Neither of those risks are an issue though if the 'lender of last resort' is doing its job. Long dated treasuries and F&F mortgage bonds are 'safe'. They will

Neither of those risks are an issue though if the 'lender of last resort' is doing its job. Long dated treasuries and F&F mortgage bonds are 'safe'. They will pay out the par value on maturity come what may. Which means if the deposits run from SVB to another bank, then all that happens is that there is an increase in reserves at the Fed owned by those other banks and a decrease in reserves at the Fed for SVB. The Fed then just lends reserves back to SVB - offset by the increase from other banks. SVB still had enough income coming in to pay the rate at the Fed. Now that the Fed is lending against bonds at par via the Bank Term Funding Program, that is what will happen for other banks who find themselves in the same situation. Essentially the Fed has just reduced the long term interest rate. If regulations were reduced in scope, and the regulator declares that a bank is in compliance with those reduced regulations, then the lender of last resort really need to put its money where its regulatory mouth is. Otherwise we get the mess we're seeing now. Banks will always try to wriggle the jacket. This whole thing is a failure of regulation - where the left hand didn't seem to know what the right hand was doing. SVB may have been pushing the envelope. It's the job of the regulator to push back.