I’m not sure on this, but part of the issue may have to do with who legally owns the bank's assets because the bank is in the private sector, and what the FDIC and regulators are legally allowed to do with those assets in the event of a bank run and failure. It’s one thing for the FDIC/ regulators to sell those bonds immediately in its efforts to pay depositors in its standard insurance role. It is another thing for the government to hold onto those bonds potentially for years until they mature to recoup losses. That sounds like nationalization of the bank, which doesn’t happen in the U.S. historically.
Normally, in a bankruptcy there is a line of creditors with a hierarchy of who gets paid first. I could see there being legal wrangling here if the government held the bank’s bond portfolio after backstopping depositors. The argument could be that the bank investors want to seize that bond portfolio themselves to make themselves whole. A SVB stock or more likely bond investor could argue that the bank’s assets now that depositors are secure belong to investors. The government selling those assets immediately to pay depositors eliminates any potential legal ambiguity, even if that sale is at a loss.
I actually think nationalization of failing banks makes a lot of sense. Otherwise, you end up with capitalism on the way up and socialist taxpayer funded bailouts on the way down. Bailouts here are socialism for the rich. In Sweden when they had a similar banking crisis to our 2008 one in the 1990s, they conducted a structured bankruptcy of the failed banks and nationalized them:
https://en.m.wikipedia.org/wiki/Sweden_financial_crisis_1990–1994
Krugman recommended the government do the same thing here as Sweden in 2008 but was ignored. Instead, the financial sector got a big taxpayer funded gift with few long-term repercussions for any of the largest companies and the executives involved.
As for options to avoid “government-induced erosion” from rate increases, floating rate debt comes to mind. But then investors are trading duration or interest rate risk for credit risk.

Hi OJ, Not to answer your question, but I remain curious about why the Treasury couldn't (regs) or wouldn't provide a 'temp' bailout/backstop. Perhaps there is fear of setting a precedent. This is very complex without doubt.
As to part of what you noted about backstopping a business, versus backstopping/bailout of a financial institution that is part of the FDIC/banking system; I recall this from the market melt in 2008. The TARP program had particular criteria for receiving bailout monies. The list and description is here. The program went further into the economy other than financial institutions. Being from Michigan, I gave a lot of attention to what was taking place with the auto industry and the many ancillary organizations that supported this vast industry. If the big 3 auto were to melt away; the impact across the U.S. would be large in many industries, all the way to the local restaurants and bars.
Although insurance companies fall under state regs (to the best of my knowledge), there influence via many insurance products travel the entire country. One such very large insurance company, about 3 days before the TARP money window closed, had made and finalized the purchase of a savings and loan in Indiana, in order to qualify for TARP funds. Note: these 'loans' did carry interest and was expected to be repaid to the Treasury. The Treasury did have a profit when all was settled and done from the various loans.
The Troubled Asset Relief Program (TARP) was instituted by the U.S. Treasury following the 2008 financial crisis. TARP stabilized the financial system by having the government buy mortgage-backed securities and bank stocks. From 2008 to 2010, TARP invested $426.4 billion in firms and recouped $441.7 billion in return.

You are really not addressing my fundamental question, which is not primarily about SVB:
OK, I'm a business owner: why is it my responsibility to protect my cash reserves against government actions- ie, the Fed?
And if it is my responsibility, exactly how am 1 expected to do that? What financial mechanism exists that allows me to simply keep my company money safe from government-induced erosion while I try to run my business?

@msf, @yogibearbull-
I'm still hoping for some commentary by the MFO heavy-hitters on my real question regarding this:
The FDIC is expected to sell the bank’s remaining assets and use the proceeds to "partially" pay the uninsured depositors. Those assets have a reduced present value, which is a major part of the problem.
In more common banking situations the problem is that the value of bank loan assets has been significantly reduced by deterioration in the value of those assets (aka "stupid investing"). That is evidently not the case with Silicon Valley Bank- reportedly their problem is mostly due to the deterioration of the current value of otherwise secure government paper, including long-bonds, mainly due to the actions of another US government agency: the Fed.
Question: If a major source of the problem is that Silicon Valley Bank was forced to sell US Gov't securities at a loss because their current value is less than their maturity value, why would the FDIC or any other "rescue" authority do the same thing? Rather than take an immediate loss, why wouldn't a "rescue authority" provide immediate funding equal to the actual maturity value of the underlying assets, and then retain those assets until they actually mature, thus minimizing the loss due to the maturity problem?
I can see that the eventual recovery value of the government paper, especially the long bonds, might incur some eventual loss to the "rescue" authority, but that seems to me to be a lot better than the potentially disastrous alternative of immediately inflicting major losses on bank depositors.
The financial system doesn't appear to have any decent alternative for those types of business depositors to park the large amounts of cash necessary to maintain their operations. Where exactly were they supposed to keep that money safely? I just don't see any real "bad guys" in this one... and that's surely unusual.

Related from early Friday after the FDIC seizure:
Former Treasury Secretary Lawrence Summers warned that there will be “severe” consequences for the innovation sector of the US economy if regulators don’t smoothly work out the collapse of Silicon Valley Bank.
“It certainly is going to have very substantial consequences for Silicon Valley — and for the economy of the whole venture sector, which has been dynamic — unless the government is able to assure that this situation is worked through,” Summers said on Bloomberg Television’s “Wall Street Week” with David Westin.
Earlier Friday, regulators stepped in and seized the bank known as SVB after it mounted an unsuccessful attempt to raise capital and saw a cash exodus from the tech startups that had fueled its rise. The lender had plowed the tens of billions of dollars it took in from venture-capital-backed startups into longer-term bonds, a move that led to massive losses.
The Federal Deposit Insurance Corp., which has been appointed as SVB’s receiver, only insures bank deposits of up to $250,000. But a large share of the money deposited at SVB was uninsured: more than 93% of domestic deposits as of Dec. 31, according to a regulatory filing.
“There are dozens, if not hundreds, of startups that were planning to use that cash to meet their payroll next week,” according to Summers, a Harvard University professor and paid contributor to Bloomberg Television. “If that’s not able to happen, the consequences really will be quite severe for our innovation system.”
Summers said he hoped that regulators will be “aggressive about containing the problem and containing possible contagion.”
“I don’t think this is a time for moral-hazard lectures or for talk about teaching people lessons,” he said. “We have enough strains and challenges in the economy without adding the collateral consequences of a breakdown in an important sector of the economy.”
The sudden implosion of SVB delivered a deep blow to a sector already reeling from layoffs, falling stock prices and diminishing funding for startups. The bank is most known for its financing in the venture capital community but also serves as a financial supermarket for tech executives, providing mortgages on mansions, personal lines of credit and financing for vineyards.
Treasury Secretary Janet Yellen earlier in the day convened a meeting of top regulators, after which she issued a statement saying that the US banking system “remains resilient” and that regulators “have effective tools” to address developments around Silicon Valley Bank.
For his part, Summers said, “I don’t think this is likely to be a broadly systemic problem.”
The hammering of SVB’s stock triggered a broader selloff in US lenders, with the KBW Bank Index tumbling 16% for the week — the worst selloff since the March 2020 Covid shock to the financial system.
Summers said it doesn’t now look like the biggest banks had the kind of mismatch between the kind of deposits SVB had and “the ways in which they had invested their money in longer-term bonds.”
Earlier Friday, Summers said that “there may be a need for some consolidation” in the banking sector as a result of the latest developments. That could then pose a test for regulators, he said.
A number of Democrats have pushed to limit bank mergers. For example, Senate Banking Committee Chair Sherrod Brown last year called for “ensuring that bank mergers, if approved, serve American families, small businesses, and communities – not Wall Street and big corporations.”
Summers warned that “one of the mistakes the authorities could make would be — out of a fear of consolidation coming from some kind of populist concern about concentration — blocking combinations that would ultimately operate in the direction of financial stability.”
“That’s something I think that we’re going to need to be attentive to going forward,” the former Treasury chief said.
--

Well, after hearing from the MFO community, I've changed the title of this post, as well as my mind. The demise of SVB is multilayered and many faceted, and evidently the commonly encountered "greed and stupidity" factors were a major factor after all, as usual.
Below is a section containing severely abridged excerpts from a long article in The Washington Post.
From that section this excerpt is most pertinent to a question that I have:

The FDIC is expected to sell the bank’s remaining assets and use the proceeds to pay the uninsured depositors.

