Wasn't their balance sheet before the panic what caused the panic? It wasn't some WSB meme that drove the bank run, they couldn't cover their normal day to day operations and started a bond fire sale and desperate equity raise.
IIUC: they could definitely cover their normal day-to-day. The thing that broke down is they had to announce true things that made investors conclude that their money wouldn't grow as fast as investors expected, and investors (understandably / justifiably) wanted to pull it out to somewhere it would grow faster.
(The investors don't actually know the money won't grow as fast... the Fed could decide to drop interest rates tomorrow, or something else could intervene making it sensible to drop interest rates. But "not growing as fast" was the very likely scenario).
Once everyone decided to pull, they were tanked because no bank keeps 100% liquidity.
> The thing that broke down is they had to announce true things that made investors conclude that their money wouldn't grow as fast as investors expected, and investors (understandably / justifiably) wanted to pull it out to somewhere it would grow faster.
SVB disclosed they took massive losses from high risk, high duration assets and were desperate for cash. Investors took large (up to 60% over 24h!) losses, paper or otherwise, to get out of the stock. That can't be just concern over not growing as fast, that's concern about solvency. VC's and depositors saw the same writing on the wall, but it was SVB who wrote it there.
If they were able to cover their normal operations, they wouldn't have needed the emergency equity raise.
High duration, yes, but actually extremely low risk.
The thing that killed SVB was the bank run. They would have been fine with the raise. Panic set in and killed them. FRB is not in a better position, but nobody is panicking, so they’ll survive.
Didn’t SVB directly cause the bank run that killed them though? It wasn’t some externally driven event outside the scope of risk management. The assets were fine but the high duration was the risk. They took it purposely and lost billions when their risky bets turned against them. The emergency equity raise and sale attempts were desperation, and seen as such.
Doesn’t feel much different than a yield farming crypto bank going under when they are forced to fire-sale thinly traded sh*tcoins and take a beating.
No bank keeps 100% liquidity, but my understanding is that most banks are capable of getting liquidity -- at least from the lender of last resort (LoLR) -- for massive withdrawals based on the value of their loan portfolio, and SVB's portfolio had tanked too low to do this based on interest rates the LoLR would lend to them at.
Won't lots of investors (aka depositors) start making this same analysis? Whether you have $10K or $10M, right now you don't want your cash anywhere it's not earning 3%+. So it's back to whether they're unique in finding themselves uncompetitive as a place to park cash at a market rate.
