> Part of the reason SVB failed so fast was because they held a lot of long term government debt, mortgages etc.
When they tried to sell it to provide liquidity for deposits they found there were not many buyers for it.
What? That’s nonsense. There is an extremely liquid market for the securities and selling them was no problem.
The problem is that they lost value when interest rates rose, were held in a “hold to maturity” portfolio to avoid having to mark down prices as interest rates rose, and the bank didn’t properly hedge its interest rate risk.
Yeah, there was a liquid market for it, but not for par value. No one wants to buy securities yielding ~1% when there's ample supply of safe securities yielding ~4%, so they had to discount them a fair bit to get them to sell. Which is how they lost value.
But it mainly happened fast because once word was out on social media that they were bleeding out, it had stoked depositors to withdraw their deposits.
What? That’s nonsense. There is an extremely liquid market for the securities and selling them was no problem.
The problem is that they lost value when interest rates rose, were held in a “hold to maturity” portfolio to avoid having to mark down prices as interest rates rose, and the bank didn’t properly hedge its interest rate risk.