They are almost certainly not going to let the bidder leave the deposits. The way the fdic actually protects deposits most of the time is by selling the business to another bank, so that’s what this auction is for.
FDIC probably will not put in anything: there are sufficient assets to cover the insured amount.
The SVB name is worth something. If FDIC can liquidate assets and pay 90 cents on the dollar for deposits, a bank who will acquire and give 95-100 cents on the dollar is better for everyone.
It would be more accurate to say, the expertise and relationships that come with SVB, and the access to the market that SVB served... are worth something. Even if all of these are damaged.
> “Let me be clear that during the financial crisis, there were investors and owners of systemic large banks that were bailed out, and the reforms that have been put in place means that we’re not going to do that again,” Yellen told CBS’ “Face the Nation.” “But we are concerned about depositors and are focused on trying to meet their needs.”
Senator Mark Warren said:
> “The shareholders in the bank are going to lose their money, let’s be clear about that. But the depositors can be taken care of,” he told ABC’s “This Week.”
These statements tend to indicate that the government is not going to bail out the bank owners (shareholders of the bank). But they are concerned about the depositors, presumably because they realize that there's a risk that if a fairly large (top 20) bank is allowed to go under, many smaller banks could be at risk of a run.
These statements are incredibly vague and could mean anything. I certainly don't interpret them as that the US government has decided to pitch in additional money, because if they have, it makes a whole lot of sense for them to explicitly, clearly and undeniably announce that: the whole goal of such an action would be to aid confidence in the financial system, and announcing that the US government is standing behind it with its full faith and credit is the best way they have to do that.
There are not unambiguous statements, and the senator's statement is alone not sufficient to guarantee anything (he's one of 100 senators, to say nothing of the House). But if high level officials are making statements like these, it does tend to indicate that there's a significant chance that depositors will be looked after (perhaps not fully, but to some extent beyond the $250k FDIC limit).
Which they would have been _anyways_... Seriously, the FDIC insures 250k$ IF and only if the banks assets are insufficient for _that_. In other words, as long as SVB has enough assets to pay out 250k$ per ~account. All the FDIC is going to be doing is the administration [1] of the distribution.
Whatever assets are left beyond the first n_accounts * 250k$ will be distributed among the account holders with extra balance. Some of _that_ money will also be distributed tomorrow morning. So in fact all depositors with more than 250k$ balance will be "looked after, but not made whole" TOMORROW. The question remains ,IF there aren't enough funds to make everyone completely whole, what happens then. There is _zero_ indication in those statements, that there would be money added to the pile that will be generated by the auction of SVB's assets.
[1] not sure if there's a fee for that, but it would be negligible anyhow
The FDIC is looking to sell (actually give away) the business whole with the minimum possible contribution, they aren't differentiating between deposit classes, unless the buyer specifies that as a part of their bid, which is unlikely in the case of SVB.
