Bankers After Hours

This is interesting (emphasis mine):

The U.S. government announced Sunday night that all depositors at the failed Silicon Valley Bank would have access to all their money on Monday morning.

Authorities said they were extending protection to depositors of a second bank, Signature Bank of New York, which state regulators closed on Sunday. The bank’s management has been ousted…

Taxpayers will not bear any costs for any losses associated with unwinding the bank, the statement said. The announcement from Treasury appeared to cover deposits worth more than the $250,000 limit for federal bank insurance.

That’s going to be a good trick. But my deep-seated fear of Peter Thiel buying it seems not to have passed. I still think someone needs to see if he shorted SVB, and I wouldn’t put it past him.

But wait! There’s this:

Separately, the Federal Reserve announced that it was creating a new lending facility for the nation’s banks, designed to buttress them against financial risks caused by Friday’s collapse of SVB…

…Under the new program, the Fed said it would provide loans of up to one year to banks, savings associations, credit unions, and other eligible depository institutions in return for collateral such as U.S. Treasuries, agency debt and mortgage-backed securities.

So, in the future, they will be the bank of last resort as these commercial banks have a liquidity crisis and end up being one of the debtors? Did I get that right?

The full statement is here, but this is the key:

Shareholders and certain unsecured debtholders will not be protected. Senior management has also been removed. Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law.

UPDATE 1: Dr. Jorge Caballero

PSA: If you’re following someone calling the US Government response to the #SVB bank-run a “bailout” then you can spare yourself a lot of anger and frustration by muting or ignoring them on this topic.

Shareholders and private investors in SVB will realize 100% of the loses. The $25b fund isn’t for them, and it’s not free money. It’s essentially a short-term loan that gets paid back with interest (and it will get paid back in the same way it was paid back after the 2008 global meltdown)