$13B of the Silicon Valley Bank bailout went to 10 accounts
dailywire.com
dailywire.com
A better way of thinking about it would be something like: SVB had 170B (random estimate) in uninsured deposits. 13B of the uninsured deposits were from 10 accounts. So (13B / 170B) * 18B = 1.3B went to those 10 accounts.
$56bn [1]. So about 23% of the emergency insured deposits were held by 10 accounts.
If we stuck to the law, that would have been $2.5mm (0.005%). So 10 accounts got a 5,200x courtesy boost in their backing by the full faith and credit by the United States.
[1] https://www.bloomberg.com/news/articles/2023-03-27/first-cit...
> This leaves about $90 billion in securities and other SVB assets in the hands of the FDIC, and an estimated cost of the failure to the Deposit Insurance Fund of about $20 billion.
So the real number is 50 + 90 = 140.
This doesn’t make sense. You’re adding deposits (liabilities) to assets. $56bn deposits doesn’t mean $56bn of cash in a vault, it means $56bn owed to depositors.
Deposits aren’t all SVB’s liabilities, though they were most of them. Their balance sheet changed between failure and disposition. And the FDIC is giving the acquirer some guarantees on the assets, which are being acquired for substantially less than $90bn.
I think most likely is that the FDIC has had the bank for a number of weeks and allowed a large number of withdrawals. Those withdrawals are counted as part of the 18B cost to the FDIC, but aren't part of the 50B that was sold.
At some point in the past, sure, there were more deposits being emergency insured by the FDIC, which might reduce that 5,200x figure by up to an order of magnitude. I would also clarify, however, that the emergency insurance kicked in two days after the FDIC put SVB into receivership.
> those withdrawals are counted as part of the 18B cost to the FDIC
No, they’re not. The discount offered on the assets is where the loss comes from.
And that's not the sole source of the FDIC's possible losses. (Again, deposits being withdrawn doesn't cause losses per se. The liability and assets sold are struck simultaneously.)
> As of March 10, 2023, Silicon Valley Bridge Bank, National Association, had approximately $167 billion in total assets and about $119 billion in total deposits. Today's transaction included the purchase of about $72 billion of Silicon Valley Bridge Bank, National Association's assets at a discount of $16.5 billion. Approximately $90 billion in securities and other assets will remain in the receivership for disposition by the FDIC. In addition, the FDIC received equity appreciation rights in First Citizens BancShares, Inc., Raleigh, North Carolina, common stock with a potential value of up to $500 million.
> The FDIC estimates the cost of the failure of Silicon Valley Bank to its Deposit Insurance Fund (DIF) to be approximately $20 billion. The exact cost will be determined when the FDIC terminates the receivership.
100% agree. This is the first time, however, we’ve been able to quantify where the direct benefit went.
[1] https://www.fdic.gov/news/press-releases/2023/pr23023.html
Is there any downside to FDIC expanding policy to state "All deposits are covered, regardless of amount"? This is effectively already happening AND would contribute value-add safety and security to US banks. It would also create a level playing field for them, regardless of size, to have an opportunity to service customers they may not be backstopped to handle without outside investment or additional customers. Perhaps the only downsides would be stress tests and audits would need to ensure proper investments and diversification of products to avoid the risks of becoming a dangerously-narrow boutique bank.
The first of these claims is false, the second is true only in the trivial sense that anyone can sue for any reason however baseless and even a completely baseless claim has some cost, and the existence of the limit may make people upset enough to file a baseless suit.
> Is there any downside to changing the policy to state “All deposits are covered, regardless of amount”.
Presumably Congress felt there was both when introducing the FDIC Act and again when revising it in 1991 to restrict the conditions in which the FDIC could cover deposits beyond the insured amount.
> This is effectively already happening
No, its not. The invocation of the systemic risk exception in limited cases is not the same thing, "effectively", as a general extension of FDIC insurance to all balances without limits.
> AND would contribute value-add safety and security to US bank. It would also create a level playing field for US banks, regardless of size, to have the opportunity to service customers of any size.
This contradicts what precedes it; if it was effectively already happening, doing it officially would change nothing of substance.
Except that it's widely believed that depositor bailouts still only apply to "too big to fail institutions", and if this had been a smaller bank with less politically important depositors, the FDIC might have said too bad.
Furthermore the main point of my original comment is that making it explicit gives the FDIC a reason to assess insurance premiums on all accounts in proportion to their explicitly acknowledged risks (which are non-linear!), rather than continuing to collect smaller premiums under the belief that they only have to cover small accounts, while often ending up covering larger ones.
If those insurance premiums get too onerous for large accounts, then that creates a preemptive incentive to split up accounts and/or look at other non-bank financial custodians (decreasing FDIC's exposure either way).
74% !?!? to 10 accounts?
holy cow!
such a large proportion of the funds used to protect such a small number of accounts?
some are really more equal then others :(
Yes, the amount of money in the hands of a few is that extreme
but some are more equal :) take is as a joke
All Men are Created Equal, But Some are More Equal Than Others
... by the end of Orwell’s book, the Seven Commandments had disappeared from the wall, replaced by one lone Commandment:
All Animals are Equal
But Some Animals are More Equal Than Others
[0] https://pagosadailypost.com/2021/08/18/ready-fire-aim-all-me...
I’m quite aware it is a reference from Animal Farm, I didn't see how it was related and was wondering if there was more, or if the joke was funny aside from “unexpected orwell”
Is there a special privilege conveyed to the 10 large accounts over every other depositor that had more than $250k on account?
"Gee [senator|congressperson|etc], my donation to your re-election campaign was in that SVB account, would be a shame if I lost it".Letting the whales die would have meant every other whale in every other bank would suddenly feel the need to inspect balance sheets or be whiny or just run. The entire reason SVB failed was poor management on their part, and poor risk hedging, but that's not a systemic problem. However, making every big cash holder suddenly worried they aren't as safe as they expected could be a mild systemic problem.
Yes the special privilege was a lot of money.
Everyone was not treated equally by being bade whole, even though they were treated equitably.
so they were treated equitably
in what way were they treated unequally?
equal treatment would be every account getting 1/n of the money used to save SVB. Equitable treatment is everyone being restored by the same % of their losses (in this case 100%). It’s different.
Since the goal was to save deposits 100% and there was enough money for that goal, and every account got 1/1 treatment, and nobody got 1/10th treatment, nobody got 1.5/1 treatment, and this applied to everyone over and under $250k not just those 10 accounts in the article, I’m still not seeing how those 10 accounts accounts “were more equal than others” which was the supposition introduced in the “joke” earlier
I don’t think semantics really helps point out that OP just had a poor joke that wasnt funny or accurate, I’m open to counterpoints though.
I mostly think people misunderstand what happened and that joke can easily perpetuate that.
Nanny state bad.
Nanny state with watered-down regulations, but which still bails out us when we screw up royally - better!