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When it's revealed that one bank has a bad balance sheet, it suggests that other banks do too, because they all went through similar circumstances and had acces
by maxbond 4y ago
When it's revealed that one bank has a bad balance sheet, it suggests that other banks do too, because they all went through similar circumstances and had access to similar markets and probably came to similar decisions about what securities to buy (and when to buy them).
Kind of like how when you learn that one major application has vulnerabilities due to misuse of log4j, it suggests other major applications will have similar vulnerabilities, because programmers working with the same flawed tools are liable to make similar mistakes.
Not every Java application is vulnerable and not every bank is insolvent (presumably very few of them are) but a bad apple spoils the bunch.
- digitaltrees 4y agoThat’s right in general but not in the case of SVB. It was a bank that had a highly narrow client mix that all stopped raising money at the exact same time after a decade of raising tons of money. So SVBs depositors all started withdrawing money at the exact same time. No other bank in the world has that same client mix. If there is another Run it’s because of heard mentality not because of a real problem