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Comment by throwingrocks | Hacker News Reader

> They failed specifically because of business they were servicing.

This is so disingenuous. They failed because they made risky investments, interest rate hikes put their investments in jeopardy, and when they tried to raise extra capital (responsible thing to do), people were alerted of the problem and left the bank (responsible thing to do).

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I used to think that it was entirely about the risky investments, but $42 billion left SVB (which managed about $200 billion in total) in 2 days. Literally no bank today could withstand a bank run for 20% of its asset base.

Per their mid quarter update[1] there was ~20bn outflowing per quarter, so the question I have is if they had to sell their MBS for 20bn at a 2bn loss, that seems it would only buy them an extra quarter or so of liquidity. Surely they couldn't do that every quarter and remain solvent? Did this trigger their insolvency or accelerate it?

[1]: https://s201.q4cdn.com/589201576/files/doc_downloads/2023/03...

Bank runs are the rational thing to do in the face of an insolvent bank whose deposits are decreasing. SVB mainly serviced startups who would need to withdraw deposits in the current macro climate so there is a good chance they would eventually run out money. As soon as people realize that it's about the correct game theory choice to pull the money and run.

IMHO it’s both. Although the risky investing probably played a bigger part.

It's part of the story. They had a non-diverse group of interconnected customers prone to herd behaviours led by a small influencer elite. Few banks represent such a high risk of a run.

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