Nash Equilibrium has nothing to do with efficiency. In fact Prisoner’s Dilemma is the game you’re playing here and the equilibrium is NOT Pareto efficient at all
It's not the only Nash equilibrium. The other Nash equilibrium is that everyone keeps their money in SVB. That would have also been the Pareto optimal Nash equilibrium.
The fact that VCs settled on the suboptimal Nash equilibrium actually reflects poorly on them as a community.
It's not an accident that the "V" is often read as "vulture". The only way to prevent someone from stabbing you in the back is to stab them first.
People often equate finance to gambling, because even the terminologies overlap: you don't make "risky investments", you "place bets". But that's too simplistic a take, because there are two MAJOR differences between finance and gambling.
1: In finance you gamble with other peoples' money. Not your own. And when your bets go the wrong way, you ruin lives of thousands of families. Not just your own.
2: If you manage to find a loophole and turn the letter of a contract against the spirit of the contract, in finance that's a cause for celebration and a big bonus. ("Well played.") In gambling, that's called a breach of regulations.
An INDIVIDUAL payoff. Not the global one. By your argument, nothing stops the nuclear powers from destroying themselves. Yet somehow in the 60s the nuclear powers figured out the mutually assured destruction is also a prisoner’s dilemma and they COOPERATE despite the individual payoff being greater.
No, because if everyone else keeps their money in SVB and it avoids going under, there is no payoff for defecting - you simply disrupt your own operations for no reason by trying to switch banks.
That isn't the case. To continue the concert analogy, the concert hall had more than enough doors to let everyone out if people left in their usual walking pace, but some doors were locked and the security was paying someone to unlock them. People took this as a sign that they should sprint to the gates.
The bank has failed and those with deposits in excess of 250k have not been guaranteed and cannot withdraw now what are you talking about? The bank failed!! lol. If one had withdrawn fast enough, they have their money; those who waited lost.
The analogy is, it doesn't matter, those who didn't leave quickly got stampeded and died. Anyone who had huge amounts of cash in excess of the FDIC limit sitting there is an idiot. Doubly so if they heard of the "run" and did nothing.
As long as Fed has rates way way above 0% checking accounts, the gravity is going to pull deposits out of banks and into US Treasuries.
I've been withdrawing personal and business account cash for months and rolling in short term treasuries, many others are too as commercial bank deposits have been declining at record pace this year. Now this bank run. Anyone over the FDIC limit + those who begin to notice the interest rate differential (so..safety plus excess returns) are going to be incentivized to pull money out. This might not be the last bank failure... even if technically there is not danger on paper, human psychology will probably dictate that more will withdraw.
The rational choice is clear in this situation: anyone with excess deposits should move quickly. Who cares if nothing else breaks? Better to do it and not need to, than to need to but not do it.
You completely misunderstand the situation. The bank failed because of the bank run. It’s unlikely any depositors are going to lose their money because the bank was not insolvent. They’re going to get 50-60% of their deposits by Monday or Tuesday.
*OBVIOUSLY* the bank failed because of the bank run. What the hell does that have to do with the pertinent question of: was it rational to withdraw? Those that panicked first won. Those that didn't lost.
You are just plain wrong that withdrawing was the wrong choice. What about those needing to make payroll or pay other expenses in the mean time? When will they get their money back? You have no idea lol
The bank failed. It has been closed. It was a bank failure. Here's the official source that calls it a "failed bank" [0]