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These articles and comments are to put politely, very silly. Banks and the government have an agreement where banks operate as if deposits are stable in order

These articles and comments are to put politely, very silly. Banks and the government have an agreement where banks operate as if deposits are stable in order to buy long-term assets, while the government insures deposit stability. These assets primarily comprise of lending to governments, businesses and mortgages. In other words, the banking system essentially acts as a quasi-arm of the government, enabling the welfare state to function both explicitly by buying government debt and implicitly by expanding the monetary supply. You can prevent the bank runs and massive economic booms/busts by simply prohibiting banks from monetising deposits. We wont do this because it will collapse the nation-state as we know it. The reality is that we haven't had a free market for banks since the Federal Reserve Act of 1913, so it wasn't a battle between "evil bankers" and "poor poor lidl workers," but rather a game of king-making.

pc_edwin 3y ago
The particular case of SVB is rather illuminating. They weren't risking money on some high risk mortgage bonds or memecoins for that matter (illegal). They were literally buying US government bonds based on outlook given by THE government agency which gives OUTLOOKS & sets POLICIES on these matters. They literally did the you are "supposed" to do and they were called "greedy capitalists" or chumps for not doing sophisticated active player stuff like hedging.
- dehrmann 3y ago
  Their risk was duration and idiosyncratic depositors. What got them was that the Fed raised rates the at the fastest rate ever, and a classic bank run from well-connected depositors starved for cash. But were they irresponsible? Not really. This is a scenario that's very easy to see the flaws of in hindsight.
  - borski 3y ago
    Well, and perhaps more importantly, they took the Fed at their word that they wouldn’t raise interest rates, which they then raised.
- muzz 3y ago
  No, they took risk by buying long dated bonds which had X% yield rather than short dated ones which had close to 0% yield. It was a huge gamble.
  - pc_edwin 3y ago
    Was it risky? Yes. Should they have hedged? Yes. Was it a "huge gamble"? NO! Banks are literally in the business of long duration. The Feds were draining liquidity at the fastest rate in recent history and they did this right after an extremely over leveraged bull run leaving the entire system very fragile. A collapse was inevitable, SVB just happened to get the short end of the stick and yes they put themselves in that position through incompetence/arrogance. If not SVB, it could've been maybe a bank over exposed to the commercial real-estate market or literally any other area left too fragile.

pc_edwin 3y ago

The particular case of SVB is rather illuminating. They weren't risking money on some high risk mortgage bonds or memecoins for that matter (illegal). They were literally buying US government bonds based on outlook given by THE government agency which gives OUTLOOKS & sets POLICIES on these matters. They literally did the you are "supposed" to do and they were called "greedy capitalists" or chumps for not doing sophisticated active player stuff like hedging.

dehrmann 3y ago
Their risk was duration and idiosyncratic depositors. What got them was that the Fed raised rates the at the fastest rate ever, and a classic bank run from well-connected depositors starved for cash. But were they irresponsible? Not really. This is a scenario that's very easy to see the flaws of in hindsight.
- borski 3y ago
  Well, and perhaps more importantly, they took the Fed at their word that they wouldn’t raise interest rates, which they then raised.
muzz 3y ago
No, they took risk by buying long dated bonds which had X% yield rather than short dated ones which had close to 0% yield. It was a huge gamble.
- pc_edwin 3y ago
  Was it risky? Yes. Should they have hedged? Yes. Was it a "huge gamble"? NO! Banks are literally in the business of long duration. The Feds were draining liquidity at the fastest rate in recent history and they did this right after an extremely over leveraged bull run leaving the entire system very fragile. A collapse was inevitable, SVB just happened to get the short end of the stick and yes they put themselves in that position through incompetence/arrogance. If not SVB, it could've been maybe a bank over exposed to the commercial real-estate market or literally any other area left too fragile.