In more common banking situations the problem is that the value of bank loan assets has been significantly reduced by deterioration in the market value of those assets. That is not the case with Silicon Valley Bank- evidently their problem is mostly due to the deterioration of the PRESENT VALUE of otherwise secure government paper.
Question: If a significant source of the problem is that Silicon Valley Bank was forced, by a depositor bank run, to sell US Gov't securities at a loss because their current value is less than their maturity value, why would the FDIC or any other "rescue" authority do that? Rather than take an immediate loss, why wouldn't a "rescue authority" provide immediate funding equal to the actual maturity value of the underlying assets, and then retain those assets until they actually mature, thus minimizing the loss due to the maturity problem?
Excerpts from the WashPo article-

Federal officials faced growing pressure Saturday to bail out even the biggest customers of the collapsed Silicon Valley Bank, igniting a ferocious political debate over Washington’s role in tamping down potential threats to the broader U.S. financial sector.
Companies that did business with Silicon Valley Bank are already warning that the bank’s failure may force thousands of layoffs or furloughs, and prevent many workers from receiving their next paycheck.
Some experts worry that large numbers of companies could move to transfer their money from regional banks similar to SVB to safer giant commercial banks Monday, leading to a fresh round of destabilization.
“All the choices are bad choices,” said Simon Johnson, an economist at MIT who previously served as chief economist of the International Monetary Fund. “You don’t want to extend this kind of bailout to people. But if you aren’t doing that, you face a run of really big — and really hard to predict — proportions.”
But officials at the FDIC — which, in a stunning move Friday, took over Silicon Valley Bank during normal trading hours — are facing some calls to go beyond giving smaller customers their money back.
On Friday, the FDIC said in a statement that... uninsured depositors with accounts bigger than $250,000 — would get some of their money back, but it did not specify how much. Uninsured depositors make up the overwhelming majority of the bank’s customers.
A slew of federal regulators — including those with the FDIC, Federal Reserve and Treasury Department — have scheduled a number of private briefings with top lawmakers since the bank’s collapse, including members of the House Financial Services Committee, which oversees banking, according to two people familiar with the matter who spoke on the condition of anonymity to describe the conversations.
Unwinding the bank’s balance sheet will begin in the next few days if the FDIC can’t find another bank to take over all of SVB’s business. Customers who had uninsured deposits will receive some amount of money back by next week, the FDIC said, without specifying how much. The FDIC is expected to sell the bank’s remaining assets and use the proceeds to pay the uninsured depositors.
SVB held roughly $150 billion in uninsured deposits, according to the company’s latest financial statement, issued late last month. That amounts to more than 93 percent of the firm’s deposits, Bloomberg News reported. Many of the deposits came from wealthy venture capitalists or tech firms that Washington would face certain fury for aiding, although the precise percentage held by businesses is unknown. Roku, California vineyards and philanthropic efforts backed by venture capitalists were all among the firms that had money at SVB.

Like many others here we use Schwab as our primary financial house. We have no exposure to their banking arm other than a checking account, but I have no idea how or if a problem within the banking arm might possibly spread into the brokerage arm.
In addition to a couple of fund holdings and stock holdings the great majority of our other assets at Schwab are in bank CDs and short-term (2-year max) US Treasuries. No one bank carries anything close to the 250k FDIC limit, and none of the CDs are with the Schwab Bank, so that's about as safe as reasonably possible.
Assuming the worst possible situation... a failure of Schwab bank taking down the brokerage also, I'm wondering how and how long it might take for the mess to be reasonably brought under control. What entities, government and otherwise, would be involved in trying to take care of a situation like that? Who would be responsible for sorting out all of the ownership issues with respect to Schwab brokerage assets?

BTW
"Chief Executive Officer Greg Becker sold $3.6 million of company stock under a trading plan less than two weeks before the firm disclosed extensive losses that led to its failure.
The sale of 12,451 shares on Feb. 27 was the first time in more than a year that Becker had sold shares in parent company SVB Financial Group, according to regulatory filings. He filed the plan that allowed him to sell the shares on Jan. 26."

