No one has published what kind of discount the gov't applied to the assets it is leveraging to make uninsured SVB depositors whole. For all we know the government correctly forecast the likely future losses, allocated some extra assets from the SVB carcass, and functionally prepaid those maybe rate increases.

The problem, as it were, isn't some lurking or hidden loss, it's arguably that these answers aren't currently available and we don't have the slightest idea in the public what will happen if profits result from the bailout venture. This shouldn't be a "heads-I-win-tails-you-lose" redux.

Well we already know there are some nominal losses, because the FDIC did take over SVB.

No, that is not known at this time. It will take a few years to fully wind down the assets so as of right now no one knows if recovery will be <100%, 100% of deposits, or >100% of deposits (in which case general creditors may get some money).

The only thing we can be certain of is shareholders are wiped out and general creditors will take a significant haircut.

I is pretty clear they are underwater from their SEC filings. You know what exactly what their assets are and what their the fair market value of their securities. They reported the fair market value of their underwater loans.

I guess the FED could have bullied some banks into buying the securities at a higher rate, but the books themselves are transparent.

The market fluctuates. If those assets are held to maturity most will payoff without losses... even some of the subprime mortgage dreck from 2007 ended up recovering, SVB's assets are far less impaired.

FDIC took over because SVB failed to make a margin call Thursday 9 March. Not having the money today while operating as a going concern, and having the money never after a liquidation, are different things.

If you can recover full capital from a selloff, SVB wouldn't be insolvent in the first place. The reality is that you can't, which is why we are here. The haircut is probably, also, deeper than 1-10% because otherwise SVB would have borrowed this money against its own "capital". Clearly, that was not possible too. The haircut seems to be quite big but there is no information whatsoever about how big the losses are.

Nope. The haircut was only severe because of the immediacy of the bank run. With more buffer (presumably the new holders of SVB's assets have more cash!) and no bank run fears, those assets will eventually mature to their full value. The "haircut" only applies if you're forced to take the marked-to-market value today.

You're conflating two reasons why an asset might be worth less now, but more later:

1. Illiquidity. For example, there might be few people anywhere in the world with the expertise to accurately value some weird loan to a startup. If those prospective buyers are busy or undercapitalized, then the market may become inefficient, with best bids well below FMV. If we wait for those expert buyers to research the startup's credit risk, to raise more money themselves, etc., then the bids will eventually come back up to FMV. This is the classic "It's a Wonderful Life" style bank run, and was an important dynamic in 2008.

2. Time value of money. Assuming positive interest rates, a dollar later is worth less than a dollar now. When interest rates increase, the NPV of a future cash flow decreases, so the FMV of the corresponding asset decreases. This isn't a market inefficiency; if you assume that money is lent at interest and no riskless arbitrage opportunities exist, then it's just how money works.

The SVB's problem was #2. There's a liquid and orderly market for their assets, trading at prices close to those predicted by a simple NPV calculation; that price is just lower than the SVB wished. Hold-to-maturity accounting allowed them to ignore that, but that didn't change the economic reality.