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Comment by tiffanyh | Hacker News Reader

Why exactly can't they make payroll?

Because their funds are frozen? Or they assume their funds are completely gone?

SVB's failure means that anything over $250k that a startup had there is not currently accessible. They'll probably be made whole in a couple of months by FDIC, but payroll, along with rent and the cloud bill won't wait and can't be paid via IOUs.

Why would the FDIC make them whole? Doesn’t FDIC insurance only cover $250,000?

You're right that FDIC doesn't have to, but it's in everyone's interest that people keep keeping their money in a bank, so the long and the short of it is that the FDIC's playbook is to find another bank to buy SVB (for pennies on the dollar), and as part of that deal the purchaser bank will make them whole. FDIC doesn't necessarily have to do that, but it's what they've done in the past, so guessing that they will do something similar this time around isn't out of the question.

> it's in everyone's interest that people keep their money in a bank

I never heard that before. The rich keep their money in investments.

Don't put words in my mouth! What I wrote was "it's in everyone's interest that people keep keeping their money in a bank". Which is different.

Hey sorry, I read it and thought that was a typo.

For your explained meaning, it is in depositor's individual interest to remove their money. Get cash or t-bills. Also get a credit union account where they work for the members.

FDIC is in receivership of the bank, so they can sell off assets or do whatever they need to do to recover money to pay out depositors. If you had a million dollars and they are able to recover 90 cents on the dollar - your $100k "loss" would be covered by the insurance.

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