Hopefully not. It was a bit of a special case.

Author: Iggle (12183 Posts - Joined: Sep 14, 2007)
Posted at 8:09 pm on Mar 10, 2023

They catered to startups who has been flush with cash and didn't require loans. They made the mistake of buying long term treasuries and agency mortgages with the deposit money since they didn't have a large corporate loan portfolio.

This caused a serious mismatch between demand deposits and long term bonds. As interest rates rose, the value of their assets went down. Meanwhile, the spigot of cash for startups turned off, so all the tech bros started burning through their cash. When demand for return of the deposits occurred, they were in the bad position of needing to sell those assets.

This caused serious losses to the point that assets no longer covered liabilities (deposits).

It was a weird bank that didn't do what most banks do because of their target market. Hopefully won't mean large contagion risk. Although Mr Market is going to take a run at SBNY next week.


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