Reply to I don’t know how banks work

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]So this SVB situation is going over my head. :([/quote]

I follow @yourrich.bff on IG.  She did a great job of explaining what happened to SVB, in a very simple, easy to understand way

https://www.instagram.com/p/CpqU7Mag4vS/[/quote]

She almost gets it right.

She is just parroting the many articles available online to explain WHAT happened with a partial understanding and explanation of WHY it happened.[/quote]

To continue--and to repeat my prior posts above--it does NOT matter what type of business SVB's main clients operated. It does NOT matter that VC (venture capital) money dried up. It does NOT matter that payrolls needed to be met.

All that matters is that the bank failed to match up the liquidity rights of its depositors with the investment terms of the bank's investments. (If you understand this very basic concept, then you should be able to understand that the SVB bank officers and directors were derelict in their duties--that SVB officers and directors "don't know how banks work".

SVB business clients always had payroll obligations and typically have funding needs. All of this could have been handled by SVB since it was ADEQUATELY capitalized, but it failed because it was NOT PROPERLY capitalized.[/quote]

But any bank would fail to meet simultaneous withdrawal of 1/3 of its depositors.  Or did that happen after they announced the first shortfall? [/quote]

I believe it was precipitated by the proposed capital raise.  I think the need for more capital took people by surprise and they took another look at their financials that were telling a potentially concerning story.  I don't know who their advising IB was, but they screwed up to.[/quote]

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