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Comment by greatpostman | Hacker News Reader

It’s still not clear to me, are they making the depositors whole?

It sounds like they're trying to – and I think probably will – but it isn't a sure thing yet.

Resting in my armchair, I think they're trying to make deals with several other banks to absorb the SVB clientele. Maybe there's one bank that agrees to buy up a large chunk of the deposits and a couple smaller ones that participate as well. If there are multiple buyers, it spreads out risk and doesn't just give assets to a big big, and may help raise the price floor. The FDIC might cover the gap.

Yellen is suggesting they will, but there’s no details yet.

I don’t believe the FDIC has the legal authority to do so, but it’s highly possible that the treasury and/or Federal Reserve can cobble together some ad hoc legal justification.

There’s a lot of ways they can just do whatever they want.

It could be as simple as the fed purchasing a large long dated convertible note with very favorable terms from the new entity created for receivership and then turning around and selling that entity to another bank, now that the balance sheet is fine. Or the conceptual equivalent.

Yes, it's share holders who will realize the loss. Anyone owed money by the bank, ie depositors is now in a line to be paid as the FDIC sells everything and pays out the obligations.

Paid out to the limit set up by FDIC rules you mean?

Yes you're correct. Another poster has detailed the process, but most of the depositors monies will be paid back in due time.

Just to be clear we are on the same page. The FDIC limit is 250K and most startups had more than that...

"FDIC - Deposit Insurance FAQs" https://www.fdic.gov/resources/deposit-insurance/faq/

Right, but the bank still has substantial assets. The government is making sure the depositors get the bank's remaining money, not the shareholders.

The 250k will happen Monday and is not in question, the rest will come in bits via special dividends as they sell assets, it may or may not reach 100% of deposits over time.

If the fdic has any sense they’ll announce up front the exact figures though and announce it is close to 100% for depositors to make sure this is contained, ideally through a sale to another bank, if not they’ll have to run it. Bondholders and shareholders and svb employees get wiped out.

The bank has long term bonds that they loaded up on during the Covid interest rate lows. It's not possible for the uninsured depositors to get anything near 100% of their deposits since these bonds have lost much of their value. Unless there is a bailout, no depositor is getting anything near 100%.

75% of depositors had less than $250k on account and every one of these accounts will get all of their money tomorrow. The rest of the depositors will get $250k tomorrow and most of the rest of their money later.

Depositors will get a “special dividend” next week which is about 50% of their deposits. The other 50% will be coming as they sort out and sell the assets which would take a couple of months.

I'm hearing this 50% number everywhere but what is the source for it?

The 250k FDIC limit is just what they guarantee. If the bank has enough assets left they will pay over the limit to make depositors as whole as possible. Plenty of information on this topic in threads over the last few days.

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