I think the main thing is that holding long bonds was a way to get profits and pay interest. Despite being doomed long term, there were a couple reasons banks d

I think the main thing is that holding long bonds was a way to get profits and pay interest. Despite being doomed long term, there were a couple reasons banks did it - they couldn't make money by making conventional business loans, profitable loan opportunities weren't available and most banks expected to be bailed out when things went bad (Silicon Valley Bank and Signature had each been previously bailed out). The related question is why did regulators turn a blind eye? Interest rate risk is something regulators look at. I know SVB had some loopholes that prevented a lot of oversight but one other factor that comes to mind is that the Fed needed to get rid of high prices/low-interest Fannie Mae bonds somehow and letting bonds feed on them was one way.