p
Let’s refine that a bit. SVB collapsed because it did not sell its ASF aecurities and reallocate their investments as the Fed began to raise interest rates. That would have required taking a small loss, to be written off, and would not have been a big deal.
They did not evaluate the possible scenarios if the Fed continued rate hikes. They should have been hedging. Then things got out of hand. It seems they sold HTM securities to meet their cash needs because it was the lesser of two losses. That indicates things were completely mismanaged. Understand that bonds, particularly treasuries, are secure investments with a known return AT maturity. Nothing is guaranteed when selling prior to the maturity date.
I suppose SVB’s finance department was filled with a bunch of gender studies graduates. There’s definitely a lack or rigor.
We can blame decades of piss poor fiscal policy on part of government and the Fed’s terrible monetary policy in response to fiscal policy until the cows come home. But that should not remove the responsibility of banks to effectively manage their assets. They have to deal with the realities staring them in the face. That’s not some man’s breast augmentation surgery.
I need help understanding one thing - how does money “evaporate”? I heard stories in the news about $100B “evaporating”. Banks forced to sell treasuries at a loss to cover redemption rather than holding to maturity, does that cause the “evaporation”?