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I am one of those who has been harmed. I work at a different bank. The rates charged to banks for FDIC insurance have been based on the assumption that the FDI

by mcherm 4y ago

I am one of those who has been harmed. I work at a different bank. The rates charged to banks for FDIC insurance have been based on the assumption that the FDIC would cover depositor losses up to the insured limit. By choosing to cover all losses even above the insured limit, we have chosen to put the burden for paying for those losses on all of the other banks (and indirectly on those banks depositors). I suspect this means that you will not see the interest rate on savings accounts go up as much as it might have otherwise. I'm not saying this outcome is terrible, perhaps it was the best solution for the system as a whole. But using an insurance fund to cover a kind of loss, the insurance was not sized to address is not a choice that has no impact. If I were in charge of everything (perish the thought!) I would probably have insisted that the uninsured portion of the deposits take some haircut. If depositors had gotten back 90% or 98% of their deposits instead of 100%, it might have increased the chance in the future that institutions with 100 million+ bank accounts would pay more attention to the risk profile of the banks they choose to invest with. Banks are rewarded mostly in proportion to the risks that they take; having a force other than government regulation that pushes in the opposite direction can be very useful.

tptacek 4y ago
Here is my question about that: whatever the increased costs to insure other banks by making uninsured depositors whole, aren't they ultimately based on the resolution costs for SVB itself? That is to say: in the limit, if it costs almost nothing to wrap up SVB, because their assets are fine (just inconveniently structured), what drives insurance costs up at other banks? I'd also add that covering uninsured depositors isn't new behavior for FDIC, at least as I understand it. The mechanics of how it was done here are different than in previous instances.
- kasey_junk 4y ago
  Covering uninsured deposits is common as they retain their senior debt status. Guaranteeing them on the other hand is very new. And if we are going to expect them to be guaranteed in the future insurance rates must go up, not just to cover more things but to cover the riskier behavior it creates. If we aren’t going to cover them 100% in the future then apparently it’s true that there are not just different classes of banker but different classes of depositors.
  - tptacek 4y ago
    Or just different circumstances? IndyMac famously paid uninsured depositors back 85 cents on the dollar, right? But IndyMac was also plowing depositor dollars into a portfolio of Alt-A MBS's.
    - kasey_junk 4y ago
      A regulatory regime that makes depositors whole when a bank fails due to not managing their interest rate risk appropriately but not when they mismanage their credit risk feels even stranger than just admitting that the fdic cares more about some depositors than others.
      - FreakLegion 4y ago
        First Republic now has a sweep account that spreads up to $100m across 400 banks in increments of up to $FDIC_INSURANCE_LIMIT. What's the difference between the FDIC insuring all deposits at US banks directly and US banks doing it themselves by forming a complete graph? (Other than there being a clear upper limit in the latter case, which is currently greater than $1b per account.)
        mercyandgrace 4y ago
        Insurance only pays out to $FDIC_INSURANCE_LIMIT if a bank fails. I can't say what the scenario looks like where 400 banks fail simultaneously, but I can image it would not be good. I'm not sure the current FDIC payout models account for that, either.
        Gunax 4y ago
        I agree about 400 banks failing would likely be due to some greater catastrophe. But financially I think it's the same. If 400 customers each use 1 bank each, then a single bank failure means the FDIC needs to make whole one customer. But if every customer put 1/400th of their wealth into each of the 400 banks, then FDIC has to cover all customers for 1/400th each. The cost to us as depositors/taxpayers is equal.
- KingMachiavelli 4y ago
  > because their assets are fine (just inconveniently structured) If assets are so inconveniently structured that the bank fails, then the assets are not fine. A bond that pays 0.01% that never matures has an infinite value over infinite time. So while the FDIC/gov can solve the liquidity issue by replacing a $100 face value bond with $100 cash but that's still a net transfer of actual value from the FDIC i.e other banks. As far as I know, regulatory requirements require/encourage holding good bonds but if the FDIC is going to start treating gov/muni bonds of any maturity length as good as cash, then there's less reason to hedge against interest rate risk.
- JamesBarney 4y ago
  I think this move probably saved the FDIC money. If you had a massive bank run(1), it's probably cheaper to pay back 250k+ depositors of one bank than for the FDIC to pay out < 250 on 40. Not to mention unloading enormous amounts of MBS's could trigger further insolvencies. 1. which seemed pretty likely, I know people who over the weekend were planning to pull all of their money out of a regional bank and put it in one of the 4 super banks Monday morning)
  - deleted 4y ago
    [deleted]
jt2190 4y ago
Just so I’m clear, you’re saying that you’ve been harmed because your savings account will pay a lower interest rate? (Note that I’m not trying to suggest that you were not harmed, I just want to make sure that I understand the source of the harm.)
- UncleOxidant 4y ago
  I'm guessing that if they work for a bank the FDIC special fee might also cut into bonuses.
el_nahual 4y ago
Have the FDIC rates actually changed or is this a hypothetical. It's relevant because the FDIC limit has not actually increased--it's still de jure $250K. The fact that the FDIC said they would cover 100% of deposits at SBV could be related to the fact they weren't actually insolvent and could have covered the run if given enough time to liquidate assets.
- deanCommie 4y ago
  100% hypothetical. Of course the banks are only happy to have ANY justification to complain and not raise saving rates, and blame the Federal Government. But there have been no indication yet that the FDIC will be drawing on the insurance fund to cover the depositors.
- RC_ITR 4y ago
  >Have the FDIC rates actually changed or is this a hypothetical. It's hypothetical. The FDIC is likely to recover a vast majority of the uninsured deposits through asset sales, people just want to be outraged. At smaller banks, 60-75% of uninsured deposits are usually recovered by FDIC and those banks went out of business for bad balance sheets, not bank runs due to duration mismatch. We've gotten so used to assuming every statement is spin on 'you're getting screwed' that people assume it's always the case.
- WorldMaker 4y ago
  Relatedly, the FDIC is built as an insurance pool and has always stated coverage as a minimum with no explicit maximum coverage. It's entirely possible to see the FDIC's over-coverage here as an explicit "this pool has seen lower portfolio risk than expected" which may only indicate that past rates were higher than necessary versus real world risk profiles and that serves no expectation of future rate changes just a sign of a very healthy risk pool. (It's just as possible to argue that if the insurance pool was able to 100% cover the deposits in this event that actuaries should reevaluate the risks for the entire pool and decrease rates moving forward to stronger align with the expected minimum coverage and present risk assesment knowledge of the likelihood of events of this scale.)
qotgalaxy 4y ago
[dead]
miohtama 4y ago
As you have insight, 1) Is this outcome better than (expected) panic on the banks and bank runs? There still seem to be runs going on e.g. First Republic. Are the markets “calm” now? 2) Because insurance fund is not designed for the task it is currently experiencing, how the gap will be plugged? 3) Could this cause depositors move money from smaller banks to larger ones, and then larger banks just lend this money back to small banks w/some nice profit?
HPMOR 4y ago
As somebody employed by a company which kept all their assets in SVB, I strongly support the FDIC bailout. Even a couple percent haircut would've resulted in many many second order economic implications. I think even for member banks, strong economic activity not realized through a systemic contagion is much better than slightly lower premiums.
- whatshisface 4y ago
  If we're not going to let economic signals tell companies to check who they're banking with before putting all their assets in one place, how can that happen? Regulations saying every small business needs to have a risk officer, and more regulations specifying how that officer has to make decisions?
  - RC_ITR 4y ago
    >If we're not going to let economic signals tell companies to check who they're banking with before putting all their assets in one place, how can that happen The assumption that an operating company should understand fixed income pricing dynamics, have a POV on future FED interest rate moves, and dive into each potential banking partners' asset duration is an interesting one, especially when most of SVB's deposits were made during a period of perpetually falling interest rates, where duration mismatch helped banks.
    - AlexandrB 4y ago
      Maybe not each company, but the VCs who encouraged their portfolio companies to put everything in SVB should have some inkling of the risks involved in doing that.
  - cameronh90 4y ago
    Isn't the point of banking regulations that we are relying on the government to do that checking? Relying on customers to check their bank, besides being fairly impractical for all but the largest and most sophisticated customers, is just going to trigger bank runs as soon as customers get any whiff of a problem. I don't see the problem with unlimited FDIC provided the regulations are congruent with that. If you want to go the private route for better interest rates and take on the regulatory burden yourself, you can always go with an uninsured bank. If you just want a simple place to stash a few hundred million, why make you jump through hoops? What I don't understand is why start-ups were apparently keeping millions of dollars of capital in a bank account rather than government bonds or other instruments, given that the FDIC limit was well known.
upsidesinclude 4y ago
>interest rate on savings accounts go up as much as it might... No sensical person is concerned with the interest rate on savings, it is nearly zero and effectively negative. I dont believe anyone should have a single account with 100 million dollars nor should banks allow that, but they do. Perhaps part of the problem is that the $250k coverage is a value that should adjust annually and coverage should be relative to each account as opposed to each account holder
- bandofthehawk 4y ago
