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To: semimojo

OK, you called out what you think DID NOT cause the collapse. Please explain what did or post an article that you think caused it.


46 posted on 03/18/2023 12:11:48 PM PDT by ProtectOurFreedom (The government's lying liars love to lie)
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To: ProtectOurFreedom
OK, you called out what you think DID NOT cause the collapse. Please explain what did…

During and after Covid lots of money flowed into the companies that are SVB’s primary customers, and much of that money ended up being deposited into SVB.

These deposits were way more than SVB could turn around and lend out, so SVB bought long-term treasuries and mortgage backed securities as a place to park the money and get a little return.

When interest rates went up the market value of those low-yielding securities on SVB’s books declined. This normally wouldn’t be a problem because if the bank held the bonds to maturity there would be no loss.

When SVB’s customers started to withdraw more money than SVB was expecting SVB needed to sell some of its securities to provide the cash - again, this is just how banking works.

The problem was, SVB had screwed up and didn’t have enough of its reserves in short term paper, so they had to sell the long-term bonds and recognize the book loss.

This made them fall below the minimum required reserves so they had to raise capital.

SVB management stupidly made this public which spooked people and resulted in the run on the bank.

In short, as a result of stupid management SVB ended up with a maturity mis-match between assets and liabilities and got squeezed when rates went up.

48 posted on 03/18/2023 2:13:37 PM PDT by semimojo
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