Yeah, but they bought bonds to make their numbers work. They had a choice of getting like 0.08% in overnight funds or 0.36% in short term T-bills or locking it up and getting ~3% in MBS. They chose the latter to make more money. If they had chosen the former things would have been far less critical.

In retrospect this was a huge risk. They locked up way too much money in long term securities for how flighty their deposits could be.

They too, thought that the world had fundamentally changed as a result of the pandemic.

3% MBS, that's a good one. Try more like 1.25% coupon rate with the crazy low mortgage rates were at when SVB got the inrush of deposits (the banks and the GSEs gotta make their money too, with mortgage rates near 7% UMBS coupons are only at 5.5%).

The type of bond would matter if default risk was a meaningful piece of the puzzle here, but in this case it isn't (IIUC).