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Do you really think putting it out as mortgages would lock the money up for a shorter duration? SVB had a reasonable amount of liquidity for normal stresses.
by wins32767 4y ago
Do you really think putting it out as mortgages would lock the money up for a shorter duration? SVB had a reasonable amount of liquidity for normal stresses. They'd gotten close to breaching their regulatory cushion for spare capital which was why they were trying to recapitalize.
However once the VCs panicked started a bank run, they folded. Just like literally any bank would. ~45b of net withdrawals in a single day is going to cause any bank significant trouble.
- lscharen 4y agoIf SVB were originating mortgages then, yes, that should have helped because then, like every other originator, they would have immediately sold the mortgage into the secondary market where it would be turned into a Mortgage-Backed Security and SVB would have cash on-hand and unloaded the long-duration risk. Instead, they were the ones buying the MBSs and taking on the long-duration risk.
- ajross 4y agoAgain that's revisionist. They booked a huge loss (something like $1.2B) last week, before the bank run, precisely because they lacked liquidity to handle routine withdrawals. The bank run is the effect, not the cause.