SVB’s investors will get $2b in public bailout money
Also, Silicon Valley is apparently a neighborhood in Manhattan?
This Monday (Mar 20), I’m doing a remote talk for the Ostrom Workshop’s Beyond the Web Speaker Series.
We were told that the Silicon Valley Bank bailout wasn’t a bailout: in a bailout, it’s the investors who get public money; but with SVB, it was the depositors. But, of course, the owners of SVB were also depositors in their own bank. All in all, SVB’s owners are entitled to $2B in public money.
When Biden said, “investors in the banks will not be protected. They knowingly took a risk and when the risk didn’t pay off, investors lose their money. That’s how capitalism works,” he was ignoring the fact that this isn’t how the law works.
Writing on Credit Slips, the incomparable Adam Levitin — the best source on bankruptcy law writing on the web today — breaks it down: “creditors of a subsidiary have no claim on the assets of a parent.” That means that the FDIC has no claim on the assets of the now-bankrupt holding company that owned SVB:
