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Any investment strategy will require addressing various forms of risk and making tradeoffs, but it is a choice. SVB did not properly hedge against this risk whi
by trilobyte 4y ago
Any investment strategy will require addressing various forms of risk and making tradeoffs, but it is a choice. SVB did not properly hedge against this risk which, as soon as interest rates started rising, should have been a priority for their leadership to have a plan to address.
- norswap 4y agoCould they have done better? Sure. Hindsight is 20/20. Would it have been a reasonable assumption? No. As pointed out in the parent, every bank pretty much works like this, they're all liable to go under in the presence of a big enough run. Also if it must have been so obvious to them, it probably should have been obvious to the regulatory agencies in charge of monitoring banks and avoiding exactly these situations, as well as the Fed who set the policies leading to this in the first place. It just wasn't part of anyone's threat model.
- trilobyte 4y agoThis isn't a hindsight thing, this is a well-understood risk in finance. The lead time on rising interest rates was also significant enough for SVB to have shifted their investment strategy. Regulatory bodies in the US are both underfunded and hamstrung in their ability to regulate, and for a bank of SVBs size, they would not have been a prime target for regulators.