[collectedparts]

I think it's more mark to market vs "par" value trickery.

SVB had plenty of assets at "par" value or held to maturity value. But it was insolvent if you marked those to market.

So FDIC is letting First-Citizens buy the assets at closer to their true market value. 20% loss.

That's my understanding but it is kind of a distressing conclusion. SVB had no enterprise value, and the outcome we're getting is financially the same for FDIC as if they just firesold the assets and did a pure winddown?

[nordsieck]

> That's my understanding but it is kind of a distressing conclusion. SVB had no enterprise value, and the outcome we're getting is financially the same for FDIC as if they just firesold the assets and did a pure winddown?

Could you explain why that's a distressing conclusion?

[collectedparts]

Part of me wanted to believe that SVB's failure wouldn't lead to real financial losses for the FDIC. That there was a weird panic bank run, and then the steady hand of a regulator was needed, but there really were enough assets.

Not saying I studied the data and concluded that; it's just what I wanted to believe.

$20b loss to FDIC insurance fund feels high. It still meets the technical definition of "no losses borne by taxpayers" but it's a lot of money. I've gotta believe it's among the largest ever if not the largest ever losses borne by the FDIC for a single bank failure.

Distressing – some combination of having been in denial about just how screwed up SVB was financially, paired with concern for what this will mean if the dominos keep falling.

[bradleyjg]

The issue with a fire sale is that the seller doesn’t get the true market value. The market value is the value. Every time someone uses face amounts to claim asset value he or she is being entirely disingenuous.

[balderdash]

I generally agree, but it’s not that cut and dry.

If I have $100 in assets in 10yr zero coupon treasuries at par issued in a 0% interest rate environment, and funded with $100 of liabilities in the form of deposits paying 0%, and rates increase 1% and the rate I’m paying depositors increases to 0.1%. My bonds are now only worth $90, but I’m going to receive $100 at maturity, and so I’m really only out the the $1 on interest paid to depositors over 10 years, not the $10 mark to market loss. In this example I’d say your economic impairment is closer to $1 vs the $10 implied. judging at the asset side of the ledger in isolation doesn’t give you the whole picture.