[pefloresjr]

This is obviously a complex situation and there were many factors involved.  However, it is ludicrous to claim that SVB was hoodwinked by the Fed into buying too many long-term bonds.  This is one of the most sophisticated bank/investment houses in the country.  (Banks aren't simple banks having to cover deposits anymore of course, but that is a different discussion.)  They would have been fine if they were buying long-term bonds to hold until their maturity.  I am part of a very conservative association that has been rolling 10-year bonds for many, many years with steady, modest gains because the funds used were not part of our liquidity.  SVB was instead, putting too high of a percentage of their assets in non-liquid investments to cover unexpected withdrawals.  SVB could claim that they expected to be able to take such risks because they were never prevented from doing so before, but they knew they were taking risks.  Whether they would or would not have passed a stress test is a separate question from their culpability for their investment decisions.  Getting away with it is not the same as being tricked into doing it.  

Cheers,
Pete F.

[pefloresjr]

This is obviously a complex situation and there were many factors involved.  However, it is ludicrous to claim that SVB was hoodwinked by the Fed into buying too many long-term bonds.  This is one of the most sophisticated bank/investment houses in the country.  (Banks aren't simple banks having to cover deposits anymore of course, but that is a different discussion.)  They would have been fine if they were buying long-term bonds to hold until their maturity.  I am part of a very conservative association that has been rolling 10-year bonds for many, many years with steady, modest gains because the funds used were not part of our liquidity.  SVB was instead, putting too high of a percentage of their assets in non-liquid investments to cover unexpected withdrawals.  SVB could claim that they expected to be able to take such risks because they were never prevented from doing so before, but they knew they were taking risks.  Whether they would or would not have passed a stress test is a separate question from their culpability for their investment decisions.  Getting away with it is not the same as being tricked into doing it.  

Cheers,
Pete F.