[tracker1]

Exactly... they liquidate the bank's assets, payout the FDIC insured, and most of the depositors only lose about 10%... the shareholders would lose more... and the executives and board potentially lose everything to pay shareholders. That's how this is supposed to work under existing rules.

[geysersam]

Why didn't the fed decide that course of action in this case?

Seems the difference is small. Shareholders still lost everything, depositors lost nothing instead of 10% but that's a minor difference.

Guess one difference is how long it'll take before depositors can access their money. Now they'll get it immediately. If they were waiting for liquidation of the banks assets, that would probably take longer.

[rafaelero]

The difference is that the thought of losing 10% is enough to make everyone else consider withdrawing the money they have with their banks. And that initiates a bank run that would spill over all the banking sector. The bailout is not to protect SVB; that's already gone. Fed is now trying to avoid having people stress testing other banks, because they probably won't handle it.

[geysersam]

That's very interesting. Thanks.

[kevingadd]

Depositors would have lost up-to $X - 250000, not 10%.

SVB is down ~10% but that doesn't mean everyone would have actually been made whole from the money.

[thegrimmest]

I guess I still don't see a problem. Some business close. Some people find new jobs. Life goes on. I don't see a reason for intervention here.