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> Then what do we do with the billions in remaining assets? Appropriate them, and leave small and mid businesses hanged to dry? Easy, pay out $250K per account

• imustbeevil 4y ago
  > Money to depositors for amounts greater than $250K is a bail out. They have no right to that money from the Feds. No. The feds aren't giving anyone fed money, they're selling SVB's assets and giving the people they owe their own money back. There isn't enough money to give everyone 100% back, so they won't be getting 100% back. There's no extra government money making anyone "whole". They're just winding down the assets so they don't all get stolen like FTX.
  • auntienomen 4y ago
    Extra money is precisely what Yellen is proposing. The government will backstop the depositors to prevent a run on every other non-SIFI. This is the right move.
    • belter 4y ago
      Under what regulatory framework?
    • imustbeevil 4y ago
      > Extra money is precisely what Yellen is proposing. That's certainly not what any of the articles quoting her are saying.
    • BaseballPhysics 4y ago
      > Extra money is precisely what Yellen is proposing. Then you should be able to offer up a quote where she says that. Hint: she never said that.
• a13n 4y ago
  This is short sighted. If the government doesn’t make depositors whole then people and companies all over the world lose trust in US banks and eventually US dollars. This is a federal problem. It makes sense to make depositors whole, they’re innocent here. It doesn’t make sense to make SVB whole for managing their risk poorly.
  • rafael09ed 4y ago
    Maybe we should have a public banking option if the government's going to give everyone their money anyway
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    • a13n 4y ago
      Yeah I think the capitalist version of that is more regulation to the point where large banks aren’t able to take on so much risk to depositors.
  • Denvercoder9 4y ago
    > If the government doesn’t make depositors whole then people and companies all over the world lose trust in US banks and eventually US dollars. This is a federal problem. I fail to see how the government doing exactly what the law says and what they've always said they will do makes people lose trust in the US.
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  • koolba 4y ago
    No, they’ll have high trust that amounts up to $250K are covered. Because that’s what’s covered. Any treasurer or CFO with half a brain knows that.
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• nonethewiser 4y ago
  > Money to depositors for amounts greater than $250K is a bail out. They have no right to that money from the Feds. I’m surprised to hear this perspective. I think most people understand a bailout as cash injection. Not that you get more than what the government insures. If it were the latter then bailouts happen all the time without bank failures or FDIC takeovers (all transfer > 250k).
  • koolba 4y ago
    The $250K is the FDIC covered limit. Amounts greater than that are not insured by the Feds. If the bank fails, the Feds ensure that depositors get at least $250K per account. If SVB is insolvent than customer deposits are not worth their full value. The phrase “making all depositors whole” would be the Feds covering the difference. Anything beyond the $250K per account would be money that they are not entitled to per US banking regulation. > If it were the latter then bailouts happen all the time without bank failures or FDIC takeovers (all transfer > 250k). This has nothing to with bank transfers. It’s about deposit insurance.
    • gammarator 4y ago
      > Anything beyond the $250K per account would be money that they are not entitled to per US banking regulation. This isn’t correct. SVB has assets which are still worth something, even if they are less than their total liabilities. Unsecured depositors are first in line for that money, and the $250k fdic insurance limit has nothing to do with it.
      • belter 4y ago
        As others have pointed out, those assets are not liquid. And selling many of them on short notice, will cause all other kinds of problems. Takes time and you wont get the money equal to their current valuation.
    • madamelic 4y ago
      > Anything beyond the $250K per account would be money that they are not entitled to per US banking regulation. It's my understanding that FDIC considers $250k the minimum they'll cover and they can (and have) cover(ed) higher through raised premiums to other banks.
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• senttoschool 4y ago
  I think the depositors should get a bit of a haircut if selling the assets don’t cover all deposits. For example, 5%. If it’s more than 5%, then the government steps in and pay for the rest. 5% seems like the right balance between the two extremes. Companies and people should pay a small penalty. At the same time, we shouldn’t rock the financial system further. We need to have confidence in the system. After this, the government should make new regulations to prevent this scenario from happening again. For those wishing to just follow existing rules exactly as is, bear in mind that a contagion will likely reach your personal finances.
  • admissionsguy 4y ago
    > 5% seems like the right balance between the two extremes. No it's not. If they get a single cent above the bank's remaining assets (after administrative costs of the FDIC action), I don't think I will be the only one losing any remaining trust in the system.
    • drgath 4y ago
      Seems likely it’s all there. https://www.fdic.gov/news/press-releases/2023/pr23016.html https://www.fdic.gov/news/press-releases/2023/pr23016.html > As of December 31, 2022, Silicon Valley Bank had approximately $209.0 billion in total assets and about $175.4 billion in total deposits. At the time of closing, the amount of deposits in excess of the insurance limits was undetermined. The amount of uninsured deposits will be determined once the FDIC obtains additional information from the bank and customers.
      • metalspot 4y ago
        "assets" are the dollar amounts of the loans you have issued. what those "assets" are actually worth is a completely different number.
