spur any reflection on the accounting rules for HTM securities.
    - dehrmann 4y ago
      I bet they bought mortgage-backed securities because returns on everything safer were essentially zero. Crazy-low interest rates for too long created this problem.

dmoy 4y ago

It's a little unique because it's a top 20 bank failing. As far as I can tell, it's not super unique in terms of % of fdic insured deposits. As a whole it's like <30% FDIC insured in the whole US banking industry. > they’ll probably get all their money but it will still be bad They may not. Even for banks where most assets are FDIC insured, you'll see that not 100% of deposits are returned. Selecting a random recent one: https://closedbanks.fdic.gov/dividends/bankfind/Dividendindex?fin=10534 https://closedbanks.fdic.gov/dividends/bankfind/Dividendinde... ~95%.

mwarkentin 4y ago
Looks like 2.7% of their deposits were > 250k. So yes, it seems relatively unique (there are only 5 banks on this list with <15%). https://twitter.com/GRDecter/status/1634208652595699713?s=20 https://twitter.com/GRDecter/status/1634208652595699713?s=20
- MR4D 4y ago
  You've got that backwards. Reread the tweet you linked to: "Only 2.7% of SVB deposits are less than $250,000. Meaning, 97.3% aren't FDIC insured." Not a good situation at all.
  - dllthomas 4y ago
    Aren't fully FDIC insured, yes?
    - lobochrome 4y ago
      Yes - if you have 5M$ in the bank, you'll have 250k$ of that insured. Not that comforting.
      - dllthomas 4y ago
        But if you put in $250k because you're responsibly splitting things across banks, and the interest you've made on it raised you to $252k, you're counted amongst the 97.3% and it's not a big deal. I'm sure some people are out meaningful amounts of money, but I'm not sure what a typical account looks like.

hindsightbias 4y ago

SBF was a piker.

gnopgnip 4y ago

Have there been any cases in modern times, in the last 25 year or so where depositors lost money because they had more than the fdic covered ?

pirate787 4y ago
50 cents on the dollar at IndyMac in 2008 https://www.depositaccounts.com/blog/indymac-depositors-are-still-out-of.html https://www.depositaccounts.com/blog/indymac-depositors-are-...
dmoy 4y ago
Yes it happens literally every year. It's not usually a huge %, like it might end up being in this case.