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Comment by Taniwha | Hacker News Reader

One reason why it's not (mostly) a bailout is that SVB's deposits are (as far as we know) still backed by bonds and mortgage backed securities, the problem is that those securities can't be easily sold right now (because people want higher valued investments) - a sudden forced sale means selling at a loss (or a cash flow crisis which is how SVB got into this state), holding on to them and letting them play out and they still have their value (worst case you sell them at a loss that is the difference between what they yield and what current investments yield)

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> the problem is that those securities can't be easily sold right now

they can be sold easily, they just happen to not be worth very much

They're worth alot - I haven't seen any indication that they're more than 10% underwater. Even 20% underwater is much more than 'not be[ing] worth very much'

One thing nobody seems to be talking about is whether SVB had more assets than liabilities- presumably they did since it was a money-making enterprise, right? So even if they sell at a loss there may be more than enough to cover the liabilities.

We’ll see I guess.

> One thing nobody seems to be talking about is whether SVB had more assets than liabilities

On paper, with some of them at HTM valuation, they did.

At actual market value, I don’t know that an assessment has been done.

> So even if they sell at a loss there may be more than enough to cover the liabilities.

Sure, but there is still a kind of bailout in what amounts to a bridge loan from the FDIC for the uninsured balances.

> a sudden forced sale means selling at a loss

A gentle sale at their leisure over the next six months would also mean selling at a loss.

No, they liquidated those positions at a loss because of outflows. They are actually short the cash.

They didn’t liquidate $200 billion in MBS and treasury bonds in a week let alone a day.

From [1]: > The bank initially sold more than $20 billion of bonds, but did so at a $1.8 billion loss.

What we don't know is did they liquidate the positions that were more valuable in order to take a smaller loss, or positions that were most underwater? I'm guessing it's the former, which would mean they were in even worse shape with the unsold securities.

1: https://www.nationalreview.com/2023/03/the-real-reason-silic...

They absolutely did the former. Those are the securities which were marketable reasonably quickly, and they were planning to sell equity, too (another expensive but liquid asset).

Now that those assets are in the FDIC's hands, though, they can likely be unwound really slowly and without a ton of execution slippage, which would have otherwise happened if this were a firesale.

At a loss is kinda bullshit b/c that loss happened a long time ago, not when the sale happened

They realized that loss in their books is what matters.

the problem is if I sell my own investments right now at loss nobody will come to pay my obligations. so why large institutions get to reap profit but get out of jail free when they screw up.. one set of rule for common man and another for investor..elite class.

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