Jim Rickards
@JamesGRickards
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54m
Master Class: Many (not all) depositors at SVB were also loan customers. That’s “relationship banking.” Their owners can file bankruptcy, wipe out loans, wait for partial recovery of deposits, and pocket a nice profit. One of the unintended consequences of new “bail-in” rules.
https://twitter.com/JamesGRickards
If these SVB depositors/loan customers start filing for bankruptcy and stop making payments on the loans, then SVB’s custodians will have to start writing off the value of those loans on the books — which means its balance sheet is eroded even further.
The scenario Rickards has proposed there sounds like a sure way to guarantee that no depositor gets a penny more than their FDIC-insured $250,000 back.
Word to the Wise … Listening to ideas related to complex issues that are posted in a 280-character Twitter message is likely to make you mentally retarded.