[chernevik]

You're entirely right about the hostage scenario.

Ultimately the VCs that guided their portfolio companies to use SVB and neglect obvious cash management are responsible for the anxiety. I suspect they would have stepped up to fill any gaps, which would have been less serious than claimed; making payroll was never seriously threatened.

But before then they were happy to let some useful idiots clamor for a depositor bailout that would absolve them of that responsibility.

[twblalock]

The systemic risk to the entire banking system was real and still is, and VCs banding together to save a single bank would not have helped.

The systemic risk became real simply because a lot of people realized that SVB was not the only bank with problematic assets. The result would have been an outflow of deposits to the "too big to fail" banks because those banks effectively have infinite deposit insurance (because everyone already knew they would not be allowed to fail).

[chernevik]

I think the VCs would have helped not SVB but their own portfolio companies. The amounts involved would have been small and the VCs would not want to admit to their own investors they were idiots.

Failure of a number of regional banks does not threaten the whole system but the handful with sketchy solvency / liquidity.

[twblalock]

All banks that were not in the “too big to fail” category were at risk as panicked depositors would have flown to safety in the arms of Chase and the other big banks. They would have done that even if their own smaller banks were just fine, because of a fear that other people would do it first. Once the panic begins it becomes a self-fulfilling prophecy.

Also, many other small banks are not fine. SVB is not the only one with concerning duration risk in their assets.