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The FDIC estimates the cost of the failure of Silicon Valley Bank to its Deposit Insurance Fund (DIF) to be approximately $20 billion. The exact cost will be de

The FDIC estimates the cost of the failure of Silicon Valley Bank to its Deposit Insurance Fund (DIF) to be approximately $20 billion. The exact cost will be determined when the FDIC terminates the receivership.

ummonk 4y ago
I don't understand the math there. So they're selling 72 billion of assets for 55.5 billion + 500 million in stock, but out of 167 billion in assets they're only left with around 90 billion? What happened to the other 5 billion in assets? And if they get 56 billion out of this deal that should leave 63 billion out of 119 billion in deposits to cover, so if the bailout ends up costing 20 billion that means they're only recovering 43 billion on the remaining 90 billion in assets? Is this some kind of worst case estimate?
- jxramos 4y ago
  I really wish they’d start reporting those things in independently verifiable forms to the maximum extent possible. Spreadsheets, Jupyter notebooks, etc.
  - refulgentis 4y ago
    All the information needed to derive the # as well as why its provisional and they can't provide a "Jupyter notebook, etc." right now is right there, in the article.
    - jxramos 4y ago
      Are you talking about something two or three links deep branching out from the article? I don’t see any language even suggesting there’s such data to navigate to that’s specifically related to the article’s subject. There are three links in the article that seem to link to some procedural background stuff they thought offered good context to what was being discussed. What information specifically in the article did you feel satisfied the ability to derive on the spot?
- toast0 4y ago
  There were $167B on March 10, but the sale was today. Presumably $5B of assets were sold in the interim? We also don't know today's deposit numbers from the press release. Presumably a future report will give all the numbers as of the same date.
- sawyna 4y ago
  Maybe a very basic question, but why does FDIC say it costs them 20B$ ? The assets are higher than deposits, can they not sell off all assets and cover the deposits?
  - collectedparts 4y ago
    I think it's more mark to market vs "par" value trickery. SVB had plenty of assets at "par" value or held to maturity value. But it was insolvent if you marked those to market. So FDIC is letting First-Citizens buy the assets at closer to their true market value. 20% loss. That's my understanding but it is kind of a distressing conclusion. SVB had no enterprise value, and the outcome we're getting is financially the same for FDIC as if they just firesold the assets and did a pure winddown?
    - bradleyjg 4y ago
      The issue with a fire sale is that the seller doesn’t get the true market value. The market value is the value. Every time someone uses face amounts to claim asset value he or she is being entirely disingenuous.
      - balderdash 4y ago
        I generally agree, but it’s not that cut and dry. If I have $100 in assets in 10yr zero coupon treasuries at par issued in a 0% interest rate environment, and funded with $100 of liabilities in the form of deposits paying 0%, and rates increase 1% and the rate I’m paying depositors increases to 0.1%. My bonds are now only worth $90, but I’m going to receive $100 at maturity, and so I’m really only out the the $1 on interest paid to depositors over 10 years, not the $10 mark to market loss. In this example I’d say your economic impairment is closer to $1 vs the $10 implied. judging at the asset side of the ledger in isolation doesn’t give you the whole picture.
        Workaccount2 4y ago
        You're forgetting that you are stuck in that position to maturity though. So while you might not feel like you are not going to take a loss, you are also chained to a position that will not make money either. While everyone else is out making 1%, you are stuck with 0%. If you could wave a wand and get out of your bond with no loss, you would pick up a 1% and hold that instead. It would almost certainly be better to just eat the loss, and re-invest that money into something else, and come out ahead after 10 years. Dollars in, dollars out isn't the only factor here. Bonds give this illusion that loss isn't happening because you can wait to get your money back. But a little introspection reveals that the loss is actually just hidden in the waiting is a itself.
notch898a 4y ago
~$60 / person. You can be certain the banks will pass on the "special assessment" in a way that won't be regressive against the common person. Certain.
- TMWNN 4y ago
  Let's see if the Biden administration has the nerve to continue to claim that the bailout won't cost the taxpayer a cent, when the union of taxpayers and bank customers is 1.
  - qwytw 4y ago
    Is FDIC funded through taxes? I thought it was an insurance fund...
    - FartyMcFarter 4y ago
      If things get bad, it will get funded by taxpayers. It's definitely "too big to fail".
    - TMWNN 4y ago
      It is an insurance fund; for every $100 in deposits, banks pay a few cents in insurance premiums. notch898a is referring to how, when the full backstop of deposits regardless of size at SVB and Signature bank was announced, the government said that a) it wasn't a bailout because taxpayers wouldn't pay anything, and b) there would if necessary be a "special assessment" (i.e., mandatory additional premiums) from all banks. Our point is that a) is nonsensical given b), because of the total overlap between US taxpayers and US bank customers.
      - op00to 4y ago
        For every $100 in deposits, banks pay an assessment from one penny per $100 (least risky) to ~40 cents per $100 (most risky). https://www.fdic.gov/resources/deposit-insurance/deposit-insurance-fund/dif-assessments.html https://www.fdic.gov/resources/deposit-insurance/deposit-ins...

