Reply to I don’t know how banks work

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[quote=Anonymous][quote=Anonymous]SVB's directors took a gamble that the Federal Reserve would not raise interest rates [by investing depositors' money in low yielding, long-term US Government Treasury bonds.

When depositors wanted their money to invest elsewhere for a higher return or to use in their businesses, SVB had to sell these long-term government bond investments at a loss because interest rates had risen substantially--just as the federal reserve repeatedly told the world that it would do.

In short, the officers and directors of SVB put all of their eggs in one basket and this gamble did not pay off. And the entire world--except for SVB officers and directors--knew that such a gamble of placing a large bet on low yielding, long-term government treasuries was destined for failure.

[/quote]

They also had way too much depositer risk.  Highly concentrated interconnected depositers withdrew tens of billions of dollars all at the same time.  Any bank would fail if 1/3 of their deposits were pulled on a single day.[/quote]

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