4 ms·

I feel like the 10 year MBS investment might actually have been a case of excess risk. In a world of zero interest rates (which I presume is when they invested

I feel like the 10 year MBS investment might actually have been a case of excess risk. In a world of zero interest rates (which I presume is when they invested in the MBS), 1.5%-2% yield makes SVB quite a bit of extra profit. Their investment may have been a case of greed and poorly controlled risk.

tsunamifury 4y ago
Go back to 2021 before rates go up and tell me what you’d do. Kinda damned either way. The bank had to make profit to survive btw. They dont pay for their services on good will.
- BigCatStuff 4y ago
  Most other banks found ways to survive the environment in 2021. So clearly there are ways to do it without locking money up for 10 years in MBS.
  - gkoberger 4y ago
    Most other banks didn't see the incredible growth SVB did, either.
    - BigCatStuff 4y ago
      I understand that they needed to put the money to work somewhere, but they really chose a bad way to do it. Hence the 'poorly controlled risk' that I mentioned.
      - tsunamifury 4y ago
        I think it was quite fair to think they could have sold 10 year treasuries at cost at least. An invert yield curve for this long is not normal. But yes maybe they should have laddered better.
        ashwagary 4y ago
        >An invert yield curve for this long is not normal. Risk management at financial institutions isnt meant to be an exercise of expecting or planning for the normal. Any way we slice it, they failed to adequately assess risk.
        tsunamifury 4y ago
        You understand that’s the silliness of risk management. Anyone who failed is always accused of not managing it. It’s a truism. You can’t prepare for all outcomes and this was not one a bank expects. A 3 day 40 billion dollar draw down maybe a first ever event for any bank in all of history. Should they also have risk managed for a nuclear bomb going off in their lobby? Get real man. Recognize that you are Monday morning quarterbacking here.

tsunamifury 4y ago

Go back to 2021 before rates go up and tell me what you’d do. Kinda damned either way. The bank had to make profit to survive btw. They dont pay for their services on good will.

BigCatStuff 4y ago
Most other banks found ways to survive the environment in 2021. So clearly there are ways to do it without locking money up for 10 years in MBS.
- gkoberger 4y ago
  Most other banks didn't see the incredible growth SVB did, either.
  - BigCatStuff 4y ago
    I understand that they needed to put the money to work somewhere, but they really chose a bad way to do it. Hence the 'poorly controlled risk' that I mentioned.
    - tsunamifury 4y ago
      I think it was quite fair to think they could have sold 10 year treasuries at cost at least. An invert yield curve for this long is not normal. But yes maybe they should have laddered better.
      - ashwagary 4y ago
        >An invert yield curve for this long is not normal. Risk management at financial institutions isnt meant to be an exercise of expecting or planning for the normal. Any way we slice it, they failed to adequately assess risk.
        tsunamifury 4y ago
        You understand that’s the silliness of risk management. Anyone who failed is always accused of not managing it. It’s a truism. You can’t prepare for all outcomes and this was not one a bank expects. A 3 day 40 billion dollar draw down maybe a first ever event for any bank in all of history. Should they also have risk managed for a nuclear bomb going off in their lobby? Get real man. Recognize that you are Monday morning quarterbacking here.