[wstuartcl]

The other good news is that it will probably net out to costing little to nothing in the long term as they had enough assets to cover liabilities -- it was a liquidity crunch. Seems very much relevant to what the FDIC was created for -- to make depositors whole and stop contagion. It would be different if the bank was not properly asset backed.

[yunwal]

> The other good news is that it will probably net out to costing little to nothing in the long term

If it cost nothing with no risk, surely a larger banking institution would have been willing to step in to solve it.

> Seems very much relevant to what the FDIC was created for

The FDIC was created to be an insurance corporation, not to bail out banks at their discretion.

[actually_a_dog]

Banks are not being "bailed out." Depositors are. SVB no longer exists. Now, you can certainly argue over the merits of bailing out depositors, but disingenuously framing it as a "bank bailout" is not the position to start from.

On that point, the government does have an obligation to "provide for the common defense and the general welfare of the United States," and that is clearly one of the overarching purposes of the Constitution itself. I find it hard to argue that saving tens of thousands of jobs[0] but by making the depositors whole, when the assets of SVB, illiquid though they may be, can cover 60-90% of the cost, is at all the wrong thing to do. This is literally part of why we have a government, and why markets are regulated at all.

[0]: I couldn't find a good source on the number of jobs, but that seems like the correct order of magnitude, anyway.

[fisherjeff]

The only risk for other banks is opportunity cost: right now, there are much more productive uses of their money than buying old agencies at par. If you had $200b or whatever laying around, you could buy their portfolio and make about the lowest risk $10b there is. But if you just bought new agencies at the same durations instead, you could easily double that.

EDIT: To clarify, this is the primary risk at large banks, where they could absorb a chunk of the bonds without significantly affecting their average maturity. Smaller banks obviously risk replaying the SVB run.

[wstuartcl]

The FDIC charter: The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by the Congress to maintain stability and public confidence in the nation’s financial system. The FDIC insures deposits; examines and supervises financial institutions for safety, soundness, and consumer protection; makes large and complex financial institutions resolvable; and manages receiverships.