The "walking away" definitely fits recent actions in the last couple of weeks in SF, per my other comment: https://news.ycombinator.com/item?id=36314386 https:/

The "walking away" definitely fits recent actions in the last couple of weeks in SF, per my other comment: https://news.ycombinator.com/item?id=36314386 https://news.ycombinator.com/item?id=36314386 It's true they're "not dumb" - the "systemically important banks" know they can take a chance on a sectoral or cyclical collapse like this, because the government won't let them all fail together. The downside is capped, but the leveraged upside arbitrarily larger. While wiping out SVB's shareholders, the government launched special programs (like "BTFP") to help all SVB's peers with artificially-cheap money requiring less collateral than ever before. That's a stealth & incremental bail-out – which could paper-over the problems, or worsen them, depending on other economic developments. If commercial real estate broadly crashes, those banks will unload these properties they don't really want – as even the commercial real-estate pros couldn't make them profitable – at potentially-severe discounts to the unpaid loan amounts. If these discounts are anywhere near 50%, then "pennies on the dollar" would be a fair description. I guess time will tell.