The $250K is the FDIC covered limit. Amounts greater than that are not insured by the Feds. If the bank fails, the Feds ensure that depositors get at least $250K per account.
If SVB is insolvent than customer deposits are not worth their full value. The phrase “making all depositors whole” would be the Feds covering the difference. Anything beyond the $250K per account would be money that they are not entitled to per US banking regulation.
> If it were the latter then bailouts happen all the time without bank failures or FDIC takeovers (all transfer > 250k).
This has nothing to with bank transfers. It’s about deposit insurance.
> Anything beyond the $250K per account would be money that they are not entitled to per US banking regulation.
This isn’t correct. SVB has assets which are still worth something, even if they are less than their total liabilities. Unsecured depositors are first in line for that money, and the $250k fdic insurance limit has nothing to do with it.
As others have pointed out, those assets are not liquid. And selling many of them on short notice, will cause all other kinds of problems. Takes time and you wont get the money equal to their current valuation.
> Anything beyond the $250K per account would be money that they are not entitled to per US banking regulation.
It's my understanding that FDIC considers $250k the minimum they'll cover and they can (and have) cover(ed) higher through raised premiums to other banks.
This situation isn't a handful of big individuals losing some of their money and the majority being insured under FDIC, the bank's customers is mostly small and medium businesses which have lost all of their money.
I hate bailouts and think we should allow more failure but it would be a horrendously bad idea to let a bunch of businesses fail under no fault of their own.
They'd likely be looking at multiple tens of thousands of unemployed individuals near instantaneously along with accelerated layoffs at unaffected businesses as clients disappear overnight / businesses get spooked.
I’m surprised to hear this perspective.
I think most people understand a bailout as cash injection. Not that you get more than what the government insures.
If it were the latter then bailouts happen all the time without bank failures or FDIC takeovers (all transfer > 250k).