Some of you probably already knew this, but today I learned the reason for SVB and Signature Bank's failures was because they refused to participate in reciprocal deposit networks to ensure deposits in excess of $250k were FDIC insured.

Writer. Head of Product @ Stablecore. Working on simple web hosting https://orbiter.host \ https://polluterofminds.com

Crazy right? Also part of why they were able to lean into more innovative segments (startups, crypto, etc)

Signature had it's own blockchain at one point ("SigNet" I believe)

Building /indexing; love your data again. Probably also running 🏃‍♀️

Yep! But the silly thing is they could have done all this AND maintains a sweeps network that allowed every depositor to maintain FDIC insurance. If they needed money to fund other services, they would have been able to receive reciprocal deposits from other institutions to fund those activities.

I don't have any proof, but my impression at the time was that they were sort of left out of the reciprocal club because they allowed these "sketchier" activities

(I briefly worked with Signature on a crypto escrow product in 2018/19)

Yeah I knew about the shadiness. What I didn't understand until this week was the exact mechanisms banks had available to them to ensure FDIC insurance on large deposits while also maintaining deposit volume for yield-bearing activities. SVB chose not to participate or was blacklisted from participating. I don't actually know which.

They were doing some not great activities. 

Operation choke point focused on such .

They also used to lend out to their SV VC frens at very favorable terms. 

The bank run was initiated by SV and D.Sachs if I remember correctly. Encouraged every portfolio co to move all funding.

Ah, if that's true, it makes a lot more sense.