> So, what’s next? FDIC finds a buyer for the assets, perhaps a private bank or a a pseudo-government body who has the ability to wait till maturity, and in the meantime, everyone gets all their deposits.
Yes, that's happens in the ideal case. However, due to the rise in interest rates, the market value of SVB's assets is likely lower than $175B at the moment; so it might prove challenging for FDIC to find a buyer for these assets at the required price to give everyone their deposits back. Even well-capitalized entities that have the capital to refund depositors now and the ability to wait till maturity will not pay the face value for these bonds, as they can get a better return by investing that money somewhere else (such as treasuries).
That's true, I should've said that the market value of SVB's assets is likely lower than their deposits at the moment. Of course we don't know for sure, but if the market value of assets exceeded deposits, they wouldn't have had to close down.
Yes, that's happens in the ideal case. However, due to the rise in interest rates, the market value of SVB's assets is likely lower than $175B at the moment; so it might prove challenging for FDIC to find a buyer for these assets at the required price to give everyone their deposits back. Even well-capitalized entities that have the capital to refund depositors now and the ability to wait till maturity will not pay the face value for these bonds, as they can get a better return by investing that money somewhere else (such as treasuries).