Thread by @heydavidlee

In this Silicon Valley Bank situation, it might be worth giving a little credit to the #FDIC. Most people are talking about #SVB as a once-in-a-lifetime event. But, FDIC has gone through this 562 times in the last 22 years. Bank failures are not that rare.

For everyone in a panic that the money is lost -- that's probably not the case. The assets of SVB are not worth nothing. SVB went down for *liquidity* reasons, not *solvency* reasons.

On Thursday, depositors initiated $42 B (!) of withdrawals. This letter from the California regulator says that SVB ended the day with short around a billion. (this would actually be quite a feat if they actually met $41B of those withdrawals... so I don't think they did)

But, let's just say they met half of that... So deposit liabilities are down from ~$175B to $155B. On Wednesday, SVB's Total Assets were worth about $209B. So even with a 25% impairment, they should be able to make all depositors whole without even touching FDIC insurance.

It's worth mentioning that this is not like the WaMu, Lehman, Bear Stearns situation. In the GFC, the industry had NO IDEA where the bad loans were hidden. So there was a huge markdown on the whole MBS asset class. There was no value transparency, so everything was discounted.

While it might be difficult to value the pre-IPO shares on SVB's balance sheet, the value and price of all the fixed income securities are not a question. Most of that money will be should be recouped, and most (if not all) of what is lost should be covered by FDIC.

I really think the best outcome for everything is for FDIC to find a whole and complete buyer before Sunday evening. US Bank / Bank of the West / Union Bank seem to make the most sense. (if nothing else, it will give you Lebron-level Private Bank and Corp Treasury clients)

"There are no libertarians in a bank run" as evidenced by David Sacks asking for a "Top 4" rescue. But, I do not think that will happen. Wells or BofA would be a good geographic fit... but I think regulators keep their powder dry, in case there is contagion beyond SVB.

All in all -- it's really unfortunate situation for thousands of really hard working entrepreneurs and teams. I have really been impressed with every person I've met at Silicon Valley Bank. My heart goes out to them as they navigate this crisis.

I might be underestimating the SVB situation, but I think the concern around lost deposits and start-up companies folding from this is not nearly as high as the malaise on Twitter would suggest.

Best case is that a more stable bank buys everything this weekend. Medium case is that the parts are broken up and it takes a few weeks to get the money moving again. Bad case is that go into full liquidation and it takes a few months to get everyone's cash back to them.

In summary, the $175 B in deposits did not disappear. The assets of #SVB should cover it -- and if not, the FDIC, regulators, and government safety nets will protect the billionaires and future billionaires just like they do the average Jane's and Joe's when their banks fail.