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No, for now SVB assets are enough to pay for all of the drawdown. It is unclear if SVB will actually run out of assets.
by ivalm 4y ago
No, for now SVB assets are enough to pay for all of the drawdown. It is unclear if SVB will actually run out of assets.
- landemva 4y agoFor now the Fed's newly created bank funding term loan mechanism is plugging the hole by having the Fed take underwater bonds at face value. SVB was solvent two weeks ago with mark-to-maturity accounting of their underwater bond holdings. SVB, from a bank accounting perspective, became insolvent when they sold the long duration bonds for a loss. At market prices of the bonds, SVB could not continue within bank accounting regulations. I suspect they will recover 90%-some.
- ivalm 4y agoI suspect they will repay 100% as they will find a buyer/not have to actually liquidate. Remember, they had net positive interest, so as long as they can continue holding to maturity they are entirely solvent.