[jedberg]

Why in the world would you want to own the bank? Whoever is buying it is doing so to get the customer list. The assets aren't really worthwhile given that they will all need to be sold to cover the depositors, given that if they opened as DAOBank on Monday everyone would pull their money out.

The only case I see of not having a run on the remaining balances is if someone like Chase buys them.

[throw_pm23]

Couldn't someone with a lot of cash buy them, pay back the depositors without having to sell assets, then hold the assets until maturity, and then make a profit (presumably having bought them at a discount)? As far as I understand, the nominal value of assets still exceeds the obligations?

[PeterisP]

For the big SVB assets, the outcome of "holding the assets until maturity" is the price at which you can sell these assets; someone who intends to do that will buy these assets at a rate where they roughly break even - they're pretty much a commodity, so the auction price is close to the value.

But buying long-term assets at some small discount (e.g. 10%) and holding them to maturity would not make a profit - the nominal value of these assets + the interest on the (low!) fixed interest rate is far lower than the interest rate you can get elsewhere; if the difference between the interest rate that SVB had fixed and the current market rate is ~2% (which seems roughly in the ballbark) then a crude estimate is that the discount has to be 20%-ish if there's 10 years remaining until maturity and 40%-ish if there's 20 years remaining... so that's appropriately reflected in the (lowered) price those assets can fetch. The nominal value is irrelevant as future money is worth much less than current money.

[gruez]

>As far as I understand, the nominal value of assets still exceeds the obligations?

AFAIK that number was based on the book value (ie. how much it cost for the bank to buy the bonds/MBS), not the current fair market value. Other sources say that SVB is in the hole when using current fair market value for their assets.

>So big was this drawdown that on a marked-to-market basis, Silicon Valley Bank was technically insolvent at the end of September. Its $15.9 billion of HTM mark-to-market losses completely subsumed the $11.8 billion of tangible common equity that supported the bank’s balance sheet.

https://www.netinterest.co/p/the-demise-of-silicon-valley-ba...

[fbdab103]

>Whoever is buying it is doing so to get the customer list.

Not a bank or in the financial sector, but this makes no sense to me. It is likely fairly easy to get the list of VCs who used SVB. If nothing else, startup businesses which SVB catered to are significantly less appealing than they were one to two years ago. What fraction of those clients required low interest rates to keep the business viable?

[paxys]

It's easy to get the list. It's not easy to get all of them to move their assets over to your bank. When you buy the bank the assets are yours automatically. They can of course choose to then move it out, but why would they?

[fbdab103]

Putting all of your financial assets in one institution was just proven to be a liability?

[littlestymaar]

> but why would they?

Why would they not?

[PeterisP]

Because the hypothetical acquirer would have not only their assets but also all their other products - loans, credit cards, all the established payments to/from their accounts, etc. which are harder to switch.

[paxys]

Because depositors have no reason to get their money out of Chase and into another regional bank on the brink of failure.

[notmindthegap]

it was a joke, reference to the DAO that tried and failed to buy the constitution at auction

[dylan604]

it's the banking version of acquihire.

Bank CEO: "We want to get more tech biz customers, but we don't want to start from scratch with high risk startups."

FDIC: "We have this bank with a lot of established companies"

[furyofantares]

> Whoever is buying it is doing so to get the customer list.

And to prevent contagion, I'd guess? Or do you not see it that way?

[jedberg]

Yes, to an extent it's in the big bank's best interests to restore faith in the banking system. But mostly that's up to the government.

If Treasury comes in and says "we will make all depositors whole", that pretty much ends the contagion right there.