FDIC accidentally reveals the Silicon Valley Bank depositors it bailed out (2023) | Hacker News Reader

FDIC accidentally reveals the Silicon Valley Bank depositors it bailed out (2023)

fortune.com

39 pointstortilla16 comments

Nice that a human at the FDIC really either was incompetent or a fun whistleblower. Either way, glad to see how the money was spent.

Glad? I’m more disappointed than I was before to see how the money was spent. Turns out Pence was right

I wonder about the phrasing. To me, a bailout of a bank allows the bank to continue business. I think paying out customers and allowing the bank to fail doesn't quite qualify under my understanding. More of a bailout of the customers, if anything.

The FDIC found a buyer for the bank at zero without too much difficulty, so in hindsight the taxpayer's money wasn't actually spent here.

Would it have been a better warning to haircut the depositors a token amount? Say "the FDIC has evaluated the business and agreed to assume everything up to $1m, and 99% of deposits above $1m/customer". That would mean no one actually suffers cashflow problems, but it would send the message that the next time, the depositors might not be so lucky, and they need to do a better job of assessing their banks' solvency.

On the contrary, the Fed came out and pretty much guaranteed that depositors in any bank will not lose money, regardless of FDIC limits [0]. It was people "assessing their banks' solvency" (all at the same time) that caused the bank run in the first place, and our government appears to want less of that. Instead, they want depositors to treat bank deposits as, well, "money in the bank".

Whether that is a good thing and ultimately healthy for the banking sector is another question, but you can certainly see how at the time they would not want to incentivize any more panic.

[0] https://www.federalreserve.gov/newsevents/pressreleases/mone...

> FDIC found a buyer for the bank at zero without too much difficulty, so in hindsight the taxpayer's money wasn't actually spent here

At risk, not spent. The FDIC will typically agree to take first losses to maximise the price it can get for bank assets.

The depositors are innocent in this. Except where they were also shareholders or executives.

The shareholders lost their investments. The executives got to pack up their personal items into cardboard boxes[0] under supervision by the authorities[1].

The vendors and companies doing business with the bank were also innocent but ended up being harmed by the failure since their outstanding invoices were never going to get paid. If you suspect a customer is going to fail - demand immediate payment. You want to be first in line.

[0] Ironically, one brand of records box commonly used for this purpose is named "Bankers Box".

[1] I have not-fond memories of doing this during layoffs.

How did the buyout work? Was the bank just temporarily illiquid and just need cashflow?

If you want the details, it is laid out here- https://www.fdic.gov/news/speeches/2023/spmar2723.html

Skimming that and other sources, I could not confirm the assertion that no net money was spent bailing out depositors. If that was the case, then the FDIC wouldn't need to replenish their insurance fund.

Your link says:

> The FDIC estimates that […] Of the estimated loss amounts, approximately 88 percent, or $18 billion, is attributable to the cost of covering uninsured deposits at SVB while approximately two-thirds, or $1.6 billion, is attributable to the cost of covering uninsured deposits at Signature Bank.

With the caveat that these were estimates and there was significant uncertainty.

I skimmed a couple of sources and thought I caught that First Citizens paid zero, net of some guarantees, for "all of SVB's assets and liabilities".

That was wrong: it looks like the price was more like negative 16.5 billion [0] so that was the cost to the FDIC.

I agree with other commentators that even if the price was zero and the guarantees to FCB were never tested, the taxpayers still paid money in expectation - they took a bet without getting paid for the potential downside. I don't really agree with characterizations [1] of the deposit insurance fund as "not being from the taxpayers" - a fee on bank deposits is in other countries described as a tax, and even if not, the DIF is at least backstopped by the taxpayer.

[0] https://www.theguardian.com/business/2023/mar/27/silicon-val...

[1] https://apnews.com/article/svb-banks-fdic-first-citizen-sili...

(2023)

More discussion at the time: https://news.ycombinator.com/item?id=36445278

Tencent and Bezos must be happy...

Note this article is dated June 23, 2023

I'll never forget all those Silicon Valley dyed-in-the-wool libertarians, the minute their assets wete at risk, were out there begging for socialism. Using every argument imaginable for why they need to be bailed out.

Pure and absolute hypocrites.

Socialism for the rich when it affects them; deregulation, austerity, and price hikes for everyone else. Fun fact: The rich in America receive 2x as much help as social programs do, and that doesn't even count the pork MIC projects that is the defense budget. John Oliver even had a recent episode of how difficult it is to get Social Security. It took me 9 years and a lawyer. You're better off selling your organs than expecting any sort of help in America that doesn't treat you like a criminal at every opportunity.

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