  > No sensical person is concerned with the interest rate on savings, it is nearly zero and effectively negative This might have been true for the past ten years or more, it's not true now. You can easily find savings accounts now which offer over 3%, and it's going up as the fed continues to raise rates. This still might not be the best investment when you consider the high inflation, but it's great for emergency fund type accounts that need low risk, high liquidity.
  - deleted 4y ago
    [deleted]
  - upsidesinclude 4y ago
    3% savings in a 6% inflation year is negative returns. I cant believe this got downvotes...
greenhatman 4y ago
> we have chosen to put the burden for paying for those losses on all of the other banks But isn't it likely to cause more bank runs if depositors lost money? So in a real sense, many other banks were saved from going under, by assuring depositors that their money is safe, whichever bank they're at. My understanding is that other banks have massive unrealized losses as well, due to the steep interest rate increases. So they're all kind of vulnerable.
- blihp 4y ago
  I'd say it's more likely that there will be at least slower rolling runs on smaller banks by large depositors. Keep in mind that the unlimited coverage only applies to the depositors of the two banks that were taken over, not all depositors everywhere. Keeping large balances in a bank that may not be deemed a systemic risk is still rolling the dice if said bank fails. (i.e. unless a bunch of other banks fail around the same time getting national attention, you'd probably be out of luck)
idontpost 4y ago
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maximinus_thrax 4y ago
> I am one of those who has been harmed. How were you harmed specifically? > you will not see the interest rate on savings accounts go up as much as it might have otherwise. Bullshit. Interest rates for savings accounts are and have been an absolute joke. Are they going to become a more hilarious joke? Probably but seriously, who cares? > I'm not saying this outcome is terrible, perhaps it was the best solution for the system as a whole. Yes, it is the best solution, otherwise you'd have written a completely different statement if the bank run went viral and you would have been really harmed.
- HN_is_for_gemes 4y ago
  [dead]
- prottog 4y ago
  > How were you harmed specifically? That's like asking how you were specifically harmed as a result of there being one more CO2-spewing pickup truck in the world. Bad things amortized over millions of people are still bad, even if the harm to any individual is too small to verbalize.
  - maximinus_thrax 4y ago
    No, it's not. One more CO2-spewing pickup truck doesn't take the headlines for a week.
photochemsyn 4y ago
What's the rationale behind not breaking up the accounts of large depositors into FDIC-insurable accounts? Apparently this is called a 'cash sweep'. Typical ad blurb: > "Insured cash sweep is a safe and convenient service that provides FDIC insurance on large balances while giving you access to your money, as well as the ability to earn interest. Choose between demand accounts, which offer unlimited withdrawals, and money market accounts that permit up to six withdrawals per month." I've heard some claims that SVB was offering incentives to depositors who kept their funds in one lump account, is this true and if so what's the benefit to SVB from doing that?
- balderdash 4y ago
  It’s called brokered deposits, there is not reason to not do it if it’s just sitting in bank acccount, but if the $ size gets large (>$25m it can be cumbersome), and if there is a lot of operational activity it doesn’t make much sense. What’s unforgivable is why these large depositors that didn’t tend this cash for short term operational needs didn’t have the funds in govt securities in an insured brokerage account at a trust company… Where many venture backed companies got hung up though is that the terms of venture debt provided by SVB required the borrowers to keep use SVB as their bank…
sophacles 4y ago
I keep reading comments like this, but I've seen no well sourced material saying that the FDIC is raising rates. Do you have some reliable source about it? (NOT a "look at it logically" or "here's how my health insurance works, why would the FDIC be different", or "do your own research" or anything else that's some random internet comment - I'm looking for real meat about this claim).
- rippercushions 4y ago
  From the Treasury announcement: Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law. In other words, if the FDIC's current funds can't cover the bill, an extra fee will be levied on banks to make up for it. https://home.treasury.gov/news/press-releases/jy1337 https://home.treasury.gov/news/press-releases/jy1337
  - sophacles 4y ago
    So they might raise rates. If they can't recovered from SVB assets via selloff, the government loans on bonds, etc.
    - s1artibartfast 4y ago
      Well we already know there are some nominal losses, because the FDIC did take over SVB.
      - unyttigfjelltol 4y ago
        FDIC took over because SVB failed to make a margin call Thursday 9 March. Not having the money today while operating as a going concern, and having the money never after a liquidation, are different things.
      - xenadu02 4y ago
        No, that is not known at this time. It will take a few years to fully wind down the assets so as of right now no one knows if recovery will be <100%, 100% of deposits, or >100% of deposits (in which case general creditors may get some money). The only thing we can be certain of is shareholders are wiped out and general creditors will take a significant haircut.
Waterluvian 4y ago
Could you quantify your harm? How much extra are they taking from your bank to cover the delta between what the FDIC will recover and what they have to pay out?

