So what I think is happening here is that if you take over a bank the traditional way, you need to mark-to-market all of the bank's assets -- so all of the losses from the long-dated MBS that would be perfectly fine if held to maturity would have to be recognized immediately, just crushing the balance sheet of anyone who bought it. Probably trying to line someone up who can either absorb that loss, figure out a way to recapitalize without recognizing the loss, or get access to some other lending facility.
But from what I read it's common for FDIC to "sell" to the acquiring bank at a price that wouldn't make a loss.
So if you marked to market all those long term bonds and then sold SVB to a bigger bank at the resulting (possibly negative) valuation. Why wouldn't a big bank take that deal?
