You are absolutely right. The distinction between insolvency and illiquidity is a red herring. People who have to sell their house in foreclosure will be disco

You are absolutely right. The distinction between insolvency and illiquidity is a red herring. People who have to sell their house in foreclosure will be discovering the exact thing you are describing here. What's happening here is SVB is big enough that the authorities go "aaaaah, wait a second, this could blow up a bunch of other businesses and we wouldn't want that". And so they are taking the illiquidity interpretation and helping out the depositors, but at least they are not helping the shareholders. One thing that may be a bit different in the case of a bank is that the general public does not know or consider deposits to be a loan to a bank. Which is what it is, but people don't think of it this way, and the aren't encouraged to either thanks to FDIC and other state level guarantees. If we change that by letting the depositors lose money, there's going to be chaos.