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The math here seems disingenuous. There were 10 accounts with 13B in uninsured deposits. The FDIC used 18B to back the entire deposits of the bank. That doesn't
by rcme 4y ago
The math here seems disingenuous. There were 10 accounts with 13B in uninsured deposits. The FDIC used 18B to back the entire deposits of the bank. That doesn't mean 13B / 18B went to those 10 accounts.
A better way of thinking about it would be something like: SVB had 170B (random estimate) in uninsured deposits. 13B of the uninsured deposits were from 10 accounts. So (13B / 170B) * 18B = 1.3B went to those 10 accounts.
- JumpCrisscross 4y ago> SVB had 170B (random estimate) in uninsured deposits $56bn [1]. So about 23% of the emergency insured deposits were held by 10 accounts. If we stuck to the law, that would have been $2.5mm (0.005%). So 10 accounts got a 5,200x courtesy boost in their backing by the full faith and credit by the United States. [1] https://www.bloomberg.com/news/articles/2023-03-27/first-citizens-to-buy-silicon-valley-bank-after-run-on-lender https://www.bloomberg.com/news/articles/2023-03-27/first-cit...
- rcme 4y agoHmm this lists SVB's total assets at 209B: https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/svb-signature-racked-up-some-high-rates-of-uninsured-deposits-74747639 https://www.spglobal.com/marketintelligence/en/news-insights...
- JumpCrisscross 4y agoAs of 31 December 2022. The FDIC didn't bail out deposits that fled before receivership.
- rcme 4y agoGood point, although this is also included in your link: > This leaves about $90 billion in securities and other SVB assets in the hands of the FDIC, and an estimated cost of the failure to the Deposit Insurance Fund of about $20 billion. So the real number is 50 + 90 = 140.
- JumpCrisscross 4y ago> the real number is 50 + 90 = 140 This doesn’t make sense. You’re adding deposits (liabilities) to assets. $56bn deposits doesn’t mean $56bn of cash in a vault, it means $56bn owed to depositors.
- deleted 4y ago[deleted]
- rcme 4y agoIt also doesn't make sense that SVB would need a bailout if they had 50B in liabilities and 90B in assets.
- JumpCrisscross 4y ago> doesn't make sense that SVB would need a bailout if they had 50B in liabilities and 90B in assets Deposits aren’t all SVB’s liabilities, though they were most of them. Their balance sheet changed between failure and disposition. And the FDIC is giving the acquirer some guarantees on the assets, which are being acquired for substantially less than $90bn.
- deleted 4y ago[deleted]
- rcme 4y agoIt's more likely that the 50B number doesn't represent the full FDIC coverage for deposits. For instance, this article claims that the bank was about to have 100B withdrawn the day the FDIC took over: https://www.cnbc.com/2023/03/28/svb-customers-tried-to-pull-nearly-all-deposits-in-two-days-barr-says.html https://www.cnbc.com/2023/03/28/svb-customers-tried-to-pull-... I think most likely is that the FDIC has had the bank for a number of weeks and allowed a large number of withdrawals. Those withdrawals are counted as part of the 18B cost to the FDIC, but aren't part of the 50B that was sold.
- vkou 4y agoA lot more than 10 accounts got that boost, because this prevented panic and contagion.
- JumpCrisscross 4y ago> lot more than 10 accounts got that boost, because this prevented panic and contagion 100% agree. This is the first time, however, we’ve been able to quantify where the direct benefit went.
- nr378 4y ago$56bn of deposits at point of sale to First Citizens. It had $119bn of deposits at the point the FDIC took over as receiver and then subsequently guaranteed all deposits [1]. [1] https://www.fdic.gov/news/press-releases/2023/pr23023.html https://www.fdic.gov/news/press-releases/2023/pr23023.html
- JumpCrisscross 4y agoThis is correct. Cut my numbers in half.