> should be criminally charged

For what crime?

If someone unintentionally but ineptly writes code that crashes Amazon on Black Friday, did they commit a crime?

It's possible to be criminally negligent. If you took unnecessary risks then it can carry a criminal element.

MBS are literally one of the safest looking bets imaginable, most likely Silvergate blasted a huge hole in their books and set off a cascade of trouble

Long term fixed income at near 0 percent interest when you might have to give the money you used to buy it back is very risky, as we see here.

What's a safer investment?

Another bank will acquire the company and make depositors whole. Government won't actually do the bailout, just facilitate/force it.

So where does the lost money come from? Another bank just gives it up?

SVB's shareholders take the loss in the value of their shares (which were down >70% before the regulators stepped in).

What will probably happen:

- Regulators will sell SVB to a bigger bank at a greatly reduced price which makes it worthwhile for the buyer.

- Depositors will be able to withdraw up to $250k cash starting Monday (the FDIC insured amount).

- Funds above that will eventually be recoverable in phases with the first chunk available by the end of next week (because SVB does have billions in cash, the issue is with the long-term value of their investments not meeting regulatory requirements.)

- If the system works properly, it's highly likely depositors will get 100% back. It may just take a little longer.

- There will be an investigation of the bank and its board's Risk Committee. Things aren't looking great for the CEO and the former Chief Risk Officer who unloaded some of their stock but that's more of an 'insider trading' beef against those individuals (ie unrelated to the bank's failure). So far, in terms of risk management, it doesn't appear SVB did anything out of bounds or even unprecedented.

Arguably, as conditions changed last year they chose a particular investment strategy which would normally have worked out but instead hit a pretty unlikely perfect storm of external factors including the Fed raising rates really fast. We don't have all the info on who knew what and when but my guess is: if there's "wrongdoing" here, it's probably more stuff like not taking the corrective steps they took this week sooner. They may have been hoping to "play through" the rough patch and it could have worked - but this time it didn't because there was a run by their unusually close-connected depositors in the tech startup community.

(Note: some folks are arguing that the Fed itself created a volatile situation for this bank (and others) by doing pretty unprecedented things which rapidly impacted the bond markets and other securities tied to Fed rates. I find this argument not entirely unreasonable. We won't know root causes until regulators unwind this.)

Another bank will commit to meeting 100% of investor deposits, take ownership of all SVB's assets, and provide liquidity to shore up any depositor concerns. Why would they do this? They get to acquire SVB insanely cheap (basically just the cost of covering the losses), get loads of new now-happy customers, and be hailed as a hero.

Unless, of course, this predicted white knight never appears because lots of other banks are secretly in similarly shaky positions where they are also holding lots of long-term Treasuries or MBS that are in some respects extremely safe but which also pay only 0-1% over 5-10 years, and those “assets” would need to be fire-sold at 65% of face value if the bank ever needed cash quickly…

And even if that white knight or even off-white-ecru knight did come along and want to buy the bank next week, what if they don’t decide to make every depositor whole, for those holding cash above FDIC limits? They certainly don’t have to do that. They could just buy the loan book. Or the warrants or early debt for a number of Silicon Valley startups. They can be vultures, not Santa Claus…

I think people don’t quite grasp what could be coming next.

>And even if that white knight or even off-white-ecru knight did come along and want to buy the bank next week, what if they don’t decide to make every depositor whole, for those holding cash above FDIC limits?

The wisdom on the street is that the FDIC will not let that happen as it would potentially cause a run on every bank outside the top 5. If there is a bank large enough to make every depositor whole without causing stress, then the FDIC (on a 10 year time frame) is handing you $100B "for free".

> I think people don’t quite grasp what could be coming next.

Agreed on that. The FDIC will make the best deal possible for depositors, but they'll spend a very busy weekend figuring out what that maps to in reality.

We don't know yet.

> Unless, of course, this predicted white knight never appears because lots of other banks are secretly in similarly shaky positions where they are also holding lots of long-term Treasuries or MBS that are in some respects extremely safe but which also pay only 0-1% over 5-10 years, and those “assets” would need to be fire-sold at 65% of face value if the bank ever needed cash quickly…

Just by coincidence Wells Fargo is having "technical glitches" affecting account balances the exact same day this happens.

Wouldn't the FDIC take an enormous loss if it facilitated selling SVB "insanely cheap"?

FDIC is funded by premiums from participating banks. Beyond the insured limit, there isn't really a guarantee that the "lost money will come back."

They bought assets and loaned to customers … pretty standard stuff