Very likely the FDIC will make a large fraction of uninsured deposits available very quickly. This will very support payroll and operations for most. It will dole out the remainder over weeks and months as it winds down SVB's assets. It will be a huge hassle but deposits will flow back. In the end there may be some loss, but not huge.
The losses may force some companies to raise more equity sooner than they would like. Companies with large cash requirements in the next months may have a problem.
Right now anyone selling deposits at a large haircut is locking in a loss they probably don't need to take.
There are many people screaming that the sky is falling. It is not.
Why people, particularly tech community leaders, are exaggerating the consequences is not to the point here. I think it were better that they were urging calm and careful working of the problem, precisely to avoid panicked mistakes like this, but they are not. Do not take predictions of disaster at face value.
Very sorry for anyone forced to deal with this mess but I very much believe that the vast majority will find it manageable. Take some time before doing anything hasty here.
Monday, FDIC allows $250k. Let's say within the same week they're able to provide 50% of the depoits back. There are still many companies that will not survive waiting +3 months for the other potential remaining 50%.
They still get a certificate for the rest which they could potentially get loan in the market against it. the loan maybe say only up to 75c on the dollar
that would mean 87.5% of deposits available within a week or so. It would still hurt but 12.5% of your cash is going to be do or die , you already have survival problems to worry about .
>Less than 24 hours after the bank’s collapse, founders were receiving cold emails from investors offering to buy up their deposits, according to messages seen by the Financial Times.
What instruments are out there for making this kind of deal? Just a straight forward contract or loan?
7 comments
[ 4.8 ms ] story [ 22.3 ms ] threadAnyone considering this should first research how bank failures are handled. Start with the FDIC statement for starters: https://www.fdic.gov/news/press-releases/2023/pr23016.html. Research how prior failures have been handled.
Very likely the FDIC will make a large fraction of uninsured deposits available very quickly. This will very support payroll and operations for most. It will dole out the remainder over weeks and months as it winds down SVB's assets. It will be a huge hassle but deposits will flow back. In the end there may be some loss, but not huge.
The losses may force some companies to raise more equity sooner than they would like. Companies with large cash requirements in the next months may have a problem.
Right now anyone selling deposits at a large haircut is locking in a loss they probably don't need to take.
There are many people screaming that the sky is falling. It is not.
Why people, particularly tech community leaders, are exaggerating the consequences is not to the point here. I think it were better that they were urging calm and careful working of the problem, precisely to avoid panicked mistakes like this, but they are not. Do not take predictions of disaster at face value.
Very sorry for anyone forced to deal with this mess but I very much believe that the vast majority will find it manageable. Take some time before doing anything hasty here.
that would mean 87.5% of deposits available within a week or so. It would still hurt but 12.5% of your cash is going to be do or die , you already have survival problems to worry about .
What instruments are out there for making this kind of deal? Just a straight forward contract or loan?