Defining “Bailout” to Understand Silicon Valley Bank

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As I waded my way through FDIC documentation, I was struck by the fact that the agency does not use the word “bailout.”  This will be my attempt at defining “bailout” to understand Silicon Valley Bank.

To understand my confusion, start by reading the list of transaction types.

FDIC transaction categories Defining "Bailout" to Understand Silicon Valley Bank

FDIC transaction categories. Click for larger image.

What a mess.  Especially since P&A, PA, and PI all are defined as “Purchase and Assumption.”  So I turned to the definitions on the help page.

Transaction Type definitions

 

I was about to shoot a question at FDIC staff, but I decided to return to the original source: Irvine Sprague’s “Bailout.”  Here’s what Mr. Sprague has to say about bailouts.  Highlights added by me.

Bailout definition

 

So.  It appears that SVB was not, in fact, a bailout. The actions taken by FDIC are better defined by Sprague’s second method for dealing with a bank failure:

… sell it to a new owner with FDIC assistance.

But don’t quote me on that.  I may yet put in a question to FDIC.

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About Tony Lima

Retired after teaching economics at California State Univ., East Bay (Hayward, CA). Ph.D., economics, Stanford. Also taught MBA finance at the California University of Management and Technology. Occasionally take on a consulting project if it's interesting. Other interests include wine and technology.