[Mick]

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...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.  

SVB's senior management was certainly sophisticated enough to understand the risk that they were taking. From what I gather, there were a number of voices who loudly counseled against investing too much in government instruments that were disintegrating in value. This cannot have been a surprise to anyone at SVB, although the speed of the collapse may have been a surprise.

Still...the vibe I was getting from former CEO Greg Becker's announcements was that he was caught at least a little bit surprised. Did anyone else get that feeling? When did Becker realize, have the first inkling that their investing strategy was wildly incorrect? I know some people think he was very smart, and a midwestern financial conservative, and certainly he looked the part. He had gravitas. He and SVB got greedy. When did he realize that inflation was rearing its ugly head and would destroy their strategy and the 16th largest bank in the country?

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SVB was sophisticated enough to have adopted this Risk Committee Charter in April 2022

https://www.svb.com/globalassets/library...-final.pdf

Interesting process memo. It doesn't commit to a specific risk-averse profile, it just details processes. Reminds me of the old ISO-9000 standards; you could build lead lifejackets as long as you followed the process.

[Mick]

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...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.  

SVB's senior management was certainly sophisticated enough to understand the risk that they were taking. From what I gather, there were a number of voices who loudly counseled against investing too much in government instruments that were disintegrating in value. This cannot have been a surprise to anyone at SVB, although the speed of the collapse may have been a surprise.

Still...the vibe I was getting from former CEO Greg Becker's announcements was that he was caught at least a little bit surprised. Did anyone else get that feeling? When did Becker realize, have the first inkling that their investing strategy was wildly incorrect? I know some people think he was very smart, and a midwestern financial conservative, and certainly he looked the part. He had gravitas. He and SVB got greedy. When did he realize that inflation was rearing its ugly head and would destroy their strategy and the 16th largest bank in the country?

---

SVB was sophisticated enough to have adopted this Risk Committee Charter in April 2022

https://www.svb.com/globalassets/library...-final.pdf

Interesting process memo. It doesn't commit to a specific risk-averse profile, it just details processes. Reminds me of the old ISO-9000 standards; you could build lead lifejackets as long as you followed the process.