This bank did put a ton of the money in T-Bills. The vast majority of the remainder was in boring stuff like longer-term bonds. A very small amount (relatively) was involved in bitcoin lending.
The problem is highly liquid and effectively instantly redeemable wasn't enough when the crypto world melted down and a huge percentage of their depositors needed money back right away. No bank can survive that. Wells Fargo just has customers from a wide enough crosssection that they won't all need their money back at once. But you can imagine it happening to a small local bank following a natural disaster as well.
Silvergate was solvent and has the assets to cover liabilities, just has liquidity issues.
If they could cover their liabilities with their assets then they would sell the assets to do so. Clearly the assets do not cover the liabilities. It's not a lengthy process to sell a bond on the open market
If you bought them at 2-3% yields then you lost a lot of money, which is probably the case here. If they bought below par they would get their money back at maturity, but that could be 20-30 years from now. Despite being "safe" from a credit perspective, munis are not safe from interest rate risk
Sorry, you're right that their assets are also down. I didn't mean to deny that. It just seems that it was more a liquidity crunch than a solvency crunch. But maybe they cannot pay all their debtors?
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This bank did put a ton of the money in T-Bills. The vast majority of the remainder was in boring stuff like longer-term bonds. A very small amount (relatively) was involved in bitcoin lending.
The problem is highly liquid and effectively instantly redeemable wasn't enough when the crypto world melted down and a huge percentage of their depositors needed money back right away. No bank can survive that. Wells Fargo just has customers from a wide enough crosssection that they won't all need their money back at once. But you can imagine it happening to a small local bank following a natural disaster as well.
Silvergate was solvent and has the assets to cover liabilities, just has liquidity issues.
If they could cover their liabilities with their assets then they would sell the assets to do so. Clearly the assets do not cover the liabilities. It's not a lengthy process to sell a bond on the open market
A T-bill is very liquid. Municipal bond liquidity dried up during the pandemic and, AFAIK, hasn't fully recovered yet.
Obviously some assets they hold (mortgage backed securities) have declined in value.
Munis are liquid, I view (a slice of) the market every day. Volume is down, but not significantly: https://www.sifma.org/resources/research/us-municipal-bonds-...
If you bought them at 2-3% yields then you lost a lot of money, which is probably the case here. If they bought below par they would get their money back at maturity, but that could be 20-30 years from now. Despite being "safe" from a credit perspective, munis are not safe from interest rate risk
Sorry, you're right that their assets are also down. I didn't mean to deny that. It just seems that it was more a liquidity crunch than a solvency crunch. But maybe they cannot pay all their debtors?