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Comment by Blackthorn | Hacker News Reader

Solvent how? Their 80 billion of 10 year MBS's are sitting on a tremendous loss.

> As of December 31, 2022, Silicon Valley Bank had approximately $209.0 billion in total assets and about $175.4 billion in total deposits.

Per the FDIC

From what I understand, the assets were allowed to be on the books at face value, under the assumption they would be held to maturity, but they're worth significantly less on the open market.

I thought the follwoing was an interesting analysis: Aside from the fact that those assets don't seem to be valued at the current price (i.e. are marked at cost basis, not market,) much of it is already pledged as collateral.

https://twitter.com/FedGuy12/status/1634031134505066496

They had 45 billion in withdrawals before they ran out of liquidity and were taken over by FDIC, so that analysis would appear to be incorrect, since it implied they only had 80-55 = 25 billion of liquidity available.

I think the wording in the FDIC order was that customers were "initiating 42bn of withdrawals."[0] Doesn't mean those went through (in fact many from what I heard didn't.)

Still certainly very possible that the analysis is incorrect.

[0] https://dfpi.ca.gov/wp-content/uploads/sites/337/2023/03/DFP...

Ah yeah you're correct good catch.

obviously nobody believed those numbers. i had 50% of my 401K in a AAA bond index fund and it lost 15% in 6 months. SVBs assets aren't even close to AAA. They are loaning money to startups, creating deposits out of those loans, and then using those deposits as collateral to issue 10X more loans. That is all perfectly cool and legal, but when all of those startups run out of runway at the same time the party stops.

Just hold the bond to maturity.

A $100 in 10 years is just not worth $100 today in the current interest rate environment.

But that’s not an option if you have to pay out now.

That's a liquidity crisis

Let’s say I owe $100.

If I have assets worth $110 today but they are locked up, and I have to pay back what I owe today, then I’m facing a liquidity crisis.

If I have assets worth $90 today, but $110 in a few years, and I have to pay back the money I owe in a few years, then I’m solvent and everything is good.

If I have assets worth $90 today, but $110 in a few years, and I have to pay back what I owe today then I’m insolvent.

It's insolvency if the current market value (not the hold to maturity value) of the assets is less than the liability. As far as I can tell though, SVB was solvent despite its losses, and just needed to raise money to cover reserve requirements after it realized the losses. What did it under was a lack of liquidity after everyone panicked and did a run on the bank, with 45 billion (out of ~175 billion in deposits) in withdrawals overnight.

There's no reserve requirements

It started as a liquidity crisis (do they had to start selling or raise capital), it turned into a solvency crisis (they had to sell even more therefore marking assets as available for sale which made them marked to market).

Right now SVB, if fully liquidated, cannot repay all of the deposits.

People aren't waiting ten years for their money.

I’m inclined to say they will if it guarantees they get it back.

But a dollar in 10 years is worth less than a dollar today. In either case the result is the same: you take a haircut on the present value of your deposits.

No but $1 in ten years will be worth more than $0.50 today.

Specifically, it's worth about $0.65 today.

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