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Comment by raylad | Hacker News Reader

Are there any banking experts here who know whether the FDIC has to / will sell the CMOs (that are under water that were the proximate cause of the bank run) now for whatever they are worth, at a loss?

Or could they or some part of the government buy them at face value and hold them til they mature, while making the bank depositors more whole?

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My understanding is that the FDIC does have to orderly liquidate all of SVB's assets unless they find a buyer. That does mean they have to sell all their outstanding treasury and mortgage assets, they don't have the ability to hold them to maturity (HTM).

SVB had billions of dollars in first-lost equity capital that was completely wiped out against those marks, hence them being insolvent. But that means there isn't a 1-to-1 lose for depositors against those underwater assets.

FDIC doesn’t have to find a buyer for the whole bank, they have leeway to split up parts of it to negotiate. So they may be able to make a deal for CMOS, especially if congress were to authorize something.

But it could be nobody wants to touch it. Maybe Musk wants a bank?

Their core instructions in this situation is to maximize recovery, but, a lot of that is securing the maximum value as quickly as possible to reduce risk because reducing risk is also maximizing recovery.

They won't ever HTM but they can sit on things for a bit, they do have reasonable flexibility.

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