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Comment by mikeyouse | Hacker News Reader

Not sure why this is downvoted. FDIC-insured accounts have never lost funds in the nearly 100 years since the FDIC was established. And I think there was one? maybe two? times depositors lost funds in excess of the FDIC limits over that same time frame?

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Failed banks that have been resolved by the FDIC have, in fact, seen depositors lose money on non-insured deposits (i.e. deposits in excess of the insurance limits). FDIC makes payments, called "dividends", to depositors. The history of dividend payments for failed banks can be found here [0]. For reference, SVB has about $200B in assets.

The largest failure to-date was WaMu in the 2008 financial (approx $300B in assets). Depositors were paid back 100%. The largest failure prior to WaMu was IndyMac (approx $100B in assets). Depositors were paid back 50%. No additional dividends have been paid out to depositors.

According to Wikipedia [1], the last three >$1B failures were Guaranty in 2017, Doral in 2015, and First National in 2013. Depositors in each of these three cases received less than 100%, averaging around 80%.

[0] - https://closedbanks.fdic.gov/dividends/ [1] - https://en.wikipedia.org/wiki/List_of_bank_failures_in_the_U...

When Lehman Brothers collapsed in 2008, many people lost money over $100k. So many, that FDIC retroactively raised the insured limit to $250k and made people whole up to $250k. A lot of the money over that simply evaporated. Today, the limit is $250k, but as SVB's clients were mostly startups, and startups need to make payroll and pay operating expenses like their AWS/GCP bill, they'd easily have cash in excess of $250k at SVB.

>> When Lehman Brothers collapsed in 2008, many people lost money over $100k. So many, that FDIC retroactively raised the insured limit to $250k and made people whole up to $250k. A lot of the money over that simply evaporated.

That's not at all true.. 100% of Lehman customers received 100% of their funds. Secured creditors also received 100% of their funds.

https://www.sipc.org/news-and-media/news-releases/20220928

100% of depositor funds from WaMu (including every penny over the FDIC limit) were safe as well after the Chase buyout.

https://www.fdic.gov/resources/resolutions/bank-failures/fai....

From your link https://www.sipc.org/news-and-media/news-releases/20220928:

> Distributions to unsecured general creditors with allowed claims totaled over $9.372 billion, representing a 41.2841 percent recovery.

That sure sounds like 58.7259% didn't recover what they were owed. Mind explaining why that isn't the case?

And what about IndyMac? IndyMac depositors only got 50 cents on the dollar.

https://www.depositaccounts.com/blog/indymac-depositors-are-...

Unsecured creditors in Lehman Brothers were entities like other banks and hedge funds who either offered unsecured credit lines or bank loans -- they're inherently risky and have nothing to do with retail or consumer banking. Those entities ate the losses and none of their customers lost money. It's good and appropriate they saw haircuts after the depositors and secured creditors were repaid in full.

Indymac is an interesting case - their insured depositors were made whole at $100k and then the uninsured amounts were paid out immediately at 50% -- but then that is indeed when Dodd Frank did the retroactive FDIC raise to $250k -- so all of their depositors were fully reimbursed at $250k and presumably there were some losses of uninsured beyond that. It was a weird entity, they didn't have any debt or secured creditors so there wasn't anything else for an acquiring bank to buy once it was bankrupt. Very different than SVB but fair enough, a case where uninsured depositors lost some money in a bank run.

Unsecured creditors also includes anyone holding their stock, so if you held any shares of SIVB before today, you're sitting on a big fat goose egg.

Equity holders are a lower precedence still from the unsecured creditors but nobody wants to bail either of them out - they took a risk and it didn’t pay off. Their investment is worth zero. People and companies who had cash in checking accounts weren’t taking any imprudent risk.

To be sure, Lehman Brothers was not a depository institution. FDIC insurance protects only insured deposits up to the limits, and thus was not in play for creditors to Lehman.

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