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SVB failed to diversify their holdings. The venture capitalists who caused the run and their funds also failed to diversify.
by mehlmao 3y ago
SVB failed to diversify their holdings. The venture capitalists who caused the run and their funds also failed to diversify.
- politician 3y agoWas there concentration risk? Yes, absolutely. It was completely gaping failure of regulators to not force SVB to address that previously. But when you look at the scale of the bailout: how it fell to other banks to pay a special assessment to refill the FDIC insurance fund to cover 100% of deposits, you have to recognize that this event was far beyond the mismanagement at a single institution. Then, it happened again at FRB. The solution that the government came up with to solve the issue —- creating a moral hazard by implicitly guaranteeing 100% of deposits —- undermines the claim that it was merely mismanagement. We don’t deploy nuclear weapons as pest control.