The bank was appears to have been insolvent (from the currently available information), though they avoided their books showing the fact by having bonds marked as “HTM”.
When a bank is insolvent, it’s best to shut it down as soon as possible, to avoid the bank engaging in risky behavior to ‘make back’ the missing money.
But without that pressure, there probably would have been enough time for this to have been a much more orderly transition. The panic didn't help anyone, it just made SVB's existing problems more difficult to manage.
To put it another way -- SVB went bankrupt the old fashioned way... slowly and then all at once. The bank run was the inflection point.
The only way to make back the $100 they spent on a 1.25% 10 year $100 treasury was to wait 8 more years.
Those 8 years they'd either have to become slowly become insolvent by offering their depositors 3-4% savings accounts like every other bank, or become illiquid because what depositor would keep their money in an account earning 0.5% so that SVB can keep the lights on. They had to sell and book the loss eventually.
If it were only illquid, it would be far easier to find a buyer and it would have already been sold by now.
[1] https://dfpi.ca.gov/2023/03/10/california-financial-regulato...
So, only after the run did they become insolvent. The change from illiquid to insolvent happened quickly, but without those withdrawals, the illiquidity could have likely been managed to avoid an outright insolvency (probably through a sale).
If you’re going to take a loss by selling an asset prematurely, it is illiquid. Otherwise you’d have to say things like the houses people own are liquid because the person could sell it in a day if they were willing to do so for 80 cents on the dollar.
That is not the financial world’s definition of “liquid”
At a simple scale, If I own a $200k home outright and have $50k in credit card debt that I cant pay then I file for bankruptcy, negotiate with creditors to sell my home and pay the debts, and come out with $150k in assets with no liabilities. I was always solvent.
This happens daily in the business world’s bankruptcy courts. (Of course some of them are also insolvent)