ummonk 4y ago

I don't understand the math there. So they're selling 72 billion of assets for 55.5 billion + 500 million in stock, but out of 167 billion in assets they're only left with around 90 billion? What happened to the other 5 billion in assets? And if they get 56 billion out of this deal that should leave 63 billion out of 119 billion in deposits to cover, so if the bailout ends up costing 20 billion that means they're only recovering 43 billion on the remaining 90 billion in assets? Is this some kind of worst case estimate?

jxramos 4y ago
I really wish they’d start reporting those things in independently verifiable forms to the maximum extent possible. Spreadsheets, Jupyter notebooks, etc.
- refulgentis 4y ago
  All the information needed to derive the # as well as why its provisional and they can't provide a "Jupyter notebook, etc." right now is right there, in the article.
  - jxramos 4y ago
    Are you talking about something two or three links deep branching out from the article? I don’t see any language even suggesting there’s such data to navigate to that’s specifically related to the article’s subject. There are three links in the article that seem to link to some procedural background stuff they thought offered good context to what was being discussed. What information specifically in the article did you feel satisfied the ability to derive on the spot?
toast0 4y ago
There were $167B on March 10, but the sale was today. Presumably $5B of assets were sold in the interim? We also don't know today's deposit numbers from the press release. Presumably a future report will give all the numbers as of the same date.
sawyna 4y ago
Maybe a very basic question, but why does FDIC say it costs them 20B$ ? The assets are higher than deposits, can they not sell off all assets and cover the deposits?
- collectedparts 4y ago
  I think it's more mark to market vs "par" value trickery. SVB had plenty of assets at "par" value or held to maturity value. But it was insolvent if you marked those to market. So FDIC is letting First-Citizens buy the assets at closer to their true market value. 20% loss. That's my understanding but it is kind of a distressing conclusion. SVB had no enterprise value, and the outcome we're getting is financially the same for FDIC as if they just firesold the assets and did a pure winddown?
  - bradleyjg 4y ago
    The issue with a fire sale is that the seller doesn’t get the true market value. The market value is the value. Every time someone uses face amounts to claim asset value he or she is being entirely disingenuous.
    - balderdash 4y ago
      I generally agree, but it’s not that cut and dry. If I have $100 in assets in 10yr zero coupon treasuries at par issued in a 0% interest rate environment, and funded with $100 of liabilities in the form of deposits paying 0%, and rates increase 1% and the rate I’m paying depositors increases to 0.1%. My bonds are now only worth $90, but I’m going to receive $100 at maturity, and so I’m really only out the the $1 on interest paid to depositors over 10 years, not the $10 mark to market loss. In this example I’d say your economic impairment is closer to $1 vs the $10 implied. judging at the asset side of the ledger in isolation doesn’t give you the whole picture.
      - Workaccount2 4y ago
        You're forgetting that you are stuck in that position to maturity though. So while you might not feel like you are not going to take a loss, you are also chained to a position that will not make money either. While everyone else is out making 1%, you are stuck with 0%. If you could wave a wand and get out of your bond with no loss, you would pick up a 1% and hold that instead. It would almost certainly be better to just eat the loss, and re-invest that money into something else, and come out ahead after 10 years. Dollars in, dollars out isn't the only factor here. Bonds give this illusion that loss isn't happening because you can wait to get your money back. But a little introspection reveals that the loss is actually just hidden in the waiting is a itself.

notch898a 4y ago

~$60 / person. You can be certain the banks will pass on the "special assessment" in a way that won't be regressive against the common person. Certain.

TMWNN 4y ago
Let's see if the Biden administration has the nerve to continue to claim that the bailout won't cost the taxpayer a cent, when the union of taxpayers and bank customers is 1.
- qwytw 4y ago
  Is FDIC funded through taxes? I thought it was an insurance fund...
  - FartyMcFarter 4y ago
    If things get bad, it will get funded by taxpayers. It's definitely "too big to fail".
  - TMWNN 4y ago
    It is an insurance fund; for every $100 in deposits, banks pay a few cents in insurance premiums. notch898a is referring to how, when the full backstop of deposits regardless of size at SVB and Signature bank was announced, the government said that a) it wasn't a bailout because taxpayers wouldn't pay anything, and b) there would if necessary be a "special assessment" (i.e., mandatory additional premiums) from all banks. Our point is that a) is nonsensical given b), because of the total overlap between US taxpayers and US bank customers.
    - op00to 4y ago
      For every $100 in deposits, banks pay an assessment from one penny per $100 (least risky) to ~40 cents per $100 (most risky). https://www.fdic.gov/resources/deposit-insurance/deposit-insurance-fund/dif-assessments.html https://www.fdic.gov/resources/deposit-insurance/deposit-ins...