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Maybe... but SVB's immediate issue is that they lent money when rates were zero and those loans decreased in value when interest rates went up. This type of iss
by rcme 4y ago
Maybe... but SVB's immediate issue is that they lent money when rates were zero and those loans decreased in value when interest rates went up. This type of issue can only be caused by a decade-long zero-interest environment where people stop believing rates will ever go up again. It's interesting how every financial crisis has its roots in the specific economic conditions of the time.
- capableweb 4y agoEven so, no matter what cause, if people are unable to withdraw money + won't hear any rumors about a bank run, would SVB be in the scenario they are experiencing today? As it seems like the bank run is what did them in, not whatever magic they did with the deposited money.
- rcme 4y agoYes. Their issues started when they needed to sell their assets available for sale. This happened because interest rates made it harder to raise money, which caused their clients to draw down their accounts faster than they anticipated. The bank run at the end is more a symptom of SVB's issues rather than a cause. Everything about the bank's problems can be traced back to believing interest rates would be 0 forever.
- dahdum 4y agoThey were insolvent before the bank run, that's why they needed the firesale and emergency equity raise to stay afloat. If they were able (allowed) to hide that fact and get the money quietly elsewhere, we may never have known. Or perhaps they would have continued to lose money and fail later, with depositors taking a larger haircut.