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FDIC Takes over Silicon Valley Bank

fdic.gov

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Re: FDIC Takes over Silicon Valley Bank

#341

Post by ejb999 »

om42 wrote: post #147
borski wrote: post #84

Earlier quoted context omitted.

> And any accounts over $250K, poof. That's not quite true; the FDIC will pay uninsured depositors an advance dividend within the next week.

My finance-foo is quite weak, what does advance dividend mean in this context?

most likely a partial payment - i.e. you have 500K in the bank, 250K is insured and you know you will get it back - the other $250K nobody knows how much will be available when the dust settles, but maybe they (FDIC) feels confident they can give you 10% of that now, and keep making more payments as the picture becomes clearer on how much you can eventually get back. You won't get any final payments for many many months when everything is fully resolved.

Re: FDIC Takes over Silicon Valley Bank

#342

Post by renewiltord »

stephenhuey wrote: post #225
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...

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... :)

HN really is like a ChatGPT version of itself. SVB is a 40 year old bank, bro. They are the old stodgy bank. The Meows and Mercurys are all still around.

Their problem was that their risk management didn't keep up with the changing times (rapid interest rate changes).

Please go on and tell us more HN tropey things like "oh they shouldn't have sold customer data!" or more things that could be an autogenerated robot comment by ELIZA.

Re: FDIC Takes over Silicon Valley Bank

#343

Post by tome »

NordSteve wrote: post #80
jb1991 wrote: post #54

Earlier quoted context omitted.

> Only 3% of deposits in the bank are FDIC insured why is that?!

Because most of their depositors were business that kept >$250K (the insurance limit) in the bank.

Why would someone keep more than $250K in bank deposits? Isn't it more prudent (looking back no more than 15 years) to keep T-Bills or some other liquid security that isn't subject to a bank run?

Re: FDIC Takes over Silicon Valley Bank

#344

Post by victor106 »

stephenhuey wrote: post #225
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...

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... :)

Yeah, the cool kids also say/used to say only if they used blockchain this wouldn’t have happened…lol

Re: FDIC Takes over Silicon Valley Bank

#345

Post by gsibble »

JumpCrisscross wrote: post #94
briandear wrote: post #77

Earlier quoted context omitted.

I bet a lot of VCs had significant money in that bank as well. Even if companies could raise money, there wouldn't be as money available.

> a lot of VCs had significant money in that bank Everyone I know pulled yesterday.

I know a lot of individuals and startups, most over the $250k limit, who did not get out in time. SVB disabled wires and transfers for many yesterday.

Re: FDIC Takes over Silicon Valley Bank

#347

Post by tialaramex »

tchalla wrote: post #289
gumby wrote: post #161

I suspect all depositors will be made whole. The bank had a liquidity crisis; it had reserves in excess of its liabilities. Every bank borrows short term (you can walk up and withdraw your money at any time) but lends long (e.g. mortgages, though SVB writes few of those). The recent management grabbed some very long federal bonds; as rates have risen the resale value of those long term assets (paying a lower interest…

93% of deposits are uninsured according to a recent regulatory filing. So, I doubt it will be “all depositors” that would be made whole. https://twitter.com/business/status/1634211584657571843?s=20

FDIC means you get paid immediately regardless, but the bank will almost invariably turn out to be good for the rest, just not quickly.

Re: FDIC Takes over Silicon Valley Bank

#348

Post by kmod »

gumby wrote: post #161

I suspect all depositors will be made whole. The bank had a liquidity crisis; it had reserves in excess of its liabilities. Every bank borrows short term (you can walk up and withdraw your money at any time) but lends long (e.g. mortgages, though SVB writes few of those). The recent management grabbed some very long federal bonds; as rates have risen the resale value of those long term assets (paying a lower interest…

These statements seem pretty contradictory:

- "it had reserves in excess of its liabilities" - "They can't unwind that position and cover all possible demands"

I'm guessing that you're thinking of some sort of valuation of their assets that says something like "well they're really worth more than they're currently valued at", which is a common claim on this story but it's a pretty bold one?

Re: FDIC Takes over Silicon Valley Bank

#349

Post by danielmarkbruce »

Most un-insured depositors are going to get most of their money back. They'll get a good chunk (guestimate 20-50%) of it back within a week. The claims on SVB which will be held by depositors will likely be able to be sold to investors who specialize in this stuff for something reasonably close to par. Those who just hold onto the claim will be paid out most of what is owed (maybe literally 100%, more likely 90%+), but it will take longer.

It will be annoying and stressful, but basically ok.

Re: FDIC Takes over Silicon Valley Bank

#350

Post by dragonwriter »

dahdum wrote: post #324
gumby wrote: post #161

I suspect all depositors will be made whole. The bank had a liquidity crisis; it had reserves in excess of its liabilities. Every bank borrows short term (you can walk up and withdraw your money at any time) but lends long (e.g. mortgages, though SVB writes few of those). The recent management grabbed some very long federal bonds; as rates have risen the resale value of those long term assets (paying a lower interest…

DFPI specifically called them insolvent in their release today, does that change your opinion on depositors being made whole? https://dfpi.ca.gov/2023/03/10/california-financial-regulato...

> DFPI specifically called them insolvent in their release today, does that change your opinion on depositors being made whole?

If the asset/deposits balance hasn't changed much since December (which I'm not sure is the case), depositors are likely to eventually be made whole for the deposit amounts, but liquidity issues and facilitating sale of assets to make that happen may result in substantial delays. For depository accounts businesses relied on for regular operations, that...may still create substantial additional costs that will not be compensated.

So, in a more holistic sense, it seems likely that depositors will not be made truly whole for the impacts, even if they eventually recover deposits.

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