They - Silicon Valley Bank - bought vast tranches of long term, I think 10-year, US Treasury Bonds - at the then going interest rate, which was very low.
Time and tide moved on and The Fed began raising interest rates, as The Fed has been know to do, on occasion.
It has been pointed out that The Fed wasn't precipitous in this move; it talked and talked and talked about the likelihood of doing it.
So SVB shouldn't have been surprised, and, probably, should have thought about other places to put its deposits.
But they didn't.
And The Fed raised rates and that made 10-year treasury bonds have a higher yield - a lower price compared to face value of the SVB bond holdings.
So if you owned a lot of 10-year treasuries with a lower interest rate - albeit with less than 10 years to go to yield their face value - you were pretty well screwed if you wanted to cash out before maturity.
You would, in that case, need to sell at whatever the market thought they were worth.
Most probably that would not be face value.
So you would probably not want to sell them.
However, SVB decided to sell their vanishing-value Treasuries at a multi-billion-dollar loss, and then issue a press release stating that they had done that, and that that had caused SVB to loose multiple billions of dollars.
SVB's customers got really nervous and all came into the bank on their iPhones and took out 42 billion in a few hours.
Then the bank went belly up.
I know that that is true.
I have no idea whether this, that I am about to write, is true, but I have heard from trusted sources that SVB had a consulting contract with Goldman Sachs - hundred million dollar contract - and Goldman advised SVB to sell the treasuries and to issue the press release announcing that astute financial maneuver.
I guess Goldman has a script in at Net Flicks?
Is Brad Pitt providing the money?
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