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"Cost the taxpayers nothing" - well not in "taxes", but I'm not sure we can really say nothing. Clearly the banks paying for it won't just eat that cost.
by nightski 4y ago
"Cost the taxpayers nothing" - well not in "taxes", but I'm not sure we can really say nothing. Clearly the banks paying for it won't just eat that cost.
- jmyeet 4y agoSVB had more assets than depositor liabilities. IIRC the last estimate I saw claimed there was ~$30B in excess assets to depositor liabilities. The problem that SVB faced was falling out of compliance with debt ratios. The modern banking system works on fractional reserves. The US requires IIRC 10%. A run of withdrawals still meant they were asset positive but didn't have enough cash on hand. That's what forced the sale of their liquid assets at a discount. So, no, this probably won't cost the taxpayers anything, directly or indirectly.
- nightski 4y agoSVB was not the only bank involved and was at a $25B deficit (from the latest I have heard) due to the fact it was having to sell those bonds at a loss to try and provide liquidity to depositors. Also, that completely ignores the time value of money. Even if those bonds will be worth enough at maturity, holding money for 10 years isn't free. They are getting 1.5%, but the risk free rate is much higher than that atm.