Bailing out the bank, and guaranteeing depositors' accounts are different propositions. The depositors are being made whole by the FDIC's own funds, which work pretty much like insurance. But the bank is done for. To be a bank, you need to have your depositors finds plus some.
It seems they will supplement the insurance funds with loans from the Fed, with theoretical payback from the FDIC to the Fed later on.
Not saying there's no fuckery in this, or that it's a fair resolution, but that's how they are playing it.
So Fed is gonna print up some bucks to give to FDIC, FDIC is gonna give cash to everyone who had money in Woke Valley bank, and everyone else will be hit by higher inflation? Am I understanding it right?
Partly right (mostly?) but, SVB does (did) have assets on the books and those will be liquidated to cover as much of the depositors as the selling of those assets bring in. SVB stock and bond holders are being told to piss off so biggest hit will happen to anyone that has money exposed to those directly and through things like hedge funds and mutual funds. Some of the money being lent is to cover in the short term until assets can be sold off.
Yeah, basically. But the inflation, while real, is insignificant when compared to the huge dilution from recent money printing for other stuff.
But the bank owners and stockholders (not the account holders) will actually lose their own money. And anyone who lent money to the bank won't be paid back.
"Shareholders and certain unsecured debtholders will not be protected. Senior management has also been removed. Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law."
This paragraph intrigued me. "Certain unsecured debtholders"?
That is curious, exactly how is an unsecured debt holder defined? Is that non citizens, foreign depositors, people that have taken a loan (without any security)? Will be interesting to see how that is defined.
To stem the damage and stave off a bigger crisis, the Fed and Treasury created an emergency program to backstop deposits at both Signature Bank and Silicon Valley Bank using the Fed’s emergency lending authority.
The FDIC’s deposit insurance fund will be used to cover depositors, many of whom were uninsured due to the $250,000 guarantee on deposits.
While depositors will have access to their money, equity and bondholders at both banks are being wiped out, a senior Treasury official said.
They will pass liability on to all other banks by increasing their insurance in order to recover the FDIC/Treasury "payout".
Banks will then of course raise their fees and rates.
So, seems no matter how its sliced, we pay for it.
Bailing out the bank, and guaranteeing depositors' accounts are different propositions. The depositors are being made whole by the FDIC's own funds, which work pretty much like insurance. But the bank is done for. To be a bank, you need to have your depositors finds plus some.
It seems they will supplement the insurance funds with loans from the Fed, with theoretical payback from the FDIC to the Fed later on.
Not saying there's no fuckery in this, or that it's a fair resolution, but that's how they are playing it.
So Fed is gonna print up some bucks to give to FDIC, FDIC is gonna give cash to everyone who had money in Woke Valley bank, and everyone else will be hit by higher inflation? Am I understanding it right?
Partly right (mostly?) but, SVB does (did) have assets on the books and those will be liquidated to cover as much of the depositors as the selling of those assets bring in. SVB stock and bond holders are being told to piss off so biggest hit will happen to anyone that has money exposed to those directly and through things like hedge funds and mutual funds. Some of the money being lent is to cover in the short term until assets can be sold off.
Yeah, basically. But the inflation, while real, is insignificant when compared to the huge dilution from recent money printing for other stuff.
But the bank owners and stockholders (not the account holders) will actually lose their own money. And anyone who lent money to the bank won't be paid back.
"Shareholders and certain unsecured debtholders will not be protected. Senior management has also been removed. Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law."
This paragraph intrigued me. "Certain unsecured debtholders"?
I just refuse to believe that a bunch of rich leftist elites will suffer a cent
That is curious, exactly how is an unsecured debt holder defined? Is that non citizens, foreign depositors, people that have taken a loan (without any security)? Will be interesting to see how that is defined.
There are multiple classifications (tranches) of debt.. Secured by Assets; Secured by equipment; ...; ...; and, Unsecured ...
People who bought bonds issued by SVB?
They just gonna print up some more $$$
Cnbc article
They will be bailed out slowly in little bits, by those who use the banks.