SVB literally needed a constant stream of new startup customers to cover the withdrawals of their current customers. Maybe you don't like the word ponzi, but it's an accurate description of the dynamic at play. Other banks don't have this problem because they don't have money-losing startups as their core customer base.
VC investment is highly sensitive to interest rates. Always has been, and everybody knows this. Instead of hedging against this risk SVB decided to double down on it and bet the bank on interest rates going back to zero. I'm sure they had a bunch of risk experts sign off on it, but we both know that doesn't mean anything. Complacency sets in after 15 years of low interest rates, and I think it's exactly because SVB did so well in the ZIRP environment that they got careless.
> SVB literally needed a constant stream of new startup customers to cover the withdrawals of their current customers.
Isn't it true of any bank that experiences a sudden and unexpected flood of withdrawals that they need an infusion of cash to cover them? Whether they get the cash from new depositors or by liquidating investments, the cash has to come from somewhere.
I think you're mistaking a bad investment decision for a criminal act and intent, and nobody is claiming SVB of a crime at this point in time; the evidence isn't there so far. Every bank invests cash deposits in a mix of liquid and illiquid investments, and the illiquid investments often can't be liquidated quickly, if at all. (Think mortgages.) As I said, that is the business model of a bank.
VC investment is highly sensitive to interest rates. Always has been, and everybody knows this. Instead of hedging against this risk SVB decided to double down on it and bet the bank on interest rates going back to zero. I'm sure they had a bunch of risk experts sign off on it, but we both know that doesn't mean anything. Complacency sets in after 15 years of low interest rates, and I think it's exactly because SVB did so well in the ZIRP environment that they got careless.