4 ms·
No, this is damage control to stop contagion. This does nothing for SVB, it's depositors, or shareholders. it's to extend credit with backing of certain assets
by di456 4y ago
No, this is damage control to stop contagion.
This does nothing for SVB, it's depositors, or shareholders. it's to extend credit with backing of certain assets as collateral to avoid forced sale of said assets and more bank failures.
From the announcement:
> The financing will be made available through the creation of a new Bank Term Funding Program (BTFP), offering loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions pledging U.S. Treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral. These assets will be valued at par. The BTFP will be an additional source of liquidity against high-quality securities, eliminating an institution’s need to quickly sell those securities in times of stress.
- abigail95 4y agoIf treasury bonds are so risky for banks to hold that they need to create a funding program to repo them "at par" - what is the point of the govt allowing banks to hold these bonds in the first place?
- deleted 4y ago[deleted]
- cjbprime 4y agoSurely it does help SVB depositors, since without this action they would (a) take a haircut, since we expect SVB has less assets than deposits, and (b) have to wait some months or years for those remaining assets to be liquidated and distributed to the creditors including them?