They are indeed trying to shrink their balance sheet, but at the volumes they are working at, the entirety of SVBs assets amount to a few months of the fed’s current volumes.
After two years, that bond now has FMV of 1000/(1.02^8) = $853. But then interest rates increase to 4%, so its FMV drops to 1000/(1.04^8) = $731.
If we sold today at the FMV then we'd realize an $89 loss from our purchase price. That's neither better nor worse than holding to maturity, though--that's what makes it the FMV. In the case where we sell, we'd get $731 now, but we could reinvest it at 4%. After the remaining eight years, that would give us 731*(1.04^8) = $1000, exactly the same as if we'd held.
HTM accounting treats the two cases as different, but that's an arbitrary regulatory decision, untethered from any economic reality. It has no meaning outside that narrow compliance purpose. The SVB's decision to treat that accounting fiction as if it were economically meaningful appears to be a major part of how they blew themselves up.
It doesn’t follow that there will be any losses to cover. The government can take ownership of the assets of the bank and won’t be stuck having to sell them at a loss.