And that is all the incentive they need.
Let's be real, banking is a public-private partnership. While it IS significant that the banks themselves are doing this, and not the Fed/FDIC, it would also seem quite possible (likely?) to be some nudging from the Fed/Treasury. Some form of "hey, we did our part (the new emergency backstop), you guys need to show you're worth this effort".
While the top-tier of banking is obviously in competition with each other, they're also bound together by their shared interest in the status quo, and then doubling bound together by the Fed/USG also being very interested in the status quo. So it's cartel-like, but it would be a mistake to only include the banks as members of the cartel.
Propping a competitor up in this nature is fairly hard to argue as "restraint of trade".
Banks directly acting to help their competition? Why? Isn't that how competition is supposed to work?
What we're seeing is yet another version of capital and capitalism in decline, and rich financiers are still claiming the empire is wearing a wonderful robe. News flash! he's wearing nothing at all.
That's like saying we can't implement renewable energy until the grid goes dark, and the best way to get reform is to go round blowing up some power stations. People are depending on this infrastructure to work! Advocating for bank failures without regard to the consequences to the users is the sort of accelerationism that you normally only hear from revolutionary Communists.
What is the acceptable level of collateral damage from bank failures to you?
SVB isn't like the 2008 banks that held mortgage-backed securities that turned out to be full of people who lied about their income and assets and would never get repaid. SVB had treasuries that absolutely would have been repaid.
SVB was trying to do an equity raise to solve their short-term liquidity issues. If they'd done so quietly, and gotten money from a big institution before going public, they'd probably have been fine. Instead, the public equity raise spooked people, caused a bank run, and made their liquidity go from "risky" to broken.
Is there any (publicly viewable) analysis of the extent to which this is - or isn't - true?
It certainly would have survived longer, and for all I know maybe they would have been fine for the 6-7 (iirc) years remaining on those 10yr assets.
But at the same time, with money no longer as cheap as it had been for a long time, it's likely that had they not had the immediate run they would have seen money gradually leaving the bank as less new money gets put into VC and as their startup customers gradually spent down their investment lump sums without raising any new money. Would that gradual trickle out have been strong enough to push them under in the following months or years even without a bank run?
The liquidity problems seem to have lead to the bank run, but the immediate cause of the collapse was VCs panicking.
The liquidity problems caused the flight - why else would they take a $1.8b haircut on a securities portfolio and then try a bone-headed cap raise to cover the difference?
However, just because the link can be drawn, doesn’t mean it was the ultimate underlying cause. If the depositors weren’t so heavily coordinated and concentrated together, there’s no way the money would have come out that fast, if at all. Regardless of the loss on the bond sale.
Actually VC funds don't have much capital. If I agree to put $10MM into a $50MM fund as an LP, I don't send them $10MM. What I agree to do is that when they make an investment in Startup X, they can call me and ask for a fifth of that investment.
LPs invest in venture firms on the theory that the firms can pick good startups. I want the use of my money until they ask for it.
(This explanation ignores the annual management fee and the fact that some VCs have made a lot of money in the past).