Jim’s Daily Rant. A Humble Banker’s First Time at Bat.
- Jim Costa
- Mar 11, 2023
- 2 min read
The failed Banking ball game has always been played the same.
When FDIC closes a bank it kinda does it this way:
Assumptions: Net Asset Valuation: 100 M
Insured Deposit: 30 M
Uninsured Deposits 180 M
Other Creditors 20 M
Net Asset Valuation at closing Date: $100 M
Minus insured Deposit Funds Payout ( 30 M)
(Payment back to FDIC)
Available cash to all Uninsured Depositors $70 M
Remaining Cash For Other Creditors: $0 M
Therefore, Uninsured Depositors received 39 Cents on the dollar (70/180);
other Creditors received Zip.
However, being that SVB will be the first bankruptcy under Bail In Protection,
their liquidation may go somewhat like this:
Assumptions: Net Asset Valuation: 100 M
Insured Deposit: 30 M
Uninsured Deposits 180 M
Other Creditors 20 M
Net Asset Valuation at closing Date: $100 M
Minus insured Deposit Funds Payout $30 M (Payment back to FDIC)
Available cash to all Uninsured Depositors $70 M
Remaining Cash For Other Creditors: $0 M
Therefore, Uninsured Depositors will someday receive 39 Cents on the dollar (70/180);
other Creditors received Zip.
BUT Uninsured Depositors do not receive cash, they get a redeemable certificate to receive 39 cents on the dollar in another 40(?) years.
Therefore, the $70 M cash due them is added back to the bank for its use. $70 M
All other creditors get zip.
If all the above is somewhat correct, one can assume the new bank owner can lend out the $70 M a thousand times, adding $70 Trillion in assets to the new bank.
I believe this is what William Mount is trying to say in his podcast Why Did The FDIC Seize 2 Perfectly Sound Banks?
He suggests that FDIC will now cannibalize banks to feed the broke Corporate government.
Comments