[Dilbert San Diego]

I’ve heard conflicting things.

I heard one report saying that this bank had a strong balance sheet, but the problem is that it was insolvent, couldn’t sell off enough bond holdings to get cash for the depositors who were withdrawing money.

If that’s true, and the assets are in balance with the liabilities/deposits, then everyone eventually would get made whole. Even those with account balances over the $250K FDIC insurance limit.

They wouldn’t get made whole immediately, but eventually, they would get their money.

Which in that case, is very different from everyone assuming that all account balances over $250K are just gone and will never be recovered.

Of course, it’s too early to know yet, if anything illegal was going on in that bank , which led to their problems.

[rollo tomasi]

What is the maturity dating for all these bonds held by SVB along with the amount purchased? If they are long then they are screwed because depositors what their money out now. They had to sell over $2 billion Available-for-sale securities. Once that happened investors and depositors ran to the hills.

[volunbeer]

Thanks for 31 - I should have read that because I had the same question

[grey_whiskers]

https://www.netinterest.co/p/the-demise-of-silicon-valley-bank

You’re pretty close.
The problem is a lot of their bond holdings paid 1.99%.
But you can buy Treasuries right now for 4% or whatever.

So why pay full price for 1.99% a year when you can fork over the same amount and get 4% right now?

Only way to get someone to buy the 1.99% bond you’re trying to sell, is to *lower the price*.

They got an inkling of this and tried to sell SOME of their bonds, and do a stock offering to raise cash.

But then other people saw that, and figured out why. And started demanding their money now, now now.

Which created the very thing the bank was trying to avoid.

And most of those with over $250k in the bank, are small businesses, who need a lot of money, liquid, right now, to pay their employees. It’s not just people like (say) Scrooge McDuck who want to refill their swimming pool with solid gold coins.