FDIC is funded by premiums from participating banks. Beyond the insured limit, there isn't really a guarantee that the "lost money will come back."

Another bank will commit to meeting 100% of investor deposits, take ownership of all SVB's assets, and provide liquidity to shore up any depositor concerns. Why would they do this? They get to acquire SVB insanely cheap (basically just the cost of covering the losses), get loads of new now-happy customers, and be hailed as a hero.

Unless, of course, this predicted white knight never appears because lots of other banks are secretly in similarly shaky positions where they are also holding lots of long-term Treasuries or MBS that are in some respects extremely safe but which also pay only 0-1% over 5-10 years, and those “assets” would need to be fire-sold at 65% of face value if the bank ever needed cash quickly…

And even if that white knight or even off-white-ecru knight did come along and want to buy the bank next week, what if they don’t decide to make every depositor whole, for those holding cash above FDIC limits? They certainly don’t have to do that. They could just buy the loan book. Or the warrants or early debt for a number of Silicon Valley startups. They can be vultures, not Santa Claus…

I think people don’t quite grasp what could be coming next.

> I think people don’t quite grasp what could be coming next.

Agreed on that. The FDIC will make the best deal possible for depositors, but they'll spend a very busy weekend figuring out what that maps to in reality.

We don't know yet.

Honestly my pessimism is why I’m confident they’ll get a corporate bailout. I’d love to see the full contagion play out and we have a hard landing. Too many bullshit startups being propped up by free money.

> Unless, of course, this predicted white knight never appears because lots of other banks are secretly in similarly shaky positions where they are also holding lots of long-term Treasuries or MBS that are in some respects extremely safe but which also pay only 0-1% over 5-10 years, and those “assets” would need to be fire-sold at 65% of face value if the bank ever needed cash quickly…

Just by coincidence Wells Fargo is having "technical glitches" affecting account balances the exact same day this happens.

>And even if that white knight or even off-white-ecru knight did come along and want to buy the bank next week, what if they don’t decide to make every depositor whole, for those holding cash above FDIC limits?

The wisdom on the street is that the FDIC will not let that happen as it would potentially cause a run on every bank outside the top 5. If there is a bank large enough to make every depositor whole without causing stress, then the FDIC (on a 10 year time frame) is handing you $100B "for free".

Wouldn't the FDIC take an enormous loss if it facilitated selling SVB "insanely cheap"?

SVB's shareholders take the loss in the value of their shares (down ~60% earlier today).