Comment by mixdup | Hacker News Reader

Comment by mixdup | Hacker News Reader

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Exactly. The fact they didn't have a bank lined up points very heavily to the fact that they are not going to be made completely whole. In the past, the FDIC has found a buyer and as part of that process guarantees some amount of the losses. IE: Savior Bank buys Failed Bank for pennies on the dollar, or even for a negative amount. They get all deposits, insured or not, and all assets--meaning loans. Then, the FDIC guarantees they'll make Savior Bank whole some percentage of losses on assets that go bad. Sometimes 80% or more

This arrangement usually results in all depositors being made whole, and the FDIC fund not taking any, or many, actually losses, because most of the loans will still pay back, at least partially

They also do this before seizing the bank, so that it's all very orderly and calms any panics

SVB was looking for a buyer on the open market and that failed--no surprise

That the FDIC also could not find a buyer that they could subsidize and announce the same day as the seizure is very damning. I would be shocked if someone comes in later and tries to buy it

Also, the fact the seizure happened in the middle of the business day, and not at the close of business yesterday points to a somewhat disorderly and rapidly deteriorating condition. I think maybe the run picked up a lot faster than they expected

That's a really good point, FDIC usually swoops in Friday night; and this was closed on a Friday during business hours, that's actually insane; they couldn't hold on 8-10 more hours, the run must have been really bad.

Even WAMU (a huge FDIC action) was done after banking hours closed on the west coast. https://en.wikipedia.org/wiki/Washington_Mutual

I just saw recent footage of 40-50 people standing in line outside an SVB branch waiting for service (withdrawals most likely).

I would surmise that the news spread fast among the tech demographic the bank services and the run is really bad.

And in this case, tech savy individuals are willing to send $XXM in 6 clicks, 3min after getting a slack message. That's a pretty quick kind of run relative to old-school 'stand in line for your personal life savings' kind of run.

It doesn't really work this way. It takes time to set up acquisitions, even by the FDIC, and the "FDIC stormtroopers sell bank overnight" is apocryphal. They do weeks of legwork leading up to the actual handover of the bank.

We don't know the timeline here, but speculating that "it must be bad" because things didn't happen overnight isn't really responsible.

During 2008 crisis it worked exactly as described. Most failures resulted in the failing bank’s acquisition being decided before the seizure happened. The way this happened is very rare

I think those actions worked out of hours because the bank's bosses let the FDIC know they were insolvent before a run happened, though? This time the bosses thought they could hold on.

If so, then the difference doesn't imply much about the banks asset level, just the idiocy of its bosses.

I mean...I think we're describing the same thing? So sure, it worked "exactly as described", but I think most folks on HN have no idea what "as described" means, in this context.

A lot of folks (like the top of thread) want to suggest that because it didn't play out like the 60 minutes story, it must mean something significant. That story barely touched on the weeks of leg-work the FDIC did for that particular bank, for example. If you weren't paying close attention, you'd miss it.

It seems like there’s a lot of uncertainty around the dollar amount of the deposits in excess of FDIC limits which would make it difficult to figure out a deal.

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