Most FDIC bank takeovers are slow moving crashes, allowing for a longer negotiation where buyers can evaluate the loan portfolio they are buying. This is a reaction to a classic run, so no time for that.

Chase has wanted this bank for years. Either they are taking advantage (takeover) or <conspiracy theory unfounded> helped accelerate it.

Most of the good people moved to First Republic over the past few years. That caused me to have my current startup at FR after more than 25 years of SVB.

So I don’t think there was much for Chase to buy. SVB has been in decline for a while

Just saw a First Republic stock chart in crash territory, contagion?

Today's price range: 45-95

https://www.cnbc.com/quotes/FRC?qsearchterm=first

S&P bank sector is down across the board, but presume it will regress to the mean fairly soon. Aren't many other banks with exposure similar to SVB's.

First republic is in the same region and has a ton of tech clients. Collateral damage. So far it looks like they don't have the same exposure as SVB did though.

Interesting you say this, their stock is up despite rest of my portfolio being red

Flight to safety? Like when there was the Southwest Airlines December debacle - AAL skyrocketed for a bit.

So what I think is happening here is that if you take over a bank the traditional way, you need to mark-to-market all of the bank's assets -- so all of the losses from the long-dated MBS that would be perfectly fine if held to maturity would have to be recognized immediately, just crushing the balance sheet of anyone who bought it. Probably trying to line someone up who can either absorb that loss, figure out a way to recapitalize without recognizing the loss, or get access to some other lending facility.

But from what I read it's common for FDIC to "sell" to the acquiring bank at a price that wouldn't make a loss.

So if you marked to market all those long term bonds and then sold SVB to a bigger bank at the resulting (possibly negative) valuation. Why wouldn't a big bank take that deal?

Exactly. The fact they didn't have a bank lined up points very heavily to the fact that they are not going to be made completely whole. In the past, the FDIC has found a buyer and as part of that process guarantees some amount of the losses. IE: Savior Bank buys Failed Bank for pennies on the dollar, or even for a negative amount. They get all deposits, insured or not, and all assets--meaning loans. Then, the FDIC guarantees they'll make Savior Bank whole some percentage of losses on assets that go bad. Sometimes 80% or more

This arrangement usually results in all depositors being made whole, and the FDIC fund not taking any, or many, actually losses, because most of the loans will still pay back, at least partially

They also do this before seizing the bank, so that it's all very orderly and calms any panics

SVB was looking for a buyer on the open market and that failed--no surprise

That the FDIC also could not find a buyer that they could subsidize and announce the same day as the seizure is very damning. I would be shocked if someone comes in later and tries to buy it

Also, the fact the seizure happened in the middle of the business day, and not at the close of business yesterday points to a somewhat disorderly and rapidly deteriorating condition. I think maybe the run picked up a lot faster than they expected

That's a really good point, FDIC usually swoops in Friday night; and this was closed on a Friday during business hours, that's actually insane; they couldn't hold on 8-10 more hours, the run must have been really bad.

Even WAMU (a huge FDIC action) was done after banking hours closed on the west coast. https://en.wikipedia.org/wiki/Washington_Mutual

I just saw recent footage of 40-50 people standing in line outside an SVB branch waiting for service (withdrawals most likely).

I would surmise that the news spread fast among the tech demographic the bank services and the run is really bad.

And in this case, tech savy individuals are willing to send $XXM in 6 clicks, 3min after getting a slack message. That's a pretty quick kind of run relative to old-school 'stand in line for your personal life savings' kind of run.

It doesn't really work this way. It takes time to set up acquisitions, even by the FDIC, and the "FDIC stormtroopers sell bank overnight" is apocryphal. They do weeks of legwork leading up to the actual handover of the bank.

We don't know the timeline here, but speculating that "it must be bad" because things didn't happen overnight isn't really responsible.

During 2008 crisis it worked exactly as described. Most failures resulted in the failing bank’s acquisition being decided before the seizure happened. The way this happened is very rare

I think those actions worked out of hours because the bank's bosses let the FDIC know they were insolvent before a run happened, though? This time the bosses thought they could hold on.

If so, then the difference doesn't imply much about the banks asset level, just the idiocy of its bosses.

I mean...I think we're describing the same thing? So sure, it worked "exactly as described", but I think most folks on HN have no idea what "as described" means, in this context.

A lot of folks (like the top of thread) want to suggest that because it didn't play out like the 60 minutes story, it must mean something significant. That story barely touched on the weeks of leg-work the FDIC did for that particular bank, for example. If you weren't paying close attention, you'd miss it.

* * *

When was the last US bank failure where depositors lost money?

Appears to be 2020, from a cursory Google search.

https://money.stackexchange.com/questions/129772/has-anyone-...

The oft quoted 'nobody has lost money' is from the FDIC, and specifically says 'insured deposits.'

What is "SVP"?

I suspect a typo for SVB, "Silicon Valley Bank".

The size of this failed bank is quite abnormal. The business of this failed bank is quite abnormal. The surprising thing may be that the find anyone willing to take it out of their hands - let alone by Monday.