      • stephen_g 4y ago
        Yes, issue for the depositors is how long it might take. Digging through the closed banks history at the FDIC is fascinating - https://closedbanks.fdic.gov/dividends/ https://closedbanks.fdic.gov/dividends/ Sometimes up to ~75% of the funds is paid out within weeks of collapse, but for some banks it’s only 10 or so percent. Most of the time it seems to end up with over 90% being paid out (sometimes it’s 100%), but the payments can come over ten or more years! Often seems to be one within weeks, one in the next month or two, and then the payments seem to start coming every three or so years.
• drgath 4y ago
  Have we yet deviated from FDIC rules? I don’t think so, even with what Yellen says. My limited understanding of the situation is that the assets to cover everything is there, they’re just tied up in long-term treasuries. From the FDIC’s site: > As of December 31, 2022, Silicon Valley Bank had approximately $209.0 billion in total assets and about $175.4 billion in total deposits. For simplicities sake, let’s just assume 100% of the assets are actually there, but it’ll just take varying years for everything to mature. So, what’s next? FDIC finds a buyer for the assets, perhaps a private bank or a a pseudo-government body who has the ability to wait till maturity, and in the meantime, everyone gets all their deposits. That’s not a “bailout”, and is following the rules.
  • tamcap 4y ago
    Magically using billions of federal money to hold assets to maturity is a bailout. If hypothetical JPMorgan is willing to pay for the (ie) bonds $20B, but they "support" $25B of deposits... that $5B is a bailout. Even if in 10 years those bonds would be worth $25B.
  • Denvercoder9 4y ago
    > So, what’s next? FDIC finds a buyer for the assets, perhaps a private bank or a a pseudo-government body who has the ability to wait till maturity, and in the meantime, everyone gets all their deposits. Yes, that's happens in the ideal case. However, due to the rise in interest rates, the market value of SVB's assets is likely lower than $175B at the moment; so it might prove challenging for FDIC to find a buyer for these assets at the required price to give everyone their deposits back. Even well-capitalized entities that have the capital to refund depositors now and the ability to wait till maturity will not pay the face value for these bonds, as they can get a better return by investing that money somewhere else (such as treasuries).
    • JumpCrisscross 4y ago
      > the market value of SVB's assets is likely lower than $175B at the moment Deposits are less, too. We won’t have a good picture of their balance sheet until later.
• locallost 4y ago
  I don't get this comment at all. The post you're replying to literally says the bank has more assets than 250k per client. I read somewhere the insured amount is around $8B whereas the bank's assets are at least 20x that. Where should that money go if every client gets capped at 250k?
  • ericd 4y ago
    >then distribute the rest pro rata based upon closing balance from when the fed's took over. The second part of that sentence addresses your question.
  • koolba 4y ago
    They have more than $250K per client but not the full value. Each account should be allocated MIN(balance, 250K). Then the remaining should be allocated pro rata. So if one is still owed $1000 (ie the balance was $251K before the collapse), then that account’s share of the remainder is: $1000 / (sum of all remaining balances owed) The haircut per account is only on amounts beyond $250K.
    • locallost 4y ago
      But that's exactly what the post you replied to said? Anyway, I am against a bailout here, but haven't seen one announced.
  • cscurmudgeon 4y ago
    The salty commenters think it should go to them or the govt but won’t say it out loud lol.
• jliptzin 4y ago
  It is completely insane to allow innocent depositors to lose their money especially when the government clearly would have no problem coming up with the funds to backstop depositors since this is an isolated incident. This bank being located in a tech hotspot is incidental and I am sure some non-techies are swept up in this as well. Imagine a 70 year old woman who just lost her husband and sold her house to downsize to an apartment. She has $1 million in her SVB account and plans to live off the interest in her retirement. Should this 70 year old widow take a $750k haircut because she hasn’t spent the last few years brushing up on SVB 10-k filings and calling up SVB’s board of directors to ask them how they plan to manage interest rate risk? FDIC limit should be way higher anyway (when was the last time it was raised?) but if we allow depositors to lose money it will quickly cause a stampede to the handful of huge banks and drive smaller regional banks out of business. That’s why other bank stocks are also plummeting right now. Is that what you want? If an enormous earthquake strikes one region causing billions of dollars of damage but you live on the other side of the country do you complain about the federal government spending your tax dollars to help those people rebuild? For the record I believe SVB shareholders and debt holders will get wiped out, as they should.
  • koolba 4y ago
    > Imagine a 70 year old woman who just lost her husband and sold her house to downsize to an apartment. She has $1 million in her SVB account and plans to live off the interest in her retirement. Should this 70 year old widow take a $750k haircut because she hasn’t spent the last few years brushing up on SBV 10-k filings and calling up SBV’s board of directors to ask them how they plan to manage interest rate risk? Making a sob story about a 70 year old granny doesn’t change the facts. And she wouldn’t take a $750K haircut. She’d get $250K guaranteed and her share of the remainder which is not going to be zero. Probably much closer to 80+% of the balance above $250K. > If an enormous earthquake strikes one region causing billions of dollars of damage but you live on the other side of the country do you complain about the federal government spending your tax dollars to help those people rebuild? If it’s going to be done with funds not allocated or aligned with FEMA then damn straight I’ll complain. Society does not have infinite money. If they want to increase funding for something then we have a process for that.