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The FDIC found a buyer for the bank at zero without too much difficulty, so in hindsight the taxpayer's money wasn't actually spent here. Would it have been a

The FDIC found a buyer for the bank at zero without too much difficulty, so in hindsight the taxpayer's money wasn't actually spent here. Would it have been a better warning to haircut the depositors a token amount? Say "the FDIC has evaluated the business and agreed to assume everything up to $1m, and 99% of deposits above $1m/customer". That would mean no one actually suffers cashflow problems, but it would send the message that the next time, the depositors might not be so lucky, and they need to do a better job of assessing their banks' solvency.

from-nibly 2y ago
How did the buyout work? Was the bank just temporarily illiquid and just need cashflow?
- ensignavenger 2y ago
  If you want the details, it is laid out here- https://www.fdic.gov/news/speeches/2023/spmar2723.html https://www.fdic.gov/news/speeches/2023/spmar2723.html Skimming that and other sources, I could not confirm the assertion that no net money was spent bailing out depositors. If that was the case, then the FDIC wouldn't need to replenish their insurance fund.
  - dmurray 2y ago
    I skimmed a couple of sources and thought I caught that First Citizens paid zero, net of some guarantees, for "all of SVB's assets and liabilities". That was wrong: it looks like the price was more like negative 16.5 billion [0] so that was the cost to the FDIC. I agree with other commentators that even if the price was zero and the guarantees to FCB were never tested, the taxpayers still paid money in expectation - they took a bet without getting paid for the potential downside. I don't really agree with characterizations [1] of the deposit insurance fund as "not being from the taxpayers" - a fee on bank deposits is in other countries described as a tax, and even if not, the DIF is at least backstopped by the taxpayer. [0] https://www.theguardian.com/business/2023/mar/27/silicon-valley-bank-bought-by-first-citizens https://www.theguardian.com/business/2023/mar/27/silicon-val... [1] https://apnews.com/article/svb-banks-fdic-first-citizen-silicon-f6958f1fa87b0991cb525b0424c7a1cd https://apnews.com/article/svb-banks-fdic-first-citizen-sili...
  - kccqzy 2y ago
    Your link says: > The FDIC estimates that […] Of the estimated loss amounts, approximately 88 percent, or $18 billion, is attributable to the cost of covering uninsured deposits at SVB while approximately two-thirds, or $1.6 billion, is attributable to the cost of covering uninsured deposits at Signature Bank. With the caveat that these were estimates and there was significant uncertainty.
JumpCrisscross 2y ago
> FDIC found a buyer for the bank at zero without too much difficulty, so in hindsight the taxpayer's money wasn't actually spent here At risk, not spent. The FDIC will typically agree to take first losses to maximise the price it can get for bank assets.
derf_ 2y ago
On the contrary, the Fed came out and pretty much guaranteed that depositors in any bank will not lose money, regardless of FDIC limits [0]. It was people "assessing their banks' solvency" (all at the same time) that caused the bank run in the first place, and our government appears to want less of that. Instead, they want depositors to treat bank deposits as, well, "money in the bank". Whether that is a good thing and ultimately healthy for the banking sector is another question, but you can certainly see how at the time they would not want to incentivize any more panic. [0] https://www.federalreserve.gov/newsevents/pressreleases/monetary20230312b.htm https://www.federalreserve.gov/newsevents/pressreleases/mone...
chiph 2y ago
The depositors are innocent in this. Except where they were also shareholders or executives. The shareholders lost their investments. The executives got to pack up their personal items into cardboard boxes[0] under supervision by the authorities[1]. The vendors and companies doing business with the bank were also innocent but ended up being harmed by the failure since their outstanding invoices were never going to get paid. If you suspect a customer is going to fail - demand immediate payment. You want to be first in line. [0] Ironically, one brand of records box commonly used for this purpose is named "Bankers Box". [1] I have not-fond memories of doing this during layoffs.

from-nibly 2y ago

How did the buyout work? Was the bank just temporarily illiquid and just need cashflow?

ensignavenger 2y ago
If you want the details, it is laid out here- https://www.fdic.gov/news/speeches/2023/spmar2723.html https://www.fdic.gov/news/speeches/2023/spmar2723.html Skimming that and other sources, I could not confirm the assertion that no net money was spent bailing out depositors. If that was the case, then the FDIC wouldn't need to replenish their insurance fund.
- dmurray 2y ago
  I skimmed a couple of sources and thought I caught that First Citizens paid zero, net of some guarantees, for "all of SVB's assets and liabilities". That was wrong: it looks like the price was more like negative 16.5 billion [0] so that was the cost to the FDIC. I agree with other commentators that even if the price was zero and the guarantees to FCB were never tested, the taxpayers still paid money in expectation - they took a bet without getting paid for the potential downside. I don't really agree with characterizations [1] of the deposit insurance fund as "not being from the taxpayers" - a fee on bank deposits is in other countries described as a tax, and even if not, the DIF is at least backstopped by the taxpayer. [0] https://www.theguardian.com/business/2023/mar/27/silicon-valley-bank-bought-by-first-citizens https://www.theguardian.com/business/2023/mar/27/silicon-val... [1] https://apnews.com/article/svb-banks-fdic-first-citizen-silicon-f6958f1fa87b0991cb525b0424c7a1cd https://apnews.com/article/svb-banks-fdic-first-citizen-sili...
- kccqzy 2y ago
  Your link says: > The FDIC estimates that […] Of the estimated loss amounts, approximately 88 percent, or $18 billion, is attributable to the cost of covering uninsured deposits at SVB while approximately two-thirds, or $1.6 billion, is attributable to the cost of covering uninsured deposits at Signature Bank. With the caveat that these were estimates and there was significant uncertainty.

JumpCrisscross 2y ago

> FDIC found a buyer for the bank at zero without too much difficulty, so in hindsight the taxpayer's money wasn't actually spent here At risk, not spent. The FDIC will typically agree to take first losses to maximise the price it can get for bank assets.

derf_ 2y ago

On the contrary, the Fed came out and pretty much guaranteed that depositors in any bank will not lose money, regardless of FDIC limits [0]. It was people "assessing their banks' solvency" (all at the same time) that caused the bank run in the first place, and our government appears to want less of that. Instead, they want depositors to treat bank deposits as, well, "money in the bank". Whether that is a good thing and ultimately healthy for the banking sector is another question, but you can certainly see how at the time they would not want to incentivize any more panic. [0] https://www.federalreserve.gov/newsevents/pressreleases/monetary20230312b.htm https://www.federalreserve.gov/newsevents/pressreleases/mone...

chiph 2y ago

The depositors are innocent in this. Except where they were also shareholders or executives. The shareholders lost their investments. The executives got to pack up their personal items into cardboard boxes[0] under supervision by the authorities[1]. The vendors and companies doing business with the bank were also innocent but ended up being harmed by the failure since their outstanding invoices were never going to get paid. If you suspect a customer is going to fail - demand immediate payment. You want to be first in line. [0] Ironically, one brand of records box commonly used for this purpose is named "Bankers Box". [1] I have not-fond memories of doing this during layoffs.