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Comment by chollida1 | Hacker News Reader

> Classic schemes like the cayman sandwich are getting broken by bank failures like svb. The cayman division was not fdic insured afaik.

This seems wrong to me based on my understanding but i'd be willing to be educated.

Based on the fact that everyone got their money back from FDIC in what way have these bank failures caused "Cayman sandwich are getting broken by bank failures like svb"

The Cayman's had one purpose for most hedge funds. Move assets off shore so all gains would be tax free. Once you want your money you onshore it again in and pay tax on that total. This allows your money to grow tax free, which means if you're good at it, it grows faster.

It's just like a tax free retirement account that lets you deduct your contributes but makes you pay tax on the money you withdraw.

As far as for companies using the cayman sandwich, what i've read says everyone got their assets out, no?

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And if the investments do grow, the governments still get their money, just later (but in greater sums at that time).

> Based on the fact that everyone got their money back from FDIC

Did they?

https://twitter.com/mdudas/status/1641959202078720001

According to the shared documents, they will. They just need to file a claim first.

What documents?

(Edit to add: If you meant the letter in that link what it says doesn't sound like "you will definitely get your money back, you just need to file a claim first" at all:

"Balances held by customers in accounts at the Cayman Islands Branch at failure are not deposits under the Federal Deposit Insurance Act [...] Your status as a result of the Institution's failure is that of general unsecured creditor.")

Second screenshot in the tweet you linked?

What do you think that "general unsecured creditor" means?

It means "to be determined." To be clear, it does not mean their claim will be denied. And if very recent history, politics, presidential speeches are to be believed, it means their claim will be accepted.

The first clue about contemporary political economy could tell us that the entire SVB meltdown would be socialized by the US state. See my comments in this thread for my predictions pre-bailout: https://news.ycombinator.com/item?id=35094447

Of course the claims won't be denied.

The acceptance of the claims means that they will share the proceeds from the liquidation of the assets of the non-acquired remains of the bank with the other general unsecured creditors.

As far as I can see, those Cayman Islands "not-deposits" will be paid just like the outstanding invoices owed to furniture distributors, etc. They'll get at least part of it but there is no guarantee about how much - and it will take time. [Of course they could (?) still decide to treat them differently. But the current outlook is not bright.]

The key point isn't if a claim is accepted or denied (the people getting the letters almost certainly have standing to be accepted), it's if there is money to pay the claims, and how soon they can get it. Having an unsecured claim isn't "Show up on Monday and the FDIC will hand you a bag of cash", it's "The bankruptcy court and trustees expect the final settlement to be in 3-5 years, with a haircut of 10-30%".

Source?

https://www.fdic.gov/consumers/banking/facts/priority.html

"By law, after insured depositors are paid, uninsured depositors are paid next, followed by general creditors and then stockholders. In most cases, general creditors and stockholders realize little or no recovery. Payments of uninsured funds only, called dividends, depend on the net recovered proceeds from the liquidation of the bank's assets and the payment of bank liabilities according to federal statute. While fully insured deposits are paid promptly after the failure of the bank, the disbursements of uninsured funds may take place over several years based on the timing in the liquidation of the failed bank assets. "

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