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Emergency bridge loan for SVB customers

brex.com

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Re: Emergency bridge loan for SVB customers

#11

Post by gpm »

nostrebored wrote: post #6
gpm wrote: post #3

Honestly this makes a ton of sense. The FDIC will be returning most (or all) of the deposits in SVB, so the debt is reasonably safe (at least as far as debt that startups take on ever is). Whoever is funding this is probably not taking on all too much liability, and if they're heavily invested in the startup ecosystem could easily be making enough back from this indirectly to make it worthwhile. For brex this has to…

97% of deposits in SVB exceeded the FDIC threshold. The question is, by how much on average? The amount of risk here is significant. I think this is a desperate play by a company in a struggling industry.

Yes, but the assets of the balance sheet exceed the liabilities by a reasonable percentage. The vast majority of what will be paid out won't be from the FDIC's funds, it will be from those assets.

Re: Emergency bridge loan for SVB customers

#12

Post by DeepYogurt »

bluepizza wrote: post #9
nostrebored wrote: post #6

Earlier quoted context omitted.

97% of deposits in SVB exceeded the FDIC threshold. The question is, by how much on average? The amount of risk here is significant. I think this is a desperate play by a company in a struggling industry.

The FDIC threshold is a minimum guarantee. If they are able to negotiate assets into liquidity, they will be able to pay more than the minimum guarantee.

so it sounds like a gamble on what brex expects that actual return to be

Re: Emergency bridge loan for SVB customers

#13

Post by Yrlec »

Blackthorn wrote: post #10
ummonk wrote: post #4

SVB is basically solvent and had a panic bank run. It should be pretty low risk to offer startups credit collateralized against their SVB deposits.

Solvent how? Their 80 billion of 10 year MBS's are sitting on a tremendous loss.

Just hold the bond to maturity.

Re: Emergency bridge loan for SVB customers

#14

Post by ivalm »

ummonk wrote: post #4

SVB is basically solvent and had a panic bank run. It should be pretty low risk to offer startups credit collateralized against their SVB deposits.

No, SVB was solvent as long as their assets didn’t have to marked to market, once there was a bank run they became insolvent. If the SVB assets are liquidated they will not cover the deposits.

Re: Emergency bridge loan for SVB customers

#16

Post by gpm »

Blackthorn wrote: post #10
ummonk wrote: post #4

SVB is basically solvent and had a panic bank run. It should be pretty low risk to offer startups credit collateralized against their SVB deposits.

Solvent how? Their 80 billion of 10 year MBS's are sitting on a tremendous loss.

> As of December 31, 2022, Silicon Valley Bank had approximately $209.0 billion in total assets and about $175.4 billion in total deposits.

Per the FDIC

Re: Emergency bridge loan for SVB customers

#18

Post by gpm »

DeepYogurt wrote: post #12
bluepizza wrote: post #9

Earlier quoted context omitted.

The FDIC threshold is a minimum guarantee. If they are able to negotiate assets into liquidity, they will be able to pay more than the minimum guarantee.

so it sounds like a gamble on what brex expects that actual return to be

All lending is a gamble, but if they only lend 25% of what you have stored with SVB it's (approximately) a gamble that the FDIC will pay out more than 25c on the dollar. Which as lending goes is a pretty safe gamble.

Re: Emergency bridge loan for SVB customers

#20

Post by bryfb »

gpm wrote: post #16
Blackthorn wrote: post #10

Earlier quoted context omitted.

Solvent how? Their 80 billion of 10 year MBS's are sitting on a tremendous loss.

> As of December 31, 2022, Silicon Valley Bank had approximately $209.0 billion in total assets and about $175.4 billion in total deposits. Per the FDIC

I thought the follwoing was an interesting analysis: Aside from the fact that those assets don't seem to be valued at the current price (i.e. are marked at cost basis, not market,) much of it is already pledged as collateral.

https://twitter.com/FedGuy12/status/1634031134505066496

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