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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][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.

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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]

Wow ! You really do not understand. Just wow.[/quote]

PP described exactly what happened to SVB. There was a small whiff of trouble, but nothing that is unusual. Unfortunately for SVB, they heavily relied on on VC funded tech start up. Once the VC funds started advising their companies to pull funds, it turned into a bank run[/quote]

Good Lord.

We see things on a different level.

You and the previous poster to whom you refer are describing WHAT happened while I am sharing WHY it happened.

If you want to avoid the same result, the WHAT does NOT matter, the WHY does.

Simple example: Car crash. What happened = damage to car bumpers. Why it happened = brake failure. If you just know what happened, it is likely to happen again; but, if you know why something happened, the problem can be corrected so that the situation is far less likely to occur again.[/quote]

And why it happened was because a small group of depositers with an outsized amount of cash exited at the same time.  The size and coordination of the withdrawals is what caused the issue.  Had the withdrawal amounts been either smaller or spread out then this would not have happened.[/quote]

You partially understand.

The bank should have had adequate funds to handle these withdrawals, but it didn't because SVB GAMBLED on long-term bond investments that did not even come close to meeting the liquidity rights of its depositors.[/quote]

I think it was this.  they had lot of long term investments in treasuries or bonds, and maybe to get more cash available for withdrawals the borrow rate would be more than they are earning due to rate hikes[/quote]

There was $42 billion worth of withdrawals in one day.[/quote]

Right.  and stock tanked.  all the above[/quote]
The stock price is irrelevant unless the people behind the bank run were also shorting the stock.  But that's a matter for the SEC.

There is no mix of securities they could have held to survive the size and speed of the withdrawals.[/quote]

This exactly. The only way to be able to redeem $42B in deposits in one day is by having $42B in cash reserves on your balance sheet. SVB was giving their depositors 2.2% interest on checking and savings. You can’t have cash on asset side on the balance sheet earning 0%.

Even UST and TBill take T+1 Day to settle. Even if SVB had $100B in 30 day TBills that they could sell at par in the market, they wouldn’t have been able to meet the $42B deposit redemption requests because of settlement time lag. [/quote]

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