>there isn't an actual loss here as long as it encourages people to not withdraw money early.

This is like saying you loaning me 50B for ten years is zero cost as long as you get it back at the end.

It ignores the fact that you have to come up with the money, and once you have it, you could put it somewhere with an actual return.

This is the exact reason SVB failed. Their 10 year investments were worth 70 cents on the dollar because there are better returns elsewhere.

SVB failed because all their customers are in group chats with each other and think it would be funny to withdraw all their money at once and then buy stock in the bank.

https://twitter.com/torrenegra/status/1634573234187407369

Even their bad investment decisions wouldn't have killed them if there hadn't been a bank run.

If loaning or borrowing money were free, they could have covered every withdraw.

Im pushing back on the specific idea that paying full price for an asset that is locked up for 10 years isn't a loss.

I love this LinkedIn style post of "today we organized a bank run". Except they are totally serious.

Any depositors expecting to receive their deposits in due course could take our commercial loans to cover themselves in the meantime. They are being bailed out by the taxpayer to the tune of what those costs would be.

SVB was solvent before the run. Is that still the case even after Wednesday/Thursday's fire sales, where they had to sell a bunch at a loss?

SVB had more asset than liability, at least on paper. They were not able to be solvent selling on open market in the time it had, but perhaps that can be done by a bigger bank over longer period of time?

SVB was insolvent