The editorial writers at the Wall Street Journal seem to be losing their grip. Here they are on Monday, griping about First Citizens’ acquisition of Silicon Valley Bank.
“First Citizens BancShares on Sunday night was the lucky winner of the bidding to buy the assets of Silicon Valley Bank, and what a deal it is. Rather than minimize the cost to the deposit insurance fund as required by law, the Federal Deposit Insurance Corp. seems to have chosen the best political match.”
The Journal seems to think that a hedge fund would have paid more for the assets than Citizens did, but that the FDIC didn’t want to sell to a hedge fund because it feared a political backlash. That’s incredibly myopic. The FDIC surely wanted the acquired assets, which carry a loss-sharing agreement, to be managed by a buyer that has loan management and workout experience, in order to keep losses to a minimum. In addition, calling the agreement “a sweetheart deal” for Citizens when there was another bidder reminds me of the reaction to NCNB’s acquisition of the failed First Republic Bank in 1988. Many bank CEOs told me in the weeks following that announcement that if they could have bought First Republic on those terms, they would have done so. But they did have a right to bid, and did not seize the moment the way NCNB CEO Hugh McColl did. In the SVB case, Citizens acted boldly and seized the moment, and management should be congratulated.