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Intuitively, a hundred billion dollar auction with only a few hours to research, analyze and horsetrade must necessarily result in a lower winning bid. Given a

Intuitively, a hundred billion dollar auction with only a few hours to research, analyze and horsetrade must necessarily result in a lower winning bid. Given all the uncertainty about the assets and other regional bank dominoes that are yet to fall, it seems like even the winner will be a low-ball offer. Doesn't that mean a bigger haircut for uninsured depositors than would be the case if assets were methodically liquidated over a few weeks or months instead of a fire sale on one Sunday?

drdec 4y ago
It sounds like they are selling the bank, not the assets. If they are selling the bank then I think the depositors will be made whole by the buyer. This will factor into the bid. This is just my understanding, I am very open to being wrong.
lmm 4y ago
> Intuitively, a hundred billion dollar auction with only a few hours to research, analyze and horsetrade must necessarily result in a lower winning bid. Maybe. Or maybe the winner's curse will apply. > Doesn't that mean a bigger haircut for uninsured depositors than would be the case if assets were methodically liquidated over a few weeks or months instead of a fire sale on one Sunday? Maybe. Equally the longer depositors can't access their deposits, the worse things are. FDIC would rather get the depositors their 100% quickly than get maximum recovery for junior debt or equityholders. Now, if there's no offer coming in that covers 100% of deposits, then that gets more interesting; it's always possible that the FDIC will decide to keep running the bank and purse that kind of strategy.