Silicon Valley Bank closes

[Buba]

So...SVB is to be sold to First Citizens bank. Very interesting.

Or maybe not?

U.S. backstops Silicon Valley Bank sale to First Citizens

U.S. regulators said on Monday they would backstop a deal for regional lender First Citizens BancShares to acquire failed Silicon Valley Bank, triggering an estimated $20 billion hit to a government-run insurance fund.

www.reuters.com

What does "backstop" mean?

 

[bintananth]

Or maybe not?

U.S. backstops Silicon Valley Bank sale to First Citizens

U.S. regulators said on Monday they would backstop a deal for regional lender First Citizens BancShares to acquire failed Silicon Valley Bank, triggering an estimated $20 billion hit to a government-run insurance fund.

www.reuters.com

What does "backstop" mean?

tl;dr: "backstop" in this instance basically means "if the steaming pile of hot shit no one really wants that you just bought at a discount is worth less than what you paid for it ... we'll make up the difference."

 

[Buba]

Fucking financial jargon - so "backstop" does not mean "stop/deny" but is more like "underwrite/support"?

 

[posh-goofiness]

Yes. The term comes from baseball.

 

[Robovski]

It's a different form of bailout basically.

 

[bintananth]

It's a different form of bailout basically.

Not really.

The FDIC is already on the hook for all the losses. This way they get close to what they think the garbage is actually worth instead of the pennies on the dollar they'd get from a fire sale.