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Comment by fnordpiglet | Hacker News Reader

You’re not bailing them out, you’re bailing out their depositors who had no say in the investments. The principals of SVB just lost it all to the FDIC, they weren’t bailed out in the least.

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That's not how this article reads, I think the right course of action would be to make the depositors whole and let the bank fail.

That's exactly what's happening but many depositors need to be "made whole" faster than the liquidation would allow because they need to make payroll in literally a few days time.

Most of them don't need to be made whole to make payroll in the short term. The FDIC is talking about a dividend for next week.

93% of the account holdings were uninsured. Many startups burn more than the FDIC’s $250K limit in two weeks. That’s equivalent to having 50 employees making $125K each, and zero other expenses. I’m guessing anyone with more than 20-30 employees is staring down missed payrolls.

The FDIC insurance comes into play after all other options have been exhausted. Given the FDIC can draw on the treasury and SVB has assets significantly in excess of deposits there’s literally no chance anyone will lose anything other than the management of SVB.

Yes but some need more than the insurance limit I suppose and again in two weeks etc...

They aren’t insolvent and have assets to more than cover depositors. The FDIC take over is about stabilizing the bank, not destroying it. Why would you let a bank fail if it’s unnecessary ? They have enormous amounts of business relationships along a huge number of dimensions that are fully functional and fine and meaningfully contribute to the lives of millions. Why tear that up? Spite?

Have they, though, if marked to market? After the deposit outflows this week?

You don’t have to value it marked to market. You can value it as net present value of the hold to maturity value. That’s not a liquid price, but it’s the value if used as collateral against a credit line from the feds.

because the management has failed.

management needs to go. Many, many employees need to go. I'm not sure what % that is, but that's for new ownership to determine

I think all of this is a forgone conclusion. Public intervention isn’t a great career move.

The bank failed. It's worth $0 now.

That’s just false. Being unable to secure liquidity to pay depositors doesn’t make you worthy $0. The bank failed to honor its charter and is rechartered under a FDIC controlled bank. But SVB is not gone, nor is it worth $0.

Read the article. I am not talking about FDIC insurance. I am talking about the bailout that is discussed at towards the end of the article.

The article is talking about a bailout of depositors, not investors.

Not letting the bank fail is a form of bankruptcy in a way. The owners lose most or all of the value of their ownership, but the bank is sold to new owners so it can continue to run.

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