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Comment by koolba | Hacker News Reader

Money doesn’t magically appear out of nowhere. SVB does not have assets on its books to pay its short term liabilities.

Unless a government agency swoops in to bail out the difference between their short term liabilities and the net present value of their long term assets, somebody is going to be taking a haircut.

The equity of the bank itself isn’t enough to cover the losses so it’s going to be depositors.

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What if the FDIC or someone pays all depositors and then takes over the long-term bond portfolio, intending to hold to maturity?

No private institutions with hard cash are going to be willing to take the portfolio because of the opportunity cost of investing that money at higher rates of returns. Any institutions that would need to borrow to buy the portfolio would need to borrow at higher interest rates and earn lower rates generating a loss each month. There is now way to take the portfolio without a discount and not have a loss.

If there was a way out of this without a loss the bank wouldn’t be insolvent (bankrupt).

That’s an example of someone swooping in to save the day. Whoever does that would not do it for free as the SVB bond portfolio is worth less than the same bonds bought today (rates go up, bond prices go down). No private party is going to hand over billions of dollars for free so either the Feds do it or nobody does.

These startups are kind of the backbone of the tech economy, you'd think this would be a case where the government says "too big to fail" again.

When the alternative is going to be handing over stablecoin market dominance to unregulatable foreign entity, it’s not out of question that the government would step in to stabilize the USDC stablecoin market.

Why would they? their long term treasury bills are yielding almost 0% interest rate and current rate is closer to 6%. Ergo, no one is going to buy an out of the money long term asset at par when current yield is significantly higher. No sane rational person would do that.

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