[Beaver117]

>Will Roku even lose all of that 25%? Probably not. They won't be able to access it for a while, but in the end they'll probably end up getting at least some of that back.

How will they get it back? The bank is gone. FDIC will only give them $250k right?

[thephyber]

> How will they get it back? The bank is gone. FDIC will only give them $250k right?

The FDIC opened up a new bank with a different name. On Monday, the insured $250k of deposits will be available and some modest amount above that will also be available. The FDIC announced a dividend will be paid next week to uninsured deposits. The remaining balances depend on how much of the assets are needed to be liquid short term versus long term.[1]

The bank has a massive amount of assets and deposits. They just aren’t liquid and the run on the bank snowballed the illiquidity. They need something like a massive insurance company to offer them an annuity backed by their own treasuries — something to unlock short term liquidity of their assets.

[1] https://www.axios.com/2023/03/10/silicon-valley-bank-governm...

[loeg]

The bank had assets worth something like 90-100% of deposits. Deposits beyond the 250k insurance limit will get paid back at 90-100 cents on the dollar (hopefully 100) based on what the FDIC can sell the bank or its assets for. Absolute worst case, uninsured depositors take a single digit percent haircut. They don't lose 100% beyond $250k, like you're suggesting.

[thephyber]

I think the most likely scenario is almost all deposits returned (or retained), as you describe.

But I think you are also underestimating the risk and the complexity of how the new bank management gets to that place. Who valued the “assets”? What accounting method did they use? Are the current day valuations based on assumptions about the economy in the near future and the liquidity of money in the finance system? That could become a self-fulfilling death spiral.

The impact of SVB being unable to raise short term funds this week despite being the 16th largest bank in the US and having plenty of deposits is what scared the stock market away from the banking sector Thursday.

> based on what the FDIC can sell the bank or its assets for This is the big question. SVB had plenty of assets, but couldn’t sell anything large in the market this week. FDIC most likely can’t do it either.

I think the assets are only attractive to someone who plans on holding it for years, and even then this may not be the most attractive bank to buy if other banks have similar issues in the next few weeks/months.

[bombcar]

Iirc Indymac was 50% recovery above the $250k line.

[loeg]

Why would that be relevant here? The worst case depends on the failed bank's assets vs deposits. SVB's assets are worth significantly more than 50% of deposits above $250k, so depositors will get a bigger percent of deposits back.

[thephyber]

I wouldn’t be so quick to write off the mention of other fire sales.

SVB’s assets may look good on paper, but they couldn’t sell those assets in the past few months or weeks, which is the prelude to Thurs/Fri.

I think the more important questions are: (a) are the assets actually there and fairly valued? (b) can anyone actually sell the assets quickly for near their current states value in the open market?

I think people underestimate how much prices swing when the assets are that large, there are few possible buyers, and everyone in every investment company is re-running their models this weekend with the assumption that SVB’s woes might also be independently happening in other larger banks.

[loeg]

They couldn't sell them without becoming insolvent, because selling them would transition them from Hold-to-Maturity to Mark-to-Market. I don't think there's any difficulty selling 10-year MBS notes at market prices (at some discount to their HTM accounted value).

[hoofhearted]

No. FDIC will initially write checks to everyone with an account for up to $250,000.. Once the dust has settled, they will return whatever they recover back to the account holders accordingly.

[ceejayoz]

$250k is the absolute minimum cap, if the bank managed to set literally every dollar they were supposed to be holding on fire in the parking lot.

SVB was only a little (relatively speaking) underwater, so people over $250k are likely to take only a little haircut. Bad for the bank, not particularly disastrous for the individual accounts, even the big ones.