[joe_the_user]

...really this was a bank run pure and simple

I've been around and around on this question. Insolvent or illiquid, illiquid or Insolvent... etc. It was solvent on paper, by what it had to record on it's books. But it was insolvent by mark-to-market (which it didn't have to use but which the sophisticated but not-that-sophisticated investors, say venture capitalists, would assume is the reality). But hey, you could say it was solvent by the Fed supporting every bank it's size. Then again, the Fed didn't come through in time, so maybe the run was the reality [1].

And you could say "this was a run 'cause picking on SVB in particular was unfair since a significant portion of all bank capital in long term bonds that put them on an "overhang" of unrealized losses. [2] But maybe, the Fed needed to cool the economy so killing a few banks was needed and SVB and signature were the most logical.

[1] Matt Levine in Bloomberg https://archive.ph/uIYtY [2] https://finance.yahoo.com/news/u-banks-sitting-1-7-211212318...

[tripletao]

> which it didn't have to use but which the sophisticated but not-that-sophisticated investors, say venture capitalists, would assume is the reality

It seems like you're implying that a truly sophisticated investor would view this differently, but I don't see how. By all indications, the MTM price was economically correct--bid/ask spreads and trading volumes were normal, and the price was very close to what a simple NPV model would predict. There are cases where the market price is economically wrong (in a "liquidity crisis", "fire sale", etc.), but there's no evidence of that here.

Managers and shareholders of the SVB and other banks with similar losses have strong self-interest in arguing otherwise, and they're doing so quite successfully. It's particularly easy to confuse people about interest rate risk, since it's so abstract--you're still getting the same future cash flows, and it's hard to explain why they're less valuable without a concept of NPV or other bond math, which relatively few people understand. The economic loss is just as real as with any other risk though, regardless of what the accounting says.

[joe_the_user]

I suppose I shouldn't necessarily imply "truly sophisticated" but one group of depositors would just say "of course the Fed will support the depositors, there's no reason to worry" your argument about insolvency is correct.

[tripletao]

That's fair--to the extent truly sophisticated depositors believed "there's no need for a bank run, since the FDIC would take extraordinary measures to back the uninsured deposits even if the SVB collapses while economically insolvent", they were exactly right. The cost of moving money out is so small that you'd have to believe that very strongly not to though, or to get a big auxiliary benefit (access to future credit, etc.) from the continued existence of the SVB.

[joe_the_user]

Yeah, I only really wanted to say there were different levels to how might approach this stuff, not try to rank their smartness.

On the one hand, the news reports seemed to vaguely imply that some pretty wealthy people were standing in line for quite a while and I assume that was time they could use to make money other ways.

On the other hand, maybe everyone withdrawing money knew things were safe but also "knew the drill", knew the Fed needed their complaints to bolster it's actions.