[Serious] SVB’s failure is not the same as FTX and a bailout does not mean the printer goes brrr

There are many SVB posts and comments going around today in this sub that are taking great liberties with what is actually going on with SVB’s failure.

SVB’s failure is like FTX’s failure

Businesses fail, not all leaders are good leaders, but what happened with SVB is very different than FTX. SVB ended the year with $209 billion in assets and $175 billion in deposits. This is book value and SVB had large amounts of 10-year bonds that are paying less than 2% interest. Many of these assets are worth less than the book value, but the issue is liquidity. SVB is not liquid enough to withstand a bank run.

Sam Bankman-Fried and FTX made customers’ money just disappear, there was blatant fraud. AlixPartners spent 2,545 hours in February trying to figure out where the money disappeared to.

This is not to say that there was no fraud involved with SVB, but the SVB failure has very different fundamentals than FTX.

The FDIC is making the money printer go brrrrrrr

Yes, the FDIC technically has the ability to turn on the money printer, but that is not what is currently happening with SVB. The FDIC’s plan is not to turn on the money printer Monday morning and make all ~$175 billion available for immediate withdrawal. There are thoughts that ~30% to 50% will be available for uninsured deposits at the beginning of business on Monday. There currently is an auction underway for SVB with hopes to be able to repay all deposits with the proceeds.

There might be some government money used later in the process, but the money printer is not going brrrr right now and SVB’s assets are being used to repay the debts.

​

Sources 1, 2, 3