Their safe, boring assets weren't safe and boring enough. Why can't there be a bank like this that just keeps your cash as cash?
Many banks do put customer funds into T-Bills, or park it with the Fed at the fed funds rate. Both of which are 0 risk and effectively instantly redeemable. And this is still highly profitable right now, if you offer customers yields below fed funds rate (~5%), the money on the spread is risk free.
Pretty much every crypto adjacent firm has decided to take excessive risk with customer deposits to skim some off the top instead
Others are probably upset with it because Silvergate had the option to hold cash as cash, or cash as one-month T-bills, and if they had done that, they wouldn't have had to liquidate.
But instead they locked it up in much longer dated bonds to grab a little extra yield, and got burned when interest rates increased.
Absolutely insane how my local bank's money market account interest rate is something like 1.4%. Their CDs only hit 3%. Like come the fuck on. Ended up moving most of my money out of there.
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.
Banking services basically are so successful they became a necessity for the vast majority of people who can access them—you have to have money storage, as a prerequisite to moving money you can’t or don’t wish to store. I can’t think of a reason I should pay a bank for the privilege of access to paying some of my own money to another party.
On the other hand, I think this is just as good an argument that the kind of banking I’m describing should be a public good rather than a part of the services provided by investment firms. I even think there’s fairly good precedent for that argument, albeit at a drastically larger scale and with an unfortunately storied history of fraud and abuse.
EDIT: In 2020 the Southern District of New York court dismissed TNB's complaint[1], finding the 18 month wait did not construe a denial (despite the application form saying a decision "may take 5-7 days"). I guess there was no appeal?
No, they weren't. Duration is a measured risk [1]. Silvergate chose a flighty, risky set of clients. Their portfolio should have been optimized for liquidity, not yield. They got greedy and are paying the price.
