I meant "does it work out for the small towns, long term?"

The current scenario seems to be:

  * regional bank gets local depositors to get cash for lending
  * regional bank can originate loans that they sell off to larger bank
  * larger bank makes long term money off the intrinsics of the loan
  * regional bank made short term money on sale and now has to invest in other long term assets
  * regional bank loses all lending opportunities they have locally, so now survive only on long term assets and depositors

The hope is that any profit that the local bank is making is invested back into the community. But profits being what they are, this dries up quickly and now the bank is firmly at the mercy of depositors and long term investments?

My gut is that there is no way you can spin a risk free story here. Big banks don't really solve it, either. We ultimately push that risk back to the government and some of our backstop regulations?

Edit: At least, on paper, if the depositors are local to the bank, that aligns them to the same incentives as the bank. Something SVB definitely did not have.