FDIC Takes over Silicon Valley Bank • Hacker News Board

Re: FDIC Takes over Silicon Valley Bank

#101

Post by dragonwriter » Fri, Mar 10, 2023, 5:08 PM UTC

karpierz wrote: post #9

formerly_proven wrote: post #3

Yesterday I read on here that "xyz doesn't mean SVB is going under like FTX did five minutes after doing that".

The difference is that SVB's depositors will see most of their money back, which is the point of the FDIC taking over.

> The difference is that SVB's depositors will see most of their money back

Depositors will see all of their insured money back, uninsured deposits will be recovered based on available assets and/or terms of any resale by the FDIC, but could be lost in whole or substantial part. Large depositors could potentially see substantial losses.

Re: FDIC Takes over Silicon Valley Bank

#102

Post by [deleted] » Fri, Mar 10, 2023, 5:08 PM UTC

UnpossibleJim wrote: post #53

chollida1 wrote: post #30

some note i've been taking > To protect insured depositors, the FDIC created a new entity called the Deposit Insurance National Bank of Santa Clara, or DINB. DINB will maintain Silicon Valley Bank’s normal business hours, with banking activities resuming no later than Monday, including online banking and other services, the FDIC said. Customers with accounts in excess of $250,000 are being told to contact FDIC direcl…

So, first off, I am not very literate when it comes to the comings and goings of banking procedures, so forgive me if this is a dumb question. Would an incident like this make other banks shore up their defenses about this sort of thing happening to them, or will more banks fall due to market conditions in general?

[deleted]

Re: FDIC Takes over Silicon Valley Bank

#103

Post by treis » Fri, Mar 10, 2023, 5:08 PM UTC

NordSteve wrote: post #5

Only 3% of deposits in the bank are FDIC insured; other depositors will need to wait for the receivership process to run to get access to (what remains) of their deposits. edit: replace "bankruptcy" with "receivership" as the latter is usually a faster process than the former.

This isn't true. The bank is in receivership and which is a different form of bankruptcy. The FDIC will liquidate assets or find a buyer relatively quickly. Depositors will end up getting most or all of their money back.

Re: FDIC Takes over Silicon Valley Bank

#104

Post by wonderingyogi » Fri, Mar 10, 2023, 5:09 PM UTC

I wonder how many startups its going to affect.

Re: FDIC Takes over Silicon Valley Bank

#105

Post by albatross13 » Fri, Mar 10, 2023, 5:09 PM UTC

swift532 wrote: post #92

albatross13 wrote: post #29

Earlier quoted context omitted.

Probably a dumb question, but what determines if a deposit is insured or not at an FDIC insured bank?

Not a dumb question at all. AFAIK it is the amount, in the USA it's $250K. Other countries have similar situations, most of the EU is 100K €.

Awesome, that makes sense. Thanks!

Re: FDIC Takes over Silicon Valley Bank

#106

Post by bell-cot » Fri, Mar 10, 2023, 5:10 PM UTC

briandear wrote: post #61

ejstronge wrote: post #48

Earlier quoted context omitted.

>Keep in mind 93% of SVB's assest were not FDIC insured. >> Silicon Valley Bank Had About $209.0B in Assets I'm not an expert, but aren't deposits in a bank liabilities ? Assets are things like treasury bills and loans held by the bank.

When someone opens a bank account and makes a cash deposit, he/she surrenders the legal title to the cash, and it becomes an asset of the bank.

It's an Accounting 101 situation ( https://en.wikipedia.org/wiki/Accounting_equation ) -

The (say) $100 cash I deposited to the bank becomes both an asset (they have "my" $100 in the vault) and a liability (they own me $100). So the accounting equation still balances.

Re: FDIC Takes over Silicon Valley Bank

#107

Post by banku_brougham » Fri, Mar 10, 2023, 5:10 PM UTC

testfoobar wrote: post #43

What a debacle. Some gallows humor from twitter: "Imagine raising $100m for your AI enabled dog washing app - and your bank sets it on fire before you can". Original: https://twitter.com/88888sAccount/status/1634028258500169731...

Its so funny until you realize your seed-round investment in a friends company used SVB.

Gonna be quite a show, this.

Re: FDIC Takes over Silicon Valley Bank

#108

Post by dmoy » Fri, Mar 10, 2023, 5:10 PM UTC

katmannthree wrote: post #76

mkmk wrote: post #2

Oldie but goodie on what actually happens when a bank is taken over. https://www.npr.org/2009/03/26/102384657/anatomy-of-a-bank-t...

Are clawbacks a thing in this case for the people who did get [some] of their money out in time?

no

Re: FDIC Takes over Silicon Valley Bank

#109

Post by tlb » Fri, Mar 10, 2023, 5:10 PM UTC

The regulations that allow a bank to hold long-term fixed-rate bonds backing variable-rate liabilities (since deposit rates float) seems broken.

It's straightforward to reckon their exposure to interest rates: they had $90B in 10-year fixed rate bonds, so they lose $9 billion per % of interest increase. They must have known that a 4% increase in interest rates would put them underwater, but they did it (and were allowed to do it) anyway. It'll be interesting to learn about the process behind that decision.

Re: FDIC Takes over Silicon Valley Bank

#110

Post by NordSteve » Fri, Mar 10, 2023, 5:10 PM UTC

pastor_bob wrote: post #78

NordSteve wrote: post #5

Only 3% of deposits in the bank are FDIC insured; other depositors will need to wait for the receivership process to run to get access to (what remains) of their deposits. edit: replace "bankruptcy" with "receivership" as the latter is usually a faster process than the former.

Bill Ackman and Wall Street calling for a government bailout for all depositors: https://twitter.com/BillAckman/status/1634032841687285761

I can't see that happening in today's political climate. Imagine the stories juxtaposing coddled tech workers against the cost of the bailout.