4 ms·
My understanding is that the FDIC does have to orderly liquidate all of SVB's assets unless they find a buyer. That does mean they have to sell all their outsta
by zt 4y ago
My understanding is that the FDIC does have to orderly liquidate all of SVB's assets unless they find a buyer. That does mean they have to sell all their outstanding treasury and mortgage assets, they don't have the ability to hold them to maturity (HTM).
SVB had billions of dollars in first-lost equity capital that was completely wiped out against those marks, hence them being insolvent. But that means there isn't a 1-to-1 lose for depositors against those underwater assets.
- bombcar 4y agoFDIC doesn’t have to find a buyer for the whole bank, they have leeway to split up parts of it to negotiate. So they may be able to make a deal for CMOS, especially if congress were to authorize something. But it could be nobody wants to touch it. Maybe Musk wants a bank?
- AdamJacobMuller 4y agoTheir core instructions in this situation is to maximize recovery, but, a lot of that is securing the maximum value as quickly as possible to reduce risk because reducing risk is also maximizing recovery. They won't ever HTM but they can sit on things for a bit, they do have reasonable flexibility.