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This is a simple liquidity problem. SVB had the treasury bills and loan book to cover all the deposits. They just couldn’t access any of that money. The FDIC s

This is a simple liquidity problem. SVB had the treasury bills and loan book to cover all the deposits. They just couldn’t access any of that money. The FDIC should take on the bills and loans, and pay out the cash now. They will collect the entire balance eventually and they have the benefit of time and I imagine they’re authorised to hold assets like this long-term (or do a cash swap with the fed, they have plenty of long term bonds what’s another $100B). I have always assumed this is what the whole point of the FDIC and similar schemes in other countries. They foot the bill immediately and then spend time fixing up the mess but eventually reclaim it all back. It’s a bit like if you’re not at fault for an accident - the insurer pays you out now and then they deal with the at-fault driver and you’re not involved in that process afterwards in most cases. According to the press release, SVB had $206B in assets and $176B in deposits. The math is simple: everyone should get their money back. There may even be some money left over for investors.

berkle4455 4y ago
$206B in assets that were being recognized for their original, not current, valuation. That’s the entire problem. HTM vs AFS.
loeg 4y ago
> According to the press release, SVB had $206B in assets and $176B in deposits. Those numbers are from December 2022. They had $161B in deposits prior to Thursday's $42B in withdrawals. And that $206B figure is somewhat fictional hold-to-maturity accounting. The $80B in 1.5% bonds aren't actually worth $80B at market prices. They were shut down for being insolvent on Thursday ($950M in the hole). It's not just a liquidity problem.
shawabawa3 4y ago
You need to look up time value of money https://en.m.wikipedia.org/wiki/Time_value_of_money https://en.m.wikipedia.org/wiki/Time_value_of_money Having $1M in 10 years is the same as having $680k today, as you could buy 10Y treasuries that will pay out $1M So saying "The FDIC should take on the bills and loans, and pay out the cash now. They will collect the entire balance eventually" is the same as saying "They have lost 30% of depositors money but FDIC should pay that 30% out of their own pocket"
StopHammoTime 4y ago
The fed has no time value issues. In the latest press release it is obvious they are going to take ownership of the bonds and issue currency directly to cover all of the deposits. As I said, they had the assets and large government institutions are not worried about holding onto those bonds for ten years. They would never have been able to sell enough to not be able to cover their deposits - that’s when regulators stepped in.

berkle4455 4y ago

$206B in assets that were being recognized for their original, not current, valuation. That’s the entire problem. HTM vs AFS.

loeg 4y ago

> According to the press release, SVB had $206B in assets and $176B in deposits. Those numbers are from December 2022. They had $161B in deposits prior to Thursday's $42B in withdrawals. And that $206B figure is somewhat fictional hold-to-maturity accounting. The $80B in 1.5% bonds aren't actually worth $80B at market prices. They were shut down for being insolvent on Thursday ($950M in the hole). It's not just a liquidity problem.

shawabawa3 4y ago

You need to look up time value of money https://en.m.wikipedia.org/wiki/Time_value_of_money https://en.m.wikipedia.org/wiki/Time_value_of_money Having $1M in 10 years is the same as having $680k today, as you could buy 10Y treasuries that will pay out $1M So saying "The FDIC should take on the bills and loans, and pay out the cash now. They will collect the entire balance eventually" is the same as saying "They have lost 30% of depositors money but FDIC should pay that 30% out of their own pocket"

StopHammoTime 4y ago

The fed has no time value issues. In the latest press release it is obvious they are going to take ownership of the bonds and issue currency directly to cover all of the deposits. As I said, they had the assets and large government institutions are not worried about holding onto those bonds for ten years. They would never have been able to sell enough to not be able to cover their deposits - that’s when regulators stepped in.