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Comment by fairity | Hacker News Reader

> The cold, hard fact is that the bank doesn't have sufficient assets to pay back depositors.

That's not true. As of December 31, 2022, Silicon Valley Bank had approximately $209.0 billion in total assets and about $175.4 billion in total deposits. Even if liquidating assets forced a 15% haircut, depositors will be made whole.

If a bail out is necessary, it's likely in the form of a short-term loan to make depositors whole sooner rather than later. And, such a bail out can/should be structured as a loan with significant interest in which case it's not really a cost to taxpayers.

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That $209 billion number was not marked to market. Their assets weren't worth that much then, and they're worth less now.

The cold, hard fact is that if the bank had sufficient assets to let depositors withdraw their cash, then they wouldn't be in receivership now.

You can argue that they actually do have sufficient assets, but they just can't access them right now, and we just need to wait ten years for bonds to mature.

But that argument only makes sense if you also say that large depositors should wait ten years to get their money out.

Naturally, a dollar that you might receive ten years from now is worth a lot less than a dollar you can actually spend today, and if regulatory sleight of hand obscures that essential fact to bail out the 1% of the 1%, that would be extraordinarily unjust.

Once again, my point is that your following statement is untrue: The cold, hard fact is that the bank doesn't have sufficient assets to pay back depositors.

It is not a cold, hard fact that they don't have sufficient assets. It's entirely possible that after liquidating their assets (on the time scale of months), they can make depositors whole even after factoring in the time cost of money.

Of course you're correct, nobody knows the future.

It's possible the $80 billion in mortgage-backed securities they bought yielding 1% and maturing in 10 years might be salvaged. They're now worth far less than they paid because interest rates are up to 5% and nobody wants to buy bonds that yield 1%.

Maybe this receivership will bork a thousand startups, throw a bunch more people out of work, and cascade into a larger recession, driving interest rates back down to 1%, and restoring the value of the mortgage-backed securities, and making the bank solvent again!

Or maybe a recession severe enough to drive interest rates back to 1% would also be severe enough to prevent homeowners from paying their mortgages, which wouldn't be great for the valuation of mortgage-backed securities.

Not unless interest rates plummet, no. The bulk of portfolio losses is from long term bonds losing value with the increase in interest rates. Allowing more time to sell doesn’t help you there, especially if you have to pay prevailing interest rates on any delay.

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