Hacker News Reader

Comment by jastanton | Hacker News Reader

I'm not very financially literate. How does SVB shareholders getting nothing translate to shareholders of all other banks being in the same situation?

View on HN

SVB shares are worth $0 because there was a run on the bank and the US Government did not step in to save the bank, only the depositors.

If the same thing happens to other banks - everyone withdraws, they shut down and the government steps in - the assumption is that their equity will eventually be worth $0 too. So, everyone sells at >$0.

It's not going to be all banks, though.

I see it as a haircut for newly discovered risk

> SVB shares are worth $0 because there was a run on the bank and the US Government did not step in to save the bank, only the depositors.

And there was a bank run because the investors panicked and caused the share price to plummet. Depositors saw stock plummeting, got nervous and pulled out. If this type of thing spreads to other banks we'll have a bad time.

Hence, the US government stepping in to ensure both depositors are made whole, and (more importantly) saying that the banks can redeem their underwater treasury bills at par (up to some limit under some circumstances obviously).

Hopefully this isn't too little, too late. There are already a few regional banks with share prices getting hammered in the market this morning regardless of the intervention.

> SVB shares are worth $0 because there was a run on the bank and the US Government did not step in to save the bank, only the depositors.

It also simultaneously stepped in to preemptively save similarly-situated [0] banks, though.

[0] to the condition SVB was in which led ultimately to the bank run.

You misread my comment: I mean all other banks that happen to be (i.e., put themselves) in the same situation.

Reply on news.ycombinator.com