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Sure, but we did bail out SVB

• bloppe 2y ago
  Actually, we didn't. It failed and collapsed. What makes you think it was bailed out? To add detail: SVB was a subsidiary of SVB Financial Group, a holding company that owned the bank as well as some other things. SVB still exists, but is no longer a subsidiary of that holding company. It was completely taken over by the FDIC so they could make depositors whole. The former owners lost their biggest business, had to liquidate the rest of their businesses, and filed for bankruptcy a week later. They did not get bailed out. The thing is, they were not exactly behaving badly. Their big mistake was over-investing in "safe" long-term government bonds. These assets are traditionally considered very low-risk, but rapidly rising interest rates made them lose book value, and some stakeholders got a bit jittery. Then SVB's leadership held a disastrous conference call where they basically said "everything will be fine, as long as there is no bank run", which pretty much instantly kicked off a bank run on ~80% of all their deposits. Even the best-managed banks could not withstand that kind of bank run. SVB basically got unlucky. They were not horribly mismanaged like everybody seems to assume.
  • borski 2y ago
    That’s fair. I meant to say the customers were all made whole well above and beyond the FDIC limit. I think that’s a good thing. I’m unconvinced the same wouldn’t happen at WF. [edit] You edited your comment with a significantly larger amount of preamble, so I’m adding: I agree, and I am very well read on SVB. They were simply unlucky, and perhaps made a bad choice in overinvesting in illiquid bonds, plus bad VC behavior leading to the bank run. None of that was my point.