by mcherm 4y ago

tptacek 4y ago

Here is my question about that: whatever the increased costs to insure other banks by making uninsured depositors whole, aren't they ultimately based on the resolution costs for SVB itself? That is to say: in the limit, if it costs almost nothing to wrap up SVB, because their assets are fine (just inconveniently structured), what drives insurance costs up at other banks? I'd also add that covering uninsured depositors isn't new behavior for FDIC, at least as I understand it. The mechanics of how it was done here are different than in previous instances.

kasey_junk 4y ago
Covering uninsured deposits is common as they retain their senior debt status. Guaranteeing them on the other hand is very new. And if we are going to expect them to be guaranteed in the future insurance rates must go up, not just to cover more things but to cover the riskier behavior it creates. If we aren’t going to cover them 100% in the future then apparently it’s true that there are not just different classes of banker but different classes of depositors.
- tptacek 4y ago
  Or just different circumstances? IndyMac famously paid uninsured depositors back 85 cents on the dollar, right? But IndyMac was also plowing depositor dollars into a portfolio of Alt-A MBS's.
  - kasey_junk 4y ago
    A regulatory regime that makes depositors whole when a bank fails due to not managing their interest rate risk appropriately but not when they mismanage their credit risk feels even stranger than just admitting that the fdic cares more about some depositors than others.
    - FreakLegion 4y ago
      First Republic now has a sweep account that spreads up to $100m across 400 banks in increments of up to $FDIC_INSURANCE_LIMIT. What's the difference between the FDIC insuring all deposits at US banks directly and US banks doing it themselves by forming a complete graph? (Other than there being a clear upper limit in the latter case, which is currently greater than $1b per account.)
      - mercyandgrace 4y ago
        Insurance only pays out to $FDIC_INSURANCE_LIMIT if a bank fails. I can't say what the scenario looks like where 400 banks fail simultaneously, but I can image it would not be good. I'm not sure the current FDIC payout models account for that, either.
        Gunax 4y ago
        I agree about 400 banks failing would likely be due to some greater catastrophe. But financially I think it's the same. If 400 customers each use 1 bank each, then a single bank failure means the FDIC needs to make whole one customer. But if every customer put 1/400th of their wealth into each of the 400 banks, then FDIC has to cover all customers for 1/400th each. The cost to us as depositors/taxpayers is equal.
KingMachiavelli 4y ago
> because their assets are fine (just inconveniently structured) If assets are so inconveniently structured that the bank fails, then the assets are not fine. A bond that pays 0.01% that never matures has an infinite value over infinite time. So while the FDIC/gov can solve the liquidity issue by replacing a $100 face value bond with $100 cash but that's still a net transfer of actual value from the FDIC i.e other banks. As far as I know, regulatory requirements require/encourage holding good bonds but if the FDIC is going to start treating gov/muni bonds of any maturity length as good as cash, then there's less reason to hedge against interest rate risk.
JamesBarney 4y ago
I think this move probably saved the FDIC money. If you had a massive bank run(1), it's probably cheaper to pay back 250k+ depositors of one bank than for the FDIC to pay out < 250 on 40. Not to mention unloading enormous amounts of MBS's could trigger further insolvencies. 1. which seemed pretty likely, I know people who over the weekend were planning to pull all of their money out of a regional bank and put it in one of the 4 super banks Monday morning)
- deleted 4y ago
  [deleted]

jt2190 4y ago

Just so I’m clear, you’re saying that you’ve been harmed because your savings account will pay a lower interest rate? (Note that I’m not trying to suggest that you were not harmed, I just want to make sure that I understand the source of the harm.)

