4 ms·

Who is bailing them out though? My understanding is that SVB still had cash and 10 year MBS that cover 90%+ of deposits if those MBS were able to mature. And be

Who is bailing them out though? My understanding is that SVB still had cash and 10 year MBS that cover 90%+ of deposits if those MBS were able to mature. And because of that when another bank takes over these accounts, they will (as a condition from the FDIC) honor those deposits. When people say bailout, they refer to tax dollars going to bailing out an entity. I could be 100 percent off base but that's my understanding.

deleted 4y ago
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houseinthesky 4y ago
> When people say bailout, they refer to tax dollars going to bailing out an entity. One thing I've learned over the years is that lots of people use words wrong, especially regarding financial topics. After seeing the ridiculousness that gets posted any time topics like short selling, stock buy-backs, tax writeoffs or fed policy get discussed, I'd be cautious about assigning a narrow meaning to what random internet posters mean when they say "bailout".
- HWR_14 4y ago
  Bailout can refer to depositors who could not get back 100% of their assets above the FDIC limit based solely on SVB assets getting made whole (what I was referring to) or to the shareholders getting made whole (which I took great pains to explain as a different situation I was not referring to). But fundamentally the term "bailout" could be used to refer to either and distinguishing those two states is valuable.
HWR_14 4y ago
The Fed and FDIC are going to bailout depositors by guaranteeing that whichever bank takes them over won't lose money on the deal. That is, the assets might be worth 90% of the liabilities, and the insured accounts cover another 5%. So the FDIC and/or fed will cover the last 5% of the money owed to depositors. In part, by doing so quickly, they can have Monday morning a full guarantee by (huge bank) be the next news story. The stockholders are not being bailed out. They may get something back if the assets happen to exceed the liabilities. But I would need amazing odds of make that bet. I fully expect depositors to get made 100% whole, with something like 95% coming from existing assets/covered FDIC accounts and the remaining 5% coming from other entities.

deleted 4y ago

[deleted]

houseinthesky 4y ago

> When people say bailout, they refer to tax dollars going to bailing out an entity. One thing I've learned over the years is that lots of people use words wrong, especially regarding financial topics. After seeing the ridiculousness that gets posted any time topics like short selling, stock buy-backs, tax writeoffs or fed policy get discussed, I'd be cautious about assigning a narrow meaning to what random internet posters mean when they say "bailout".

HWR_14 4y ago
Bailout can refer to depositors who could not get back 100% of their assets above the FDIC limit based solely on SVB assets getting made whole (what I was referring to) or to the shareholders getting made whole (which I took great pains to explain as a different situation I was not referring to). But fundamentally the term "bailout" could be used to refer to either and distinguishing those two states is valuable.

HWR_14 4y ago

The Fed and FDIC are going to bailout depositors by guaranteeing that whichever bank takes them over won't lose money on the deal. That is, the assets might be worth 90% of the liabilities, and the insured accounts cover another 5%. So the FDIC and/or fed will cover the last 5% of the money owed to depositors. In part, by doing so quickly, they can have Monday morning a full guarantee by (huge bank) be the next news story. The stockholders are not being bailed out. They may get something back if the assets happen to exceed the liabilities. But I would need amazing odds of make that bet. I fully expect depositors to get made 100% whole, with something like 95% coming from existing assets/covered FDIC accounts and the remaining 5% coming from other entities.