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0 pointsrrrrrrrrrrrryan3y ago0 comments

Sometimes they've been able to make all the depositors while by wiping out all the investors and selling all the assets (buildings, office chairs, etc.)

What was unprecedented this time was the promise that they'd do it regardless of whether or not they could recover enough assets.

When Washington Mutual and IndyMac collapsed in 2008, some depositors indeed never got all their money back from their uninsured accounts.

One big difference was that those banks were knowingly engaging in hugely risky schemes, while SVB was ultimately burned by making overly conservative investments.

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fmajid3y ago

The government could make that promise because they have the power to tax, i.e. they have the guns.

https://www.federalreserve.gov/newsevents/pressreleases/mone...

"Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law."

Now you may argue it is unfair to other banks to penalize them for the failings of a few. What the SVB fiasco showed is that systemic risk is not just in the too big to fail institutions, but also ones like SVB that are important to specific sectors of the economy, like SVB for Tech or GMAC for cars. As it turns out, SVB had recently gotten TBTF and started the risk management compliance process, including the so-called "living will" to give the Feds a roadmap for an orderly wind-down of the bank, which must have been well-thumbed over the weekend. I expect one of the consequences of this is that more banks will be subject to oversight.

hnfong3y ago

> while SVB was ultimately burned by making overly conservative investments.

This isn't true, interest rates risk of securities of long duration (especially when current fed interest rate is zero) is well known to be risky by anyone who has a cursory understanding of the matter.

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