My sense is that wrong asset mix was the cause, and ESG a contributing cause, of the bank's downfall. It was the wrong treasuries, not the wrong loans, that caused the failure, since the bank had to sell long-term treasuries at a steep loss to make deposit withdrawals. On this analysis it wasn't imprudent loans to favored tech start-ups that laid the bank low. However, only one member of the bank's board had banking experience, a likely result of political or ideological considerations, so the board was not equipped to oversee the bank, and the officers' commitment to an ESG agenda probably took their eyes off the ball. Jim Dueholm
As I see it the problem with the position that ESG was the SOB for SVB is the lack of public evidence that the loans made to the startups were significantly in default or non-performing. It may have happened, but I haven't seen evidence of it. The bigger problem seems to be SVB's business model. It apparently required or strongly encouraged borrowers to place their deposits with SVB, producing a lot of money that had to be put to work. SVB, without a risk manager for eight months, assuming the low inflation environment would last forever, plunged in long-term treasuries and didn't unload them when Biden's policies and the Fed produced an inflation that inverted the yield curve and crushed the value of SVB's assets. When the depositors came calling for their money, SVB had to unload its treasuries at a big loss. The rest is history. Jim Dueholm
Ultimately is was Joe Biden who brought down the bank, for it was his spendthrift ways that caused the inflation that caused the fed to hike short term interest rates that drove down the value of the long-term treasuries that rendered the bank's asset base inadequate. Jim Dueholm
My sense is that wrong asset mix was the cause, and ESG a contributing cause, of the bank's downfall. It was the wrong treasuries, not the wrong loans, that caused the failure, since the bank had to sell long-term treasuries at a steep loss to make deposit withdrawals. On this analysis it wasn't imprudent loans to favored tech start-ups that laid the bank low. However, only one member of the bank's board had banking experience, a likely result of political or ideological considerations, so the board was not equipped to oversee the bank, and the officers' commitment to an ESG agenda probably took their eyes off the ball. Jim Dueholm
As I see it the problem with the position that ESG was the SOB for SVB is the lack of public evidence that the loans made to the startups were significantly in default or non-performing. It may have happened, but I haven't seen evidence of it. The bigger problem seems to be SVB's business model. It apparently required or strongly encouraged borrowers to place their deposits with SVB, producing a lot of money that had to be put to work. SVB, without a risk manager for eight months, assuming the low inflation environment would last forever, plunged in long-term treasuries and didn't unload them when Biden's policies and the Fed produced an inflation that inverted the yield curve and crushed the value of SVB's assets. When the depositors came calling for their money, SVB had to unload its treasuries at a big loss. The rest is history. Jim Dueholm
Thanks for these insightful comments, Jim.
Paul
Ultimately is was Joe Biden who brought down the bank, for it was his spendthrift ways that caused the inflation that caused the fed to hike short term interest rates that drove down the value of the long-term treasuries that rendered the bank's asset base inadequate. Jim Dueholm