Silicon Valley Bank: The One Question Nobody's Asking

Silicon Valley Bank has been (kinda) bailed out, but what could be down the road?
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[@cjimcook]

I predict a lawsuit against the FDIC is coming: FDIC bailed out all depositors at SVB, then said they will raise the rate they charge other banks for depositor insurance. The banks will not like the increased charge, especially since they thought they were paying for coverage up to $250,000 per account, not unlimited coverage. So, if I were a bank faced with much higher insurance charges on a product that I never agreed to, I would seek legal advice for starting a class action lawsuit. Hand me the popcorn when it starts.

[@zwanzikahatzel9296]

the gov can do whatever it wants, if they sue, the gov is just gonna change the law to unlimited coverage. honestly that's what should have been the case in teh first place, banks in a risky business and gamble ur money away so make them pay for it.

[@1donjuego]

How does the fdic backstop for svb depositors create moral hazard for bankers? The investors in svb are losing everything. So how does this give an incentive to take the same risk svb did?

[@SJMLIEBERMAN]

Thank you Patrick for posting and sharing.

[@joelcorley3478]

All of their accounts were insured. Only 7% of total deposits were insured. There's a difference.

[@Sylvan_dB]

Did they reinstitute the "reserves" part of fractional reserves? Decades ago they stopped requiring any reserves (0% reserve ratio) for anything except checking accounts. The reserve required on checking accounts was 10-ish years ago and I wasnt aware it had been increased above zero.

[@rpmartin2485]

Good analogy, and I agree with the premise, but you failed to mention all the people that lost their jobs, and in turn SVB lost the steady intake of their customer’s deposits.

[@claytonspann8032]

Great explanation and much appreciated, could you clarify your statement that only 7% of accounts were insured? Did you mean to say fully insured? I thought the FDIC insured accounts up to $250K, so if I have $500K at SVB I would get $250K back. Trying to understand if 93% of SVB customers had some other type of deposit that was not FDIC insured. Thanks again for your great videos.