Silicon Valley Bank has FAILED, becoming the largest US bank failure since 2008

[Sanlmar]

The managers of this bank were supremely stupid about how they managed their exposure to interest rate risk. And by “supremely stupid”, I meant that stupidly held a sizable amount of their interest-bearing assets in longterm government bonds. When interest rates spiked due to the Fed moving to slow down the economy — and rein in inflation, the bank’s bond portfolio lost a LOT of value, especially so for a bank that had over 4/5ths of its deposits not protected by the FDIC $250,000 limit per depositor, something like $150+ BILLION. Those kinds of deposits are SUPER sensitive to any whispers of a possible problems with the bank’s net worth, which is why the bank so quickly experienced a devastating bank run.

In essence, those idiot bank managers would get an F in my Financial Institutions course for such a massive fuck-up.

Addendum: Their unprotected deposits were over 90% of deposits, $155B out of $173B. So, yeah. Effing stupid.

I’ve had some time to rethink my response.

During QE the banks took in unanticipated deposits. Let’s forget about FDIC for this exercise. They needed to offset that liability with assets.

The banks bought US Treasuries. Supposedly the safest instruments on planet earth. (Be quiet Tellafriend, I know)

The brightest economists and Druff told you that inflation was transitory. Supply chain. Covid. China. Truckers. It would all get sorted. Were the bankers with skittle colored hair dumb? What did they do wrong?

What did they do that every other bank didn’t do?

This is America damnit and if you can’t put your faith in Treasuries you are indeed a communist Mumbles. I’m joking comrade.

Of course, that proved disastrous.

Some of us did not have faith in Treasuries. You know who you are - Tellafriend.