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That's fascinating. I'd love to watch a documentary about that.
60 Minutes followed an FDIC takeover in 2009, including when the agents actually walked into the bank’s headquarters: https://youtu.be/TAE8i40A5uI
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
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Disrupt disrupt disrupt! Those old stodgy banks just slow us down with their old-fashioned risk-averse ways! The cool kids can do it better! If I had a nickel for every time I heard this from actual friends in the past couple decades, or for when I said it myself a few times... :)
But SVB wasn't even doing anything sketchy or disruptive, right?
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Disrupt disrupt disrupt! Those old stodgy banks just slow us down with their old-fashioned risk-averse ways! The cool kids can do it better! If I had a nickel for every time I heard this from actual friends in the past couple decades, or for when I said it myself a few times... :)
In fairness, it wasn't the risk-taking that did them in... it was the fact that they went all-in on 10-yr bonds at low interest rates and didn't adequately account for duration risk.
The main question is whether they were forced into these investments via regulations. It's likely they could have bought shorter dated treasuries and been fine. In the end, regulations may change such that banks can only buy short dated treasuries... or limitations on the level of duration they can hold.
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Disrupt disrupt disrupt! Those old stodgy banks just slow us down with their old-fashioned risk-averse ways! The cool kids can do it better! If I had a nickel for every time I heard this from actual friends in the past couple decades, or for when I said it myself a few times... :)
But SVB wasn't even doing anything sketchy or disruptive, right?
Stripe? Is Stripe adversely impacted by this given they recommended to merchants to use SVB and probably accounted for a large portion of deposits into SVB (from payment transactions)
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But why would the startups become illiquid? Do they get the investments from the banks or do they park the investment money in this bank? And why this bank, when there are many more risk averse institutions out there?
They become illiquid because they don't have access to their money that was in SVB. They can't make payroll, can't pay vendors and landlords. The employees will leave first. Vendors next.
Edit. I just realized, in the us, if there is no bidder, the fdic can close down the bank or run it itself.