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SVB customers who lost their deposits remain on the hook for loans

wsj.com

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Re: SVB customers who lost their deposits remain on the hook for loans

#21

Post by bradleyjg »

mdasen wrote: post #14

This article feels like rich people who were trying to get around US law/regulations/taxes now wanting the protections afforded by it. They deposited money in SVB's Cayman Islands subsidiary (a country that's a well-known tax haven). SVB goes under and the Cayman Islands have no deposit insurance so their deposits are wiped out. Now they want their money back or their debt forgiven. The SVB Cayman deposits didn't pay…

It reminds me of when cruise lines that flag their boats in places like Libera wanted a Covid handout from the US government.

Re: SVB customers who lost their deposits remain on the hook for loans

#22

Post by hamandcheese »

StanislavPetrov wrote: post #13
Simulacra wrote: post #4

Is it normal for loans to be wiped clean in a bank failure?

These were essentially secured loans offered by the bank against funds that had already been deposited. I'm definitely not a fan of Cayman Island banking nonsense, but it seems rather unfair to seize the deposited funds that secured the loan and still try to enforce repayment.

If the loans are no longer secured, then is there any reason to pay? Can payment be forced in any way?

If the bank repossessed my house, for example, I would not continue paying my mortgage.

Re: SVB customers who lost their deposits remain on the hook for loans

#23

Post by Ensorceled »

StanislavPetrov wrote: post #13
Simulacra wrote: post #4

Is it normal for loans to be wiped clean in a bank failure?

These were essentially secured loans offered by the bank against funds that had already been deposited. I'm definitely not a fan of Cayman Island banking nonsense, but it seems rather unfair to seize the deposited funds that secured the loan and still try to enforce repayment.

Imagine what would happen if you didn’t have house insurance and your house burnt down. Would you expect the mortgage to be waved because the security (the home) was now seriously devalued?

Re: SVB customers who lost their deposits remain on the hook for loans

#24

Post by LargeWu »

hamandcheese wrote: post #22
StanislavPetrov wrote: post #13

Earlier quoted context omitted.

These were essentially secured loans offered by the bank against funds that had already been deposited. I'm definitely not a fan of Cayman Island banking nonsense, but it seems rather unfair to seize the deposited funds that secured the loan and still try to enforce repayment.

If the loans are no longer secured, then is there any reason to pay? Can payment be forced in any way? If the bank repossessed my house, for example, I would not continue paying my mortgage.

The loans will be sold off, and they will have to pay whoever buys them.

Re: SVB customers who lost their deposits remain on the hook for loans

#25

Post by [deleted] »

mdasen wrote: post #14

This article feels like rich people who were trying to get around US law/regulations/taxes now wanting the protections afforded by it. They deposited money in SVB's Cayman Islands subsidiary (a country that's a well-known tax haven). SVB goes under and the Cayman Islands have no deposit insurance so their deposits are wiped out. Now they want their money back or their debt forgiven. The SVB Cayman deposits didn't pay…

[deleted]

Re: SVB customers who lost their deposits remain on the hook for loans

#27

Post by NotYourLawyer »

mdasen wrote: post #14

This article feels like rich people who were trying to get around US law/regulations/taxes now wanting the protections afforded by it. They deposited money in SVB's Cayman Islands subsidiary (a country that's a well-known tax haven). SVB goes under and the Cayman Islands have no deposit insurance so their deposits are wiped out. Now they want their money back or their debt forgiven. The SVB Cayman deposits didn't pay…

Hoo boy did you miss the point of that’s happening here.

Re: SVB customers who lost their deposits remain on the hook for loans

#28

Post by xhkkffbf »

StanislavPetrov wrote: post #13
Simulacra wrote: post #4

Is it normal for loans to be wiped clean in a bank failure?

These were essentially secured loans offered by the bank against funds that had already been deposited. I'm definitely not a fan of Cayman Island banking nonsense, but it seems rather unfair to seize the deposited funds that secured the loan and still try to enforce repayment.

Yes. I can even imagine some extreme nonsense where the regulators call the loans because they're not backed by collateral any more.

Re: SVB customers who lost their deposits remain on the hook for loans

#30

Post by epgui »

hanniabu wrote: post #18
papercrane wrote: post #9

Earlier quoted context omitted.

Loans are an asset on the banks balance sheet and can be sold like any other asset.

Why can't people sell the bank's debt to them?

They probably could, but who would “buy” a liability? If someone wanted to sell you their problems, how much money would you pay for the privilege of the burden?
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