Reply To: Backstop everything

AAQ is right on point. Its not complicated. SVB bank deposits were short term funds held in the bank by a wide range of commercial startups, payroll service companies, real estate etc and could be withdrawn in the blink of an eye. Their smaller retail depositors were moving funds from bank to bank chasing higher yields. The bank’s investment portfolio was held primarily in long-term T bills and higher quality corporate bond. It doesn’t take a Nobel economics prize winner to realize that in a rising interest rate environment, that portfolio would lose value as the Fed increasing interest rates. While the assets were high quality and if held to maturity they would have been whole. However, once they started a bank run by mindlessly announcing they were raising capital and then failed to do so, they did not have the portfolio liquidity to meet the demands by depositors to take out their money. The FDIC receiver now has the time to slowly unwind that portfolio and most likely will recover most if not all of the asset value.