UncleOxidant 4y ago
I'm guessing that if they work for a bank the FDIC special fee might also cut into bonuses.

el_nahual 4y ago

Have the FDIC rates actually changed or is this a hypothetical. It's relevant because the FDIC limit has not actually increased--it's still de jure $250K. The fact that the FDIC said they would cover 100% of deposits at SBV could be related to the fact they weren't actually insolvent and could have covered the run if given enough time to liquidate assets.

deanCommie 4y ago
100% hypothetical. Of course the banks are only happy to have ANY justification to complain and not raise saving rates, and blame the Federal Government. But there have been no indication yet that the FDIC will be drawing on the insurance fund to cover the depositors.
RC_ITR 4y ago
>Have the FDIC rates actually changed or is this a hypothetical. It's hypothetical. The FDIC is likely to recover a vast majority of the uninsured deposits through asset sales, people just want to be outraged. At smaller banks, 60-75% of uninsured deposits are usually recovered by FDIC and those banks went out of business for bad balance sheets, not bank runs due to duration mismatch. We've gotten so used to assuming every statement is spin on 'you're getting screwed' that people assume it's always the case.
WorldMaker 4y ago
Relatedly, the FDIC is built as an insurance pool and has always stated coverage as a minimum with no explicit maximum coverage. It's entirely possible to see the FDIC's over-coverage here as an explicit "this pool has seen lower portfolio risk than expected" which may only indicate that past rates were higher than necessary versus real world risk profiles and that serves no expectation of future rate changes just a sign of a very healthy risk pool. (It's just as possible to argue that if the insurance pool was able to 100% cover the deposits in this event that actuaries should reevaluate the risks for the entire pool and decrease rates moving forward to stronger align with the expected minimum coverage and present risk assesment knowledge of the likelihood of events of this scale.)

qotgalaxy 4y ago

[dead]

miohtama 4y ago

As you have insight, 1) Is this outcome better than (expected) panic on the banks and bank runs? There still seem to be runs going on e.g. First Republic. Are the markets “calm” now? 2) Because insurance fund is not designed for the task it is currently experiencing, how the gap will be plugged? 3) Could this cause depositors move money from smaller banks to larger ones, and then larger banks just lend this money back to small banks w/some nice profit?

HPMOR 4y ago

As somebody employed by a company which kept all their assets in SVB, I strongly support the FDIC bailout. Even a couple percent haircut would've resulted in many many second order economic implications. I think even for member banks, strong economic activity not realized through a systemic contagion is much better than slightly lower premiums.

whatshisface 4y ago
If we're not going to let economic signals tell companies to check who they're banking with before putting all their assets in one place, how can that happen? Regulations saying every small business needs to have a risk officer, and more regulations specifying how that officer has to make decisions?
- RC_ITR 4y ago
  >If we're not going to let economic signals tell companies to check who they're banking with before putting all their assets in one place, how can that happen The assumption that an operating company should understand fixed income pricing dynamics, have a POV on future FED interest rate moves, and dive into each potential banking partners' asset duration is an interesting one, especially when most of SVB's deposits were made during a period of perpetually falling interest rates, where duration mismatch helped banks.
  - AlexandrB 4y ago
    Maybe not each company, but the VCs who encouraged their portfolio companies to put everything in SVB should have some inkling of the risks involved in doing that.
- cameronh90 4y ago
  Isn't the point of banking regulations that we are relying on the government to do that checking? Relying on customers to check their bank, besides being fairly impractical for all but the largest and most sophisticated customers, is just going to trigger bank runs as soon as customers get any whiff of a problem. I don't see the problem with unlimited FDIC provided the regulations are congruent with that. If you want to go the private route for better interest rates and take on the regulatory burden yourself, you can always go with an uninsured bank. If you just want a simple place to stash a few hundred million, why make you jump through hoops? What I don't understand is why start-ups were apparently keeping millions of dollars of capital in a bank account rather than government bonds or other instruments, given that the FDIC limit was well known.

upsidesinclude 4y ago

>interest rate on savings accounts go up as much as it might... No sensical person is concerned with the interest rate on savings, it is nearly zero and effectively negative. I dont believe anyone should have a single account with 100 million dollars nor should banks allow that, but they do. Perhaps part of the problem is that the $250k coverage is a value that should adjust annually and coverage should be relative to each account as opposed to each account holder

bandofthehawk 4y ago
> No sensical person is concerned with the interest rate on savings, it is nearly zero and effectively negative This might have been true for the past ten years or more, it's not true now. You can easily find savings accounts now which offer over 3%, and it's going up as the fed continues to raise rates. This still might not be the best investment when you consider the high inflation, but it's great for emergency fund type accounts that need low risk, high liquidity.
- deleted 4y ago
  [deleted]
- upsidesinclude 4y ago
  3% savings in a 6% inflation year is negative returns. I cant believe this got downvotes...

