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Comment by ahmedbaracat | Hacker News Reader

This logic is counterintuitive to me “As deposits grew, SVB could not grow their loan book fast enough to generate the yield they wanted to see on this capital.”. Startups are not depositing the money in SVB to invest it, they are storing it for future use. Why the pressure to generate yield and grow the loan book “fast enough”?

https://twitter.com/AhmadBaracat/status/1634293096639787008?...

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There was no explicit need or requirement for SVB to buy MBS at 1% yield, yes. Poor management handling too much money.

They also could have hedged the interest rate risk. Likely there will be policy change as a result of this. Banks over some AUM requiring stricter regulations

The Fed is complicit in encouraging moral hazard through distortion of the bond market. Pretty much every crisis in the modern era is precipitated by fed policy from years earlier

"The yield they wanted to see on this capital" I imagine is some combination of money needed to run operations of the bank, interest paid on the deposits and profit.

They could have just stored the money in the proverbial vault. But if they do that, then they have to charge the depositors a fee to be a customer. And competition has pushed in the other direction.

And probably more importantly that whole "profit" goal.

Because if you lose 7% of capital on $180 billion in real terms that’s an awkward conversation with your boss?

Bank accounts were paying .1% interest at this time. SVB could've bought 1 year bonds and made .5-1% easily. That's a billion dollars...

They didn't think they were gonna sell the assets before maturity. In that case, buying those makes sense.

Because the bank, like all capitalist entities, exists to make a profit. Why else?

Can they make profit by charging customers a monthly fee in return for their services instead of investing the money?

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