03-12-2023, 01:20 PM
Equity holders of SVB have been, and should be, wiped out. Debt holders will take a severe haircut, if not be wiped out. Insured depositors will be made whole, and should be able to access their money tomorrow.
The question is what happens to the uninsured depositors. By definition, “uninsured” means you take some risk. Historically, even uninsured depositors have recovered all their money during a bank failure, but that process isn’t necessarily immediate. As I’ve posted, come Monday, they will have access to a third to half of their uninsured deposits, which hopefully will be enough to make payroll and deal with immediate payments. Those who don’t should be able to access a line of credit somewhere else to tide them over, and for startups, their VCs can and should be able to help; after all, VCs are invested, literally, in ensuring that their portfolio companies don’t fail due to something like this.
I think there will be bids for SVB. Their customers are very valuable, and who wouldn’t want to be the knight in shining armor that “saves” Silicon Valley. That being said, if they don’t, then the FDIC will slowly unwind SVB’s positions, and the uninsured depositors will get most, and hopefully all, of their money back, though it may be tied up in the wind down for a while.
Irony aside, I think there is an active debate about whether taxpayer money should be used to make uninsured depositors whole, in the case where there’s no buyer and SVB’s assets can’t cover all the depositors. I have mixed feelings about it.
BC
The question is what happens to the uninsured depositors. By definition, “uninsured” means you take some risk. Historically, even uninsured depositors have recovered all their money during a bank failure, but that process isn’t necessarily immediate. As I’ve posted, come Monday, they will have access to a third to half of their uninsured deposits, which hopefully will be enough to make payroll and deal with immediate payments. Those who don’t should be able to access a line of credit somewhere else to tide them over, and for startups, their VCs can and should be able to help; after all, VCs are invested, literally, in ensuring that their portfolio companies don’t fail due to something like this.
I think there will be bids for SVB. Their customers are very valuable, and who wouldn’t want to be the knight in shining armor that “saves” Silicon Valley. That being said, if they don’t, then the FDIC will slowly unwind SVB’s positions, and the uninsured depositors will get most, and hopefully all, of their money back, though it may be tied up in the wind down for a while.
Irony aside, I think there is an active debate about whether taxpayer money should be used to make uninsured depositors whole, in the case where there’s no buyer and SVB’s assets can’t cover all the depositors. I have mixed feelings about it.
BC