Yes you owe the depositor in current dollars, and that's why the bank failed. But I was responding to the parent about it not mattering if the bond is held to maturity - it does matter.

The problem SVB had is that there was no market buyer for their bonds at a price they needed today. They deserve to fail for that but that's not the part of the discussion I am responding to.

What I am responding to is the idea that there is a myth about the value of the bond. Here is what might happen, in a very simplified way:

- Depositors need their cash today - SVB can't sell their assets to meet this need, and so the bank is fails and is dissolved (already happened). Let's make this simple and say SVB owes the depositor $1000, can sell for bonds for $800 today. If they can have wait the bonds will return $1200 later. - The FDIC steps in with all their capital. They say ok - depositor here is your $1000 today and you are now whole. But we will not sell the SVB bond today to cover that $1000, instead we will hold the bond and wait for it to mature at $1200. Thus the depositor is whole, and over the long term no money is lost.

No regular market participant step in to provide the $1000 because they can get a better return on their money in other ways. But the government can do this because their goal is not maximizing return on capital, but instead stabilizing the system.

The government needs to get its money from somewhere. If it spends the taxpayers' money, that money cannot be spent on other things. So instead of doing things that are useful to society, like maintaining roads, the money is just sitting there until the bond matures. If it creates money out of thin air, the effect is the same, except that now every market participant pays (in the form of increased inflation). So in either case, the losses are socialised.

Of course, you can still argue that stabilising the system is worth it.