IMO, the top risk for SVB (by far) was (client) concentration risk. Most of SVB’s deposits and loans were from/to tech startups. Hence, client actions will be highly correlated when their industry receives a shock. It’s analogous to geographic correlations in MBSs in 2008. 1/

https://twitter.com/econompic/status/1634741386334588931

Per the OCC handbook, their focus is on credit concentration, and seems to be less on deposit concentration. (At SVB, the two seem to be nearly perfectly correlated.) SVB did have a strong capital position, but nowhere near strong enough to mitigate their actual risk. 2/

A few thoughts on teaching pedagogy – notably, the concept of “flipping the classroom.” Context: I’ve been a business school instructor/prof for 22 years, grad and undergrad. I taught fully remote in Fall of 2020. 1/x TLDR: If flipping leads to more active learning in class, do it, but keep videos 5-10 min. unless the class is quite technical (e.g. engineering, programming). Ideally, break down long videos into shorter ones when possible. 2/x

My paper: "How does past experience impact hedge fund activism?" (with Linlin Ma and Bob Mooradian) was conditionally accepted at the Journal of Financial and Quantitative Analysis (@JournalFQA)😀. A thread about the paper: 1/21 papers.ssrn.com/sol3/papers.cf… Morrison and Wilhelm (2008) argue that when investment banks (IB) abandoned the partnership structures and went public, their focus changed from a long-term mentoring approach to developing codifiable quant. skills, often at top business schools... 2/ onlinelibrary.wiley.com/doi/abs/10.111…

My interview with Carly Urban, Econ prof at Montana State University! Carly focuses on financial literacy, which I know is a really important topic for many of my Twitter friends. Thread and link: 1/15 @carly_urban @brianportnoy @RebeccaMaxcy @A_Lusardi
How Carly got interested: "I was reading two papers studying effects of high school mandates on financial outcomes, and they both had a table listing which states did and didn't have financial education mandates... and they only matched A THIRD OF THE TIME."... 2/15

Today is Tamar Frankel's 95th birthday!! Born on July 4, 1925, she is the quintessential immigrant: born in Palestine to a German father and Russia mother, she moved to the US in 1963. She and I talked last week, have a listen: 1/14 Tamar on fiduciary duty: "You can't have conflicting duties and be a fiduciary at the same time." 2/14

Great primer on negative bond yields. Thread! There are a couple types of interest rates that can be negative. The ones that we are most interested in are 1) interest on reserves and 2) (market) yields on government and corporate bonds. 1/

https://twitter.com/RyanPKirlin/status/1161267777279102976

For the first type: Interest on reserves relates to monetary policy by central banks (Fed, ECB, Bank of Japan). Every day, commercial banks in these countries have to decide what to do with the cash they hold on their balance sheets. 2/

Finally getting around to doing a thread about my working paper: The worst of both worlds? Dual-registered investment advisers. Generally, there are two types of financial advisers: fiduciaries and brokers 1/ papers.ssrn.com/sol3/papers.cf… Fiduciaries have a duty of care and loyalty, to act in clients' best interests. Brokers face a less stringent suitability standard. 2/

Thread: Brokers fighting the fiduciary rule make two arguments. First, they don't want to charge asset-based fees. Second, they worry that small clients will be left behind. 1/ As I've stated before, asset-based fees are common in fiduciary accounts, but should not be THE defining characteristic. The purported reason they are currently the defining characteristic is that asset-based fees keep adviser and client interest aligned and reduce conflicts. 2/

Thread! on financial literacy: tagging those in prior conversation @ramit @dollarsanddata @gabpott @ryanstephans @morganhousel @billsweet @copious28 @theNFaber @Nonrelatedsense @justinisreal @CastiglioneJohn @bryanportnoy 1/ @ramit @dollarsanddata @gabpott @RyanStephans @morganhousel @billsweet @copious28 @theNFaber @Nonrelatedsense @justinisreal @CastiglioneJohn @bryanportnoy My views: I want students to be financially literate. I am hopeful that a program might be designed that can work, and I vastly admire those that are trying, including @FinEdInitiative. 2/

Student has an offer with an investment bank. Offer expires in November. Job starts in June. Should he accept but keep looking for a buy side job, and rescind his IB acceptance if he gets a better job? Way more interest in this poll than I anticipated! I was waiting to express my view, but I'm A. Always have been. Your word is your bond. If you promise to do something and back out because something better comes along, you're lying. Any other response requires moral relativism.