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mfb- t1_jc5o3xz wrote

Banks need experts to spot clients committing financial crimes. What's oniony about that?


worm600 t1_jc5rq1s wrote

OP is implying that SVB went under because they were doing something illicit.

Sadly, the real reason - some bad investment decisions, poor communication, and a whole lot of bad luck - is a lot more boring.


san_serifs t1_jc6nszy wrote

Agreed that it doesn’t appear SVB was doing anything shady with the investments. They just made a poor decision on a long-term bet that backfired.


LamarMillerMVP t1_jc6b5wm wrote

More like a whole lot of bad decisions and a little bad luck


SuckMyBallz t1_jc7ayld wrote

What bad decisions? They were invested in the most boring investments possible; bonds. Who could've predicted a bank run?


LamarMillerMVP t1_jc7r37p wrote

The bank run happened because the bank was technically insolvent, and the situation was quickly deteriorating. Bonds are low risk of default. They are not “low risk” in an economic sense. If I take my money and I stuff it in a mattress, that’s low risk that the government or a bank will steal it from me, but high risk in an economic sense - it will become less valuable over time, unless all investments shrink.

What happened here was that the bank tried to invest in assets that had low risk of default, and in order to get better percentage terms, said “ok and also you can take my money for a very long time without giving it back.” As a result of that, they got more money. But that gives you more money because it’s risky! And a bank’s job is specifically to manage this exact type of risk - borrowing short to lend long is the core business model. And they lost track of what they were doing, because their deposits grew immensely in just a few months.

On paper, SVB was in the worst shape of pretty much any major bank, and that fact was what sparked the run. When you hear these VC guys going apeshit - these guys didn’t spark the run. They’re morons, they’re screeching because they were almost left holding the bag, and the bag was emptying. The guys who actually “started” the run were fine, because they understood what was happening and acted appropriately


DarkKerrigor t1_jc5tfe7 wrote

Negligence is still criminal


kendred3 t1_jc5unil wrote

Sure, for things like vehicular manslaughter... not when a bank fails because of a run after their bonds lost value...


MrBurnz99 t1_jc6j9aj wrote

No its not. It can be in some circumstances but not always.