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> Depositors who really had to could sell their bonds immediately at a discount. How does this kind of thing function? I assume the bank pools all the money an
by Waterluvian 4y ago
> Depositors who really had to could sell their bonds immediately at a discount.
How does this kind of thing function? I assume the bank pools all the money and buys various investment products. Is there just another wild level of abstraction where"you own X% of this investment product. Feel free to sell your share to someone else" ?
- Animats 4y agoThe normal FDIC procedure would be that depositors get receivership certificates which represent a share of SVB's assets. Those are hard to trade, though. Somebody would offer to buy them, but at a deep discount. A better offer from the FDIC would be to offer Treasury bonds instead to those who want them, at a discount based on the FDIC's valuation of SVB's assets. The FDIC is well placed to sell off illiquid assets slowly. That's what they do after a bank failure. Depositors would have quick liquidity if they wanted, but it would cost them something. Is SVB's balance sheet, from the FDIC, out yet?
- Waterluvian 4y agoAhh okay. So the FDIC is doing that big government thing of acting collectively in everyone's interest, I suppose? Instead of everyone getting their piece of the frozen pie, starving as it thaws (possibly having to sell it at a steep loss of degrees to the radian), the FDIC just says, "I'll hold on to the whole pie and hand out slices from my backup pie stash. Then once it thaws, I'll add it to my backup pie stash."
- nerdponx 4y agoI think they are also rebuilding the backup pie stash by charging everyone a slightly bigger slice of pie than before.