![]() Rather than make dumb loans, SVB bought assets guaranteed by the US government - Treasuries and MBS. Deposits were pouring in too fast to lend responsibly. Much of the $ was from VC-backed companies that needed a place to deposit the $ they raised. ![]() As mentioned above, from 2019-2021, the deposits tripled! SVB needed to take those funds & acquire “assets” to pay its costs.Ĥ. If a bank can’t lend deposits responsibly, it often uses excess to BUY loans or “securities,” like US Treasuries & Mortgage Backed Securities (MBS)ģ. ![]() To pay for the cost of those liabs, banks turn them into assets: lending deposits as small business loans, mortgages, etc. Liabilities cost money……”cost” both to serve those clients (branches, tellers etc ) and any interest the bank pays you on your checking account (deposit).Ģ. ![]() When banks accept deposits from clients, they OWE the client that money. How’s that a problem? It sounds great, right?ġ. ![]()
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