HSFNX has long been run by one of the smartest managers investing in the financial/banking sector—David Ellison. While investors are selling every bank, it wouldn’t surprise me if he is finding some good opportunities in this environment. He studies balance sheets fairly closely. His fund will behave differently however from the category as this one only buys small companies while the rest mainly buy large ones. He also still runs a much less interesting large-cap fund, I think.

I do have linked Schwab Bank account with my Schwab Brokerage account. I don't know too much specifically about the Schwab Bank, but Charles Schwab is #8 bank holding company (it is also included in annual Fed stress tests). Schwab Bank is also an important profit center for Schwab and it is integrally tied to its robo-advisors. So, I doubt that "Chuck" would let anything bad happen to it and have heaps of eggs on him. I am not worried. https://en.wikipedia.org/wiki/List_of_largest_banks_in_the_United_States
There is good coverage of Silvergate/SI, SVB Financial/SIVB and banks in the current Barron's:
TRADER. The STOCK market has been hit by rising RATE expectations (after POWELL’s 2-day testimony) and falling BANKS/financials (after the failures of SI and SIVB). The problem faced by SIVB – a forced sale of Treasuries at huge loss – isn’t that unusual for banks facing runs (if there is no help from the Fed, FHLB, etc). These events may cause the FED to go slow on rate hikes. In a soft-landing scenario, the SP500 of 4,600 is possible.
UP AND DOWN WALL STREET. Silicon Valley Bank/SIVB is the 2nd largest bank failure in history; it was in part due to losses on forced sale of a huge portfolio of Treasuries. The fed fund futures projections were all over – up after POWELL’s 2-day testimony, and then down on the failure of 2 CA banks, the crypto-friendly Silvergate/SI and the venture-capital (VC)-friendly SIVB. The financials were stressed (KRE, KBE, XLF); credit conditions have tightened. As SIVB lent to tech startups and others burning cash, the prospects of those companies became gloomy. The 2-yr fell 48 bps from Wednesday and similar moves were seen in the past during 10/1987 crash, Lehman failure in 09/2008, 9-11 terrorist attacks. In all this drama, the jobs report was a minor sideshow. But coming are the CPI (Tuesday) and PPI (Wednesday).
All BANKS/FINANCIALS sold off last week (KRE, KBE, XLF). But most differ from SVB Financial/SIVB (and Silvergate/SI). The problem with SIVB was a large loss on huge forced-sale of available-for-sale (AFS, market-to-market) Treasuries, and its efforts for raising capital failed (and the Fed or the FHLB didn’t step in for the rescue). Most large banks have diversified businesses, are well capitalized and can tap multiple sources of funding. While rising RATES are generally good for banks, some overleveraged banks with poor quality loan-books get squeezed. DEPOSITS are also moving from banks into higher-rate Treasuries and money-market funds. SIVB was really a bank for venture-capitalists (VCs) who are sophisticated investors that can move large amounts of money (its sudden closure during the business hours may have been to limit that flight). In better times, SIVB just parked excess deposits into Treasuries that it had to sell suddenly at depressed prices (due to higher rates now). All banks now have large unrealized losses that may be hidden within their hold-to-maturity (HTM, not marked-to-market) portfolios – really, a permissible accounting trick. (In a bank run, the distinction between HTM and AFS basically disappears) Large banks also have tougher regulations and undergo annual stress-tests by the Fed. So, this general selloff offers opportunities in banks now – FITB, HBAN, JPM, KEY, MTB, PNC, RF, USB, etc.
https://www.barrons.com/magazine?mod=BOL_TOPNAV
See also open access LINK1 LINK2

May I ask some of the experts on the board to educate me/us on what they would look for pertaining to the financial strength of a bank? Texas ratio, capitalization, deposit growth etc? What does it all mean and how should one intrepret all that? What is BS and what is important?
Example that got me sideways, Schwab bank...poor capitalization ratio, I would not have guessed that..assets/equity is low...hmm.
YogiBB...looking at you...thoughts?
Best Regards,
Bob

