It’s Matt Levine (quoted below; long read):
BNY tried to extend its cutoff, but:
It did get the money the next day, but by that point the FDIC had already seized it. Now, again, even if it had gotten the cash, it was facing continuing deposit flight, it seems to have been economically insolvent and it probably would not have survived the weekend. The Journal notes:
I do not actually think that the banking crisis of the last two weeks — in which SVB and Signature Bank of New York have failed, other US regional banks have teetered, the Fed and FDIC have provided extraordinary support to the banking system, Credit Suisse Group AG disappeared over the weekend, etc. — all could have been avoided if the Fed had said “hmm, normally we do a test transaction first, but you seem to be in a rush and it’s getting toward closing time so we’ll just skip that and go straight to lending you the money.” SVB’s problems were bigger than the Fed’s 4 p.m. transfer cutoff.
And yet! Man! What the heck! A lot has beenwritten about how SVB was a bank run for a speedier, modern age. Instead of hearing a rumor at the coffee shop and running down to the bank branch to wait on line to withdraw your money, now you can hear a rumor on Twitter or the group chat and use an app to withdraw money instantly. A tech-friendly bank with a highly digitally connected set of depositors can lose 25% of its deposits in hours, which did not seem conceivable in previous eras of bank runs.
But the other part of the problem is that, while depositors can panic faster and banks can give them their money faster, the lender-of-last-resort system on which all of this relies is still stuck in a slower, more leisurely era. “When the user interface improves faster than the core system, it means customers can act faster than the bank can react,” wrote Byrne Hobart. You can panic in an instant and withdraw your money with an app, but the bank can’t get more money without a series of phone calls and test trades that can only happen during regular business hours. And so sometimes a bank that theoretically has a lot of liquidity can just run out of cash.