The Biggest Bank Run Since the 2008 Crash

“Investors and depositors tried to pull $42 billion from Silicon Valley Bank on Thursday in one of the biggest US bank runs in more than a decade,” Bloomberg reports.

Washington Post: Silicon Valley Bank failure raises fear of broader financial contagion.

Matt Levine: “So if you were the Bank of Startups, just like if you were the Bank of Crypto, it turned out that you had made a huge concentrated bet on interest rates. Your customers were flush with cash, so they gave you all that cash, but they didn’t need loans so you invested all that cash in longer-dated fixed-income securities, which lost value when rates went up.”

“But also, when rates went up, your customers all got smoked, because it turned out that they were creatures of low interest rates, and in a higher-interest-rate environment they didn’t have money anymore. So they withdrew their deposits, so you had to sell those securities at a loss to pay them back. Now you have lost money and look financially shaky, so customers get spooked and withdraw more money, so you sell more securities, so you book more losses, oops oops oops.”