Investing General Discussion

Mist said:

Because it's done the exact same thing for 53 banks in the past 10 years.

Also, because the bank had the underlying assets to sell (at a loss, which sucks for shareholders but doesn't matter at all once they've been seized.)

It's such a non-story.

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Mist said:

Depositors are first in line when a failed bank is fire-sold. They would still get their deposits. The FDIC insurance is to cover losses beyond which can be recouped by selling off the assets of the bank, which would be basically nothing in this case.

Your argument is basically "people should lose money because I *feel* like they should."

There was no bailout here, there was temporary liquidity so depositors could continue to operate their businesses while the assets were sold.

Again, it's a non-story. If the bank had a name other than "Silicon Valley Bank" no one would have even paid attention.

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Mist said:

You're missing the point. Regardless of insurance, the laws still state that depositors are first in line when the bank's assets are sold to cover the losses.

Nothing in the laws state that depositors can only receive $250k. That's just what is insured if there's no assets to sell. But there are always assets to sell, especially after the government raised reserve requirements and implemented other stress tests to ensure there would always be assets to sell.

Literally from the FDIC regulations FAQ:

So in this case, where SVB had enough assets to cover >100% of deposits, every depositor would have been issued a Receiver's Certificate for the full amount of their deposits. They all would have gotten their money regardless, per FDIC regulations.

All that the government did is speed up the process in which claimants would have had access to their deposits by providing temporary liquidity.

Non-story.

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Mist said:

In the case of a failed bank, the FDIC itself is the receiver of the liquidated bank and all of its assets. It then distributes the assets according to its rules, and its rules state that depositors are first in line up to the full amount of their deposits.

None of this has ever previously been controversial. The media made this one controversial to generate clicks, because of the name of the bank.

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Mist said:

So you're agreeing with me.

Depositors, insured and uninsured, are first and second in line before creditors and shareholders. SVB had enough assets, even once sold at less than face value, to cover all insured and uninsured deposits.

Insured and uninsured depositors would have always gotten all their money in this situation, by the wording of the laws and regulations, because they are both in line before creditors and shareholders.

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