NPR had an excellent story of how a bank takeover and wind-down works back in 2009:<p><a href="https://www.npr.org/2009/03/26/102384657/anatomy-of-a-bank-takeover" rel="nofollow">https://www.npr.org/2009/03/26/102384657/anatomy-of-a-bank-t...</a><p><i>“On a mid-January night, some 80 agents of the Federal Deposit Insurance Corp. pull into Vancouver, Wash. Their rental cars are generic, their arrival times staggered. One by one, agents check into a hotel, each quietly offering a pseudonym to the guy at the desk.<p>…<p>He agrees it almost feels like a spy movie. "They've done this before — quite a production," he says.“</i><p>And in general, for people who are understandably worried: besides the $250k available on Monday morning, my bet is on at least 50% of uninsured deposits by end of the week, and 90-100% if not next week (via acquisition) then within a pretty short time.<p>If Oaktree and others are offering folks 70%+ face value for their uninsured deposits, that should be a pretty strong indication of where this is heading (ie a high confidence level at those shops to make a quick 20-30% off panicky sentiment).<p>Edit, PS:<p>This whole story is so bewildering, probably the only bank I can think of that was killed by its own customers (flaky VC herd) despite being generally healthy and having picked the least worst option last year (maturity risk). VCs now banding together is laudable, but why there wasn’t a Buffett type preferred stock rescue earlier this week to save their literal community bank is kinda beyond me.
Please take a moment to appreciate and respect that FDIC, as a government agency and regulator, stepped in mid day yesterday and banking operations will resume Monday morning for an orderly wind down.<p>> The main office and all branches of Silicon Valley Bank will reopen on Monday, March 13, 2023. The DINB will maintain Silicon Valley Bank’s normal business hours. Banking activities will resume no later than Monday, March 13, including on-line banking and other services. Silicon Valley Bank’s official checks will continue to clear.
FWIW, this page is from Friday, so I don't think it has new information: <a href="https://web.archive.org/web/20230310190411/https://www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/silicon-valley.html" rel="nofollow">https://web.archive.org/web/20230310190411/https://www.fdic....</a>
> The FDIC will pay uninsured depositors an advance dividend within the next week.<p>Depending on the amount, this can possibly make things a lot better for the startups banking there.
This American Life had an episode on the process some time ago: <a href="https://www.thisamericanlife.org/377/scenes-from-a-recession/act-two-3" rel="nofollow">https://www.thisamericanlife.org/377/scenes-from-a-recession...</a><p>This is proceeding as it should, and despite the terrible circumstances we should be proud that there are actual functioning institutions to take care of this process. Depositors may not be made whole, but it doesn't look like SVB had a bunch of mortgages of defunct malls in Las Vegas (and similar) like back in the housing crisis. Depositors seem likely to get half their funds back this week and then most of the rest (though likely not all) over the coming weeks.
So every depositor will get up to $250K on Monday. Those with balances above that will get a payment of some percentage of the balance not many days after. Sounds pretty fair and expedient to me.<p>Shocked that no VC or group of them haven't stood up a short term bridge loan facility since it was them who triggered the chain reaction that took the bank down.
Are there any banking experts here who know whether the FDIC has to / will sell the CMOs (that are under water that were the proximate cause of the bank run) now for whatever they are worth, at a loss?<p>Or could they or some part of the government buy them at face value and hold them til they mature, while making the bank depositors more whole?
Their liabilities were less than $180B and it's not like their assets are going to zero. Seems like there are more than a few firms who could just buy it themselves, and then they have a whole commercial and investment bank of their own that can be competitive. Just say hey, we have liquidity to cover your payroll and deposits, we're the new owners, and you get a startup banking concern without the legacy costs of an ibank that started 100y ago.<p>Why doesn't YC pick it up? Even just as a testbed for enterprise technologies for banking, a bank managed by that culture will pay itself off in growth.
Something else that I haven't seen anyone talking about (and may be a total non-issue) but are other banks exposed the same way that SVB was? I imagine a bunch of other banks must also be holding these low rate mortgages from a few years ago, could the same thing happen to them?
Here’s a question for those more knowledgeable: if bank runs continued through June and Congress can’t agree on the debt ceiling (which they won’t), thus causing a government default, does FDIC cease to function?
Having been through a painfully long acquisition, how do transactions of such a huge entity get pushed through so fast if another bank were to buy SVB?
> future dividend payments may be made to uninsured depositors<p>"may"<p>If they get their get their money back it only reinforces the bad choices here. Let them fail. The world doesn't really need these the vast majority of these YC trinket startups anyway.
What people don't seem to realize is that banks themselves are a form of speculative vehicle. You pay deposits to the bank, and they then invest these deposits in commercial loans. Banks are incredibly risk adverse as a rule, however, in this case the amount of deposits that SVB took in between 2020 and 2022 doubled from 40 to 80 billion dollars. The only way that this can happen is if the amount of available loans that the bank can make at the same risk profile increases through greater demand, or if the bank acquired several other regional banks.<p>Well. That wasn't happening. So the bank started making riskier and riskier loans rather than reduce the number of incoming deposits.<p>Arguably, given inflation, the value of FDIC should be increased beyond the $250,000 limit. But it's difficult to have much sympathy for companies that invested large sums of money into SVB without doing their due-diligence. If these companies need to be taken over by the federal government to prevent stock market contagion it would be nice to see some political consequences as well.<p>It's absurd that a Lehman Bro.s CFO chairman was an executive at this bank. There will be lawsuits that come from this, but I'd expect that the federal government should also be an aggrieved party (as in, "the People Against...") given the risk of this collapse to the finances of the larger public.
Can someone discuss if we are paying for this? My understanding is FDIC is separate from the government and works like insurance for banks. I assume this will raise the rates and I assume banks will, out of the kindness of their hearts, pass that on to the customers?<p>Why run a bank responsibly and hedge for interest rate rise, if your customers are protected over 250k anyway? Hedging lowers the yield you can give. So ignoring that, you can offer maximum yield and attract companies to do bizarre things like Roku keeping 500 million there or Circle maybe 3.3 billion. This doesn’t punish the bad behavior, it actually encourages it. Although the bank is dead so I guess there is that. But the CEO sold $3.6 million worth of stock two weeks ago so I think he will be fine.