4 ms·
> Even if the extremely unlikely scenario plays out and companies are unable to make payroll, employees are very unlikely to walk out, it would make an inconven
by kweingar 4y ago
> Even if the extremely unlikely scenario plays out and companies are unable to make payroll, employees are very unlikely to walk out, it would make an inconvenient situation (no pay) much worse (terminated) in an already challenging economic climate. Anybody with the financial means to walk away because payroll has been missed is someone with the financial means to ride out a few weeks waiting to be paid.
Even if employees don’t walk out, they can file a wage claim and collect penalties. Any retaliation for filing a wage claim is illegal and would result in more penalties.
- bombcar 4y agoFDIC isn't stupid; they're issuing IOUs and these companies can borrow against the IOUs. It's not like this is a minor bank failure; everyone knows about it.
- sp332 4y agoThey're going to send out some money this week, but the value of the IOUs will depend on how much they can sell the bank's assets for. Certainly less than face value. It's going to be hard to borrow against that.
- bombcar 4y agoI don't think anyone think's that all the money is gone, so borrowing $1m against $100m IOU shouldn't be a major issue.
- kragen 4y agothis week ends in 34 hours, so this is unlikely the ious are actually receiver's certificates, and as i understand it, borrowing against receiver's certificates is a commonplace thing to do in cases like this
- favorited 4y ago> Certainly less than face value Their assets were higher than their liabilities. This is a liquidity problem, not a solvency problem. Everyone got their money from Lehman Brothers, and everyone will get their money from SVB. But not everyone is going to get it right away, because it is invested.
- johngladtj 4y agoSure, 10 years from now
- dragonwriter 4y ago> FDIC isn’t stupid; they’re issuing IOUs “Receivership certificates” aren’t really IOUs (they are more “defunct entity owes you”). The DFPI takeover and FDIC receivership is, effectively, a kind of “bankruptcy” for the bank. > these companies can borrow against the IOUs. What amounts to an IOU from a bankrupt entity is…not very good collateral for a loan. > It’s not like this is a minor bank failure; everyone knows about it. Right, and everyone who isn’t already exposed wants to stay out of the blast radius, not jump into it.
- gizmo 4y agoOh come on, uninsured creditors will get back at least 90c on the dollar when the dust has settled. Likely 100c. So yes, they can absolutely use the IOU to cover short term expenses.
- Asparagirl 4y agoDude. Could you please tell us how much money the thousands of depositors (both individuals and companies) who were above the FDIC limits at IndyMac Bank lost in total, when the bank was taken over by FDIC in 2008? (hint: three comma club, easily)
- panarky 4y agoUninsured depositors at IndyMac Bank lost 50 cents on the dollar.
- Asparagirl 4y agoYup. And that was even after the FDIC limit was raised from $100k to $250k, and amazingly was even made retroactive back to January 1, 2008, to try to help those poor people out.
- gizmo 4y agoAnd lessons were learned! This is not 2008 repeating itself. SVB is unusual in how much exposure they have on interest rates, on both sides of the balance sheet. There is no contagion, and the bank is still an asset worth many billions. The liquidity problem gets solved by merging this bank with a bigger and more liquid bank. The insolvency problem is solved by wiping out the stockholders and bond holders will get a haircut. I get why people panic, but the issues here can be resolved cleanly and speedily.