greenhatman 4y ago

> we have chosen to put the burden for paying for those losses on all of the other banks But isn't it likely to cause more bank runs if depositors lost money? So in a real sense, many other banks were saved from going under, by assuring depositors that their money is safe, whichever bank they're at. My understanding is that other banks have massive unrealized losses as well, due to the steep interest rate increases. So they're all kind of vulnerable.

blihp 4y ago
I'd say it's more likely that there will be at least slower rolling runs on smaller banks by large depositors. Keep in mind that the unlimited coverage only applies to the depositors of the two banks that were taken over, not all depositors everywhere. Keeping large balances in a bank that may not be deemed a systemic risk is still rolling the dice if said bank fails. (i.e. unless a bunch of other banks fail around the same time getting national attention, you'd probably be out of luck)

idontpost 4y ago

[dead]

maximinus_thrax 4y ago

> I am one of those who has been harmed. How were you harmed specifically? > you will not see the interest rate on savings accounts go up as much as it might have otherwise. Bullshit. Interest rates for savings accounts are and have been an absolute joke. Are they going to become a more hilarious joke? Probably but seriously, who cares? > I'm not saying this outcome is terrible, perhaps it was the best solution for the system as a whole. Yes, it is the best solution, otherwise you'd have written a completely different statement if the bank run went viral and you would have been really harmed.

HN_is_for_gemes 4y ago
[dead]
prottog 4y ago
> How were you harmed specifically? That's like asking how you were specifically harmed as a result of there being one more CO2-spewing pickup truck in the world. Bad things amortized over millions of people are still bad, even if the harm to any individual is too small to verbalize.
- maximinus_thrax 4y ago
  No, it's not. One more CO2-spewing pickup truck doesn't take the headlines for a week.

photochemsyn 4y ago

What's the rationale behind not breaking up the accounts of large depositors into FDIC-insurable accounts? Apparently this is called a 'cash sweep'. Typical ad blurb: > "Insured cash sweep is a safe and convenient service that provides FDIC insurance on large balances while giving you access to your money, as well as the ability to earn interest. Choose between demand accounts, which offer unlimited withdrawals, and money market accounts that permit up to six withdrawals per month." I've heard some claims that SVB was offering incentives to depositors who kept their funds in one lump account, is this true and if so what's the benefit to SVB from doing that?

balderdash 4y ago
It’s called brokered deposits, there is not reason to not do it if it’s just sitting in bank acccount, but if the $ size gets large (>$25m it can be cumbersome), and if there is a lot of operational activity it doesn’t make much sense. What’s unforgivable is why these large depositors that didn’t tend this cash for short term operational needs didn’t have the funds in govt securities in an insured brokerage account at a trust company… Where many venture backed companies got hung up though is that the terms of venture debt provided by SVB required the borrowers to keep use SVB as their bank…

sophacles 4y ago

I keep reading comments like this, but I've seen no well sourced material saying that the FDIC is raising rates. Do you have some reliable source about it? (NOT a "look at it logically" or "here's how my health insurance works, why would the FDIC be different", or "do your own research" or anything else that's some random internet comment - I'm looking for real meat about this claim).

rippercushions 4y ago
From the Treasury announcement: Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law. In other words, if the FDIC's current funds can't cover the bill, an extra fee will be levied on banks to make up for it. https://home.treasury.gov/news/press-releases/jy1337 https://home.treasury.gov/news/press-releases/jy1337
- sophacles 4y ago
  So they might raise rates. If they can't recovered from SVB assets via selloff, the government loans on bonds, etc.
  - s1artibartfast 4y ago
    Well we already know there are some nominal losses, because the FDIC did take over SVB.
    - unyttigfjelltol 4y ago
      FDIC took over because SVB failed to make a margin call Thursday 9 March. Not having the money today while operating as a going concern, and having the money never after a liquidation, are different things.
    - xenadu02 4y ago
      No, that is not known at this time. It will take a few years to fully wind down the assets so as of right now no one knows if recovery will be <100%, 100% of deposits, or >100% of deposits (in which case general creditors may get some money). The only thing we can be certain of is shareholders are wiped out and general creditors will take a significant haircut.

Waterluvian 4y ago

Could you quantify your harm? How much extra are they taking from your bank to cover the delta between what the FDIC will recover and what they have to pay out?