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Hedge accounting, deposit beta, private credit, passive bond funds and flinging legal documents at Shaq’s car.
Matt Levine
One question people have asked is: Why didn’t Silicon Valley Bank hedge its interest-rate risk? SVB, like other regional banks, got a lot of deposits and invested them in long-term US government and agency bonds with fixed interest rates. As interest rates went up, those bonds lost value, eating through all of SVB’s equity. This was bad, people noticed, they withdrew their deposits, and SVB ran out of money. This was all pretty predictable, or at least a known risk. Why didn’t SVB hedge?
We have talked about a couple of answers to that question:
