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Let's be real, letting SVB and Signature hold on to their assets and not fire selling them is good for whatever Big Bank (JPMC, Citi) decides to buy those same assets themselves at a discount. This ain't about the depositors, it's about Good Ol' bank consolidation.
But they aren't holding on to their assets. They've been seized and put into receivership.
Who is buying those assets from the FDIC to fulfill their obligations?
Instead of liquidating, these assets are probably going to some big bank are they not?
The assets are going to the fed and the fed is giving depositors par, the fed will then hold the asset to maturity.
If a bank decides to buy assets and liabilities of sivb or signature they will assume both the assets and liabilities. They won’t benefit from this.
The fed could have done nothing in which case by Wednesday there likely would have been a bank holiday as every depositor moved money out of regional banks to the four banks (they are essentially the fed with retail branches).
So you could argue this hurt the big banks because it didn’t give them more deposit base.
https://www.fdic.gov/about/strategic-plans/strategic/receivership.html
this says Under the FDIC act that they must move the assets quickly. That's why I ask, if they have to move them quickly who's buying them?
They’re lending them to the fed at Libor plus 50bps and the fed is giving them par.
According to this it's the 1 year overnight swap rate + 10bps
https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20230312a1.pdf
And that's so banks can handle any runs, and use their assets as collateral.
The other link I sent you is based on the FDIC receivership. Which is what is going on with SVB.
