"...banks hold long positions on these bonds which is fine if they hold them until maturity."
Fractional reserve banking made that impossible for SVB. IIRC, cash reserve requirements have been lowered to ~5%. SVB couldn't uninvest from long term bonds to react to short term interest rate fluctuations without eradicating it's capital reserves. As @taskmaster4450 points out, they could only liquidate those investments at a substantial loss. When massive accounts like Thiel's moved their deposits on Thursday, SVB simply had no cash pay other depositors on Friday.
In 2020, the Fed removed the reserve requirement and hasnt implemented it. I dont know what other regulators such as the OCC require.
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LOL LMAO even. Fractional reserve banking without reserve requirements strikes me as absurd as the most drug fueled hallucination.
Thanks for setting me straight.