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A comment on FDIC Takes over Silicon Valley Bank. Parent comment

Re:FDIC Takes over Silicon Valley Bank by ahmedbaracat on Friday March 10, 2023 @06:30PM (#35102808)
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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Re:FDIC Takes over Silicon Valley Bank by adam_arthur on Friday March 10, 2023 @06:33PM (#35102834)
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

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Re:FDIC Takes over Silicon Valley Bank by bryfb on Friday March 10, 2023 @07:26PM (#35103420)
"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.

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Re:FDIC Takes over Silicon Valley Bank by brightstep on Friday March 10, 2023 @10:07PM (#35104772)
Because the bank, like all capitalist entities, exists to make a profit. Why else?
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Re:FDIC Takes over Silicon Valley Bank by ahmedbaracat on Saturday March 11, 2023 @12:27PM (#35110490)
Can they make profit by charging customers a monthly fee in return for their services instead of investing the money?
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Re:FDIC Takes over Silicon Valley Bank by zenlikethat on Saturday March 11, 2023 @12:07AM (#35105574)
Because if you lose 7% of capital on $180 billion in real terms that’s an awkward conversation with your boss?
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Re:FDIC Takes over Silicon Valley Bank by HDThoreaun on Saturday March 11, 2023 @01:37AM (#35106063)
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...
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Re:FDIC Takes over Silicon Valley Bank by zenlikethat on Saturday March 11, 2023 @01:37AM (#35106064)
They didn't think they were gonna sell the assets before maturity. In that case, buying those makes sense.
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