@Sven "I agree that quality journalism has decline significantly and I try to read as much as I can from our local library’s online subscription to major newspapers". =+1
@Old_Joe From your wrap up. "Hopefully we all know or understand that holding bonds or CDs of various types can easily lead to a capital loss if we are required to sell those types of instruments before maturity, and if their value has meanwhile deteriorated due to overall financial market conditions.
So they held short term T-bills paying ? , while paying their customers 20 times less than the T-bills on the customers accounts !! 2% T-bill & customer gets paid .1% !?
Over extended I'd say.
Have a good day, Derf

@LarryB- There's this, from the WSJ:
Following are selected excerpts from a current article in the Wall Street Journal-

First Republic shares fell 52% in early trading before storming back to near the previous day’s closing level, only to then finish the day down 15%. Investors expressed concerns about unrealized losses on assets at the bank as well as its heavy reliance on deposits that could turn out to be flighty.
Addressing its liquidity, First Republic said: “Sources beyond a well-diversified deposit base include over $60 billion of available, unused borrowing capacity at the Federal Home Loan Bank and the Federal Reserve Bank.” Regarding its financial position, First Republic said it “has consistently maintained a strong capital position with capital levels significantly higher than the regulatory requirements for being considered well-capitalized.”
Investors have grown wary of First Republic for reasons similar to those that caused concern at SVB. Like SVB, First Republic showed a large gap between the fair-market value and balance-sheet value of its assets. Unlike SVB, where the biggest divergence is in its portfolio of debt securities, First Republic’s gap mostly is in its loan book.
In its annual report, First Republic said the fair-market value of its “real estate secured mortgages” was $117.5 billion as of Dec. 31, or $19.3 billion below their $136.8 billion balance-sheet value. The fair-value gap for that single asset category was larger than First Republic’s $17.4 billion of total equity.
All told, the fair value of First Republic’s financial assets was $26.9 billion less than their balance-sheet value. The financial assets included “other loans” with a fair value of $26.4 billion, or $2.9 billion below their $29.3 billion carrying amount. So-called held-to-maturity securities, consisting mostly of municipal bonds, had a fair value of $23.6 billion, or $4.8 billion less than their $28.3 billion carrying amount.
Another point of concern that echoes SVB is First Republic’s liabilities, which rely heavily on customer deposits. At SVB, those deposits largely came from technology startups and venture-capital investors, who quickly pulled their money when the bank ran into trouble.
First Republic’s funding relies in large part on wealthy individuals who increasingly have a range of options to seek higher yields on their cash at other financial institutions as interest rates have risen.
Total deposits at First Republic were $176.4 billion, or 90% of its total liabilities, as of Dec. 31. About 35% of its deposits were noninterest-bearing. And $119.5 billion, or 68%, of its deposits were uninsured, meaning they exceeded Federal Deposit Insurance Corp. limits.
Uninsured deposits can prove flighty since they can be subject to losses if a bank fails.

(Text emphasis added in above.)
For additional perspective, there's this from a post that I made earlier in this thread:

Hopefully we all know or understand that holding bonds or CDs of various types can easily lead to a capital loss if we are required to sell those types of instruments before maturity, and if their value has meanwhile deteriorated due to overall financial market conditions.
But I had never given any thought to the possibility of potential bank losses when they have parked substantial amounts of their money in "ultra safe" US Treasuries. An article in this morning's WSJ pointed out that banks are potentially in the same situation as we are.
A bank such as Silicon Valley Bank can have a significant amount of their capital in short-term "safe" Treasuries, but if they are faced with an unexpected run on their deposits, they can be forced to sell those Treasuries before maturity, and at a loss.
So even a reasonably run bank can get into trouble.

