Media and Bank Failure with Anne Arvia // Cornerstone Hot Takes

Growth, as we all know, is probably at every bank’s strategic plan as a number one goal. If you’re going to grow that much, that fast, you have to be very aggressive in managing the diversification of not only your assets, which I think bankers spend a lot of time focused on, but I think the real lesson here is to focus on the diversity of your deposit base, your funding base.

In that particular place, it was a tightly knit group of depositors with backing in the PE and venture capital space. They’re talking a lot, right?

And they grew $190 billion in 2021. Think about that period of time. Super low rates, and that was about 100% growth, too, because they were about $100 billion in assets. So, huge growth for this institution at a time when the only way to make yield was on...

It was a recipe for disaster.

We said there’s a lot of kindling just hanging out there, ready for that match to start the blaze.

A lot of dry brush, and somebody tossed a cigarette, unfortunately.

Right. I’m telling you. And the cigarette came from a few different places, right? They sold some securities for a loss. I think they had four consecutive Fed rate hikes at about the same time. Then you had this tightly knit group of people, an influencer in the PE space who tweeted.

That’s where the difference, I think, for banks now versus 10 years ago is social media and the quickness, the velocity of information, as well as the velocity of money movement. It means that you have to be that much further ahead of things and that much more on top of things.

Right. The margin of error has shrunk drastically, which I don’t think we can blame them for, but I think is a lesson for all of us.