Emergency bridge loan for SVB customers • Hacker News Board

Re: Emergency bridge loan for SVB customers

#171

Post by fnordpiglet » Mon, Mar 13, 2023, 8:51 AM UTC

shawabawa3 wrote: post #156

fnordpiglet wrote: post #122

Earlier quoted context omitted.

No, it’s not. SBV was unable to meet its obligations and was insolvent. Then the FDIC stepped in and a part of its function will be to ensure liquidity. So it’s is therefore not insolvent. The FDIC won’t take a loss so it may become insolvent again and might have to resort to insurance to make depositors partially whole. The fact that it has a) access to sufficient credit liquidity via governmental ownership b) asset…

> SBV was unable to meet its obligations and was insolvent. Then the FDIC stepped in and a part of its function will be to ensure liquidity. So it’s is therefore not insolvent. The FDIC won’t take a loss so it may become insolvent again This is nonsense and contradictory The bank was insolvent. FDIC took over (due to insolvency) and has no obligation to make the bank solvent again (other than the 250k insurance limit…

Ok, so given the recent announcements by the fed, treasury, and fdic i would just point out everything I said was right.

Re: Emergency bridge loan for SVB customers

#172

Post by fnordpiglet » Mon, Mar 13, 2023, 8:52 AM UTC

JumpCrisscross wrote: post #167

fnordpiglet wrote: post #161

Earlier quoted context omitted.

That untrue. If they held the bonds to maturity they would be worth more than their face value. However due to time value of money other bonds with higher yields are in more demand making the current price lower. A private entity wouldn’t take the risk but a public one would. In fact the fed (quasi public) has been buying precisely these assets for over a decade. They actually made substantial returns by simply holdi…

> the fed (quasi public) has been buying precisely these assets for over a decade At market price, not face value.

That’s correct, but they can also lend at net present value of the HTM value using it as collateral.

Re: Emergency bridge loan for SVB customers

#173

Post by banannaise » Mon, Mar 13, 2023, 2:41 PM UTC

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.

> 97% of deposits in SVB exceeded the FDIC threshold. The question is, by how much on average?

That's just a math problem. If you assume all deposits are at least 250K, you can get a floor for that number. If 97% of deposits exceeded threshold, then the average deposit is at least $8.3 million.