Both Silvergate Bank and Silicon Valley Bank are California state-chartered banks. Is there any reason to think oversight would have been better (or worse) if they had national bank charters?
https://dfpi.ca.gov/2023/03/08/dfpi-statement-silvergate-bank-to-begin-voluntary-liquidation/
https://dfpi.ca.gov/2023/03/10/california-financial-regulator-takes-possession-of-silicon-valley-bank/

Hopefully we all know or understand that holding bonds or CDs of various types can easily lead to a capital loss if we are required to sell those types of instruments before maturity, and if their value has meanwhile deteriorated due to overall financial market conditions.
But I had never given any thought to the possibility of potential bank losses when they have parked substantial amounts of their money in "ultra safe" US Treasuries. An article in this morning's WSJ pointed out that banks are potentially in the same situation as we are.
A bank such as Silicon Valley Bank can have a significant amount of their capital in short-term "safe" Treasuries, but if they are faced with an unexpected run on their deposits, they can be forced to sell those Treasuries before maturity, and at a loss.
So even a reasonably run bank can get into trouble. In the case of Silicon Valley Bank, evidently a significant number of demand deposits are/were well in excess of the 250k FDIC protection, so when things got shaky a number of large depositors were very quick to attempt to withdraw very substantial amounts of the bank's deposits.
I suppose that there's a "lesson" of some sort to all of this, but I'm damned if I know what it is. Forget banks, use mattresses or a box buried in your backyard?

SVB Financial/SIVB had a masterfully BAD timing. Several of its filings at Edgar/SEC showed up yesterday (see the link below) - a huge AFS* portfolio for sale, a large capital raise by issuing stock, preferreds, etc, on the day after the shutdown announcement by (unrelated) Silvergate/SI. Then the SIVB CEO was on call to its venture-capitalists (VCs) to not panic, and that if everyone panicked at the same time, that could be a problem. Well, the VCs ran away in droves.
Banks are required to hold lots of Treasuries but can hold them at book value or initial purchase price (but not marked-to-market) in the long-term HTM portfolio that the banks may use for quick loans. They also hold securities in the short-term AWS portfolio that is marked-to-market. When there is a run on the bank, this distinction may disappear and almost everything becomes AWS (if the Fed or FHLB or somebody else doesn't step in for rescue) and huge losses ensue. Factors are also different for SI (a crypto-friendly bank) and SIVB (VC/startup-friendly bank).
Neither SI, nor SIVB tapped the Fed Discount Window - unclear if by choice or they were turned away. Late last year, SI strangely tapped the FHLB for liquidity and that loan was suddenly called just before its recent unwind - may be it triggered the unwind.
Twitter was buzz with both, but then it may not be mainstream media - is that CNBC?
*AFS = available-for-sale (marked-to-market)
HTM = Hold-to-maturity (NOT marked-to-market)
https://www.sec.gov/edgar/browse/?CIK=719739&owner=exclude

@johnN @junkster
What little of CNBC I watched yesterday was when Mayo was on with Scott Wapner, and they talked about financials (I didn’t know the huge financial sell-off stemmed from $SIVB)….mentioning that the largest, multinational banks have been stress-tested annually for several years, and are probably in good shape (C, BAC, WFC, JPM, etc). The banks just under that size, whether super regional or regional, have not been stress-tested. Obviously the worry is contagion.
I have been trading ZION; it’s a conservative UT (redundant? Ha) bank that I have traded in and out of for last 18 months or so. Good dividend growth. But it was down 10-11% yesterday, so I bought more.
Good luck to us….I’m in junkster’s camp that we’ve been in a rally since October, and that was the bear bottom….but man, all these walls of worry keep being built! Ha

I am surprised this hasn’t gotten more discussion on the boards today. I can’t recall the last time I saw a component of the S@P 500 lose 60% in one trading session. Various banking indexes got hit hard today in the aftermath and a couple other west coast bank saw double digit losses. Of course SVB pales to the once size and importance of Lehman during the financial crisis. And preeminent banking analyst Mike Mayo said today with the major banks we could be much closer to a bottom. SVB continued downward in after hours trading impacting the stock futures which are looking ugly as I post this.
On the bright side this could tempt the Fed to take its pedal off the gas. The employment report could also change things around in a hurry - or not.

https://www.marketwatch.com/story/the-10-banks-that-may-face-trouble-in-the-wake-of-the-svb-financial-group-debacle-50d6e49e?mod=home-page
https://www.google.com/amp/s/finance.yahoo.com/amphtml/news/marketmind-bye-kuroda-boj-takes-220502194.html
Nobody know
Folks who think could be new Lehman on horizon??
Thinking selling 50% of all asset tomorrow

For such an incredible financial genius FD10 seems to have a lot of trouble just posting a simple link. Go figure...