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Not all Treasury assets are the same! 1 year vs 10 year. SVB chose 1 year, even after Biden reduced US energy supply and Russia was invading Ukraine , making price increases inevitable. This choice resulted in some 18% market value loss, with little diversification. The risky choice plus the actual inflation is the main cause. Betting the bank on the “no inflation “ scenario is dumb, but it becomes (almost?) criminally negligent if the decision makers don’t even know they’re betting the bank.

Regulators allowing such bets are somewhat to blame because their existence and job is to not allow bank betting, leading bank execs to assume that if it was too risky it would not be allowed. There should be a phrase for reg-based increased risk hazard, similar to moral hazard.

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