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Even for insolvent banks, a bank run is typically rare or if it happens, is a very slow-moving event because of FDIC insurance. The difference here is that SVB
by zainhoda 4y ago
Even for insolvent banks, a bank run is typically rare or if it happens, is a very slow-moving event because of FDIC insurance.
The difference here is that SVB’s customers did not understand proper corporate cash management practices and had deposits far in excess of FDIC insurance. So from a game theoretic perspective if you hear a whiff of insolvency then you want to pull your cash as fast as possible.
This is on startup CEOs as much as it is on SVB.
- onlypositive 4y agoSVB had basically no hedging against rate rises. Every other bank out there did.
- guenthert 4y agoNow you have me curious. I have no difficulty spreading my cash across a few accounts on as many institutions to be well within the FDIC insurance's limit; it's not that much ("few" might or might not be one). But how are well funded corporations supposed to do that? Clearly having the funds available as (bookkeeping) cash isn't ideal, but sometimes unavoidable, I suppose.