[Waterluvian]

I’m still not clear on if it’s even the same.

My very weak understanding is that in 2008 a ton of assets turned out to be valueless junk mortgages that were all going to default. Is that true for SVB or are their assets just too locked in for now?

What that graph doesn’t show is the percentage of the blue bars that are recoverable assets.

[pclmulqdq]

I'm not sure if we know how much of the blue bar is recoverable. SVB is holding a lot of fixed-income vehicles that currently yield less than:

* Depositing money in a fed account (available to banks)

* Depositing money in a money market savings account

* Every treasury instrument you can buy today

When they go to sell those assets, they may take a much bigger haircut than the pricing models suggest given the supply and demand. The assets definitely won't be worthless, but they may not be worth very much.

[Scoundreller]

> Every treasury instrument you can buy today

Treasuries don't even need to pay more than a savings account to be the rational choice as they aren't subject to local/state income taxes. That's a bigger than average advantage in California.

Add to that no $250k limit either.

[pgwhalen]

It turns out that there was very little defaulting in 2008, the problem was the fear of default which resulted in changing valuations that were not broadly expected.

In this case, there is no doubt about the value of SVB’s assets: they’re lower than they were a year ago simply because they were heavily long duration and rates went up a lot. That’s bond pricing 101.

That, in combination with a low diversity of depositors that starting withdrawing at once, set up the bank run that VCs created by emailing all their portfolio companies to run.

[bink]

Not valueless, exactly. The mortgage backed securities were rated more highly than they should have been as the default rate was assumed to be much lower. When that became obvious the securities lost a lot of value and the banks found out they were over-leveraged.

I'm not in finance (clearly), but it seems to me there are a lot of similarities with interest rates rising and forcing banks to re-value their investments in bonds and mortgage backed securities. The clear difference this time IMHO is that valuing bonds based on interest rate movements is much less opaque (even fully transparent) compared to valuing mortgage backed securities based on default rate predictions that are outright lies.

We know, or should know, how many of these investments are held by large banks and what the rates and maturation dates are. The big question I have is the more traditional financial contagion. If companies that had millions in SVB lose that money there will be impacts for other banks as the companies and bank investors become more conservative or paranoid. If many of those companies go out of business that means fewer deposits and fewer investment opportunities.