“The Industrial Virality Complex”

The internet is full of hot takes around the series of collapses we just witnessed and I’ve debated how deep to go here. I found a thread that does a good job of providing a time series of events (with one suggested edit by me) and implications going forward. A big shout out to @professorstam.eth for the quality content 👇

I worked in bank liquidity and treasury for the better part of the last decade, and there is one very interesting risk factor from the SVB collapse that I do not think we have ever witnessed before in modern finance, a 🧵:

— Tyler Stambaugh (@ProfessorStam) March 12, 2023

My one edit to the timeline is in the below point, SVB didn’t announce they were liquidating there Available-for-Sale Securities… they announced they had already sold their AFS 👇

And so this is where I started to get very confused. SVB had announced they were liquidating their available for sale security portfolio for some extra liquidity and do some rebalancing to capture higher yielding instruments to offset what they were paying in interest deposits.

— Tyler Stambaugh (@ProfessorStam) March 12, 2023

So it makes the bank run more confusing, as, if the above description was correct, then yes the scenario would have been:

• market sees bank admission of liquidity concerns
• lets get our money out.

But that’s not what happened, SVB had already made the move of selling their AFS to Goldman at a loss and in their eyes now had the necessary strength in their balance sheet to continue to serve their customers.

This highlights @professorstam.eth’s point further, that the virality of the world we live in can run rampant, even without reason.

The SVB announcement below from their Mid-Quarter update deck dated 3.8.23 👇