Also: Credit Suisse crisis, SVB probe, T-Mobile buys Mint. 
Good morning.
Fortune’s Shawn Tully provides the best take I’ve seen on the Silicon Valley Bank blowup by talking to the man who won the Nobel Prize in Economics last year for his insights into banking: University of Chicago’s Douglas Diamond. Diamond knocks down some of the common misperceptions of the cause of the crisis, including:
–“SVB was a sound business wrecked by a stampede.” Nope. Diamond’s work shows a panic can ruin an otherwise healthy bank—but that wasn’t the case here.
–“SVB was a victim of overly aggressive Fed rate increases.” Not the problem. Fed policy certainly played a role, but it wasn’t the main cause.
–“Social media fueled the SVB bank run.” Not really. Most of the VCs involved could have gotten word at the Rosewood Sand Hill bar, or on any number of closed chat groups. They didn’t need a global media platform.
So what went wrong? Well, first, SVB violated the most basic rule of banking—it failed to diversify. “Banks make safe assets out of risky ones by diversifying,” Diamond said. “And they have diversified funding sources, so that depositors don’t all need their money on the same date.” But SVB was making loans and taking deposits from the same insular group of venture-funded tech companies, who all ran into trouble at the same time, and ultimately ran for the exits together.
And second, both SVB and its regulators failed to anticipate how the business would be affected by rising interest rates—which, by the way, was not exactly a black swan event. Anyone with a rudimentary knowledge of economic history knew the day would come when rates would return to something more like their historical norm. And SVB’s match of short-term deposits with long-term treasuries couldn’t survive the inevitable.
Why didn’t someone see the problem earlier? Well, that’s where the collective psychosis comes in. The evidence was all there. But no one was looking.
You can read Tully’s story here. Other news below.
Alan Murray
@alansmurray
alan.murray@fortune.com
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Credit Suisse to borrow $54 billion
In an effort to improve its liquidity and alleviate investor concerns, Credit Suisse has announced plans to borrow up to $54 billion from the Swiss central bank and repurchase $3 billion of its debt. The move comes after the Saudi National Bank, a significant Credit Suisse shareholder, ruled out any further investment, causing a sharp decline in the bank's share price. Financial Times
SVB probe
The U.S. Justice Department and the Securities and Exchange Commission are reportedly conducting investigations into the collapse of Silicon Valley Bank. The inquiries are focused on the actions of the bank's senior executives and are still in the early stages. The Associated Press
T-Mobile acquires Mint
T-Mobile is buying Mint Mobile, a budget wireless provider co-owned by actor Ryan Reynolds, for as much as $1.35 billion in a cash and stock deal. Mint Mobile's parent company, Ka'ena Corp., and its co-founders will be joining T-Mobile to manage the business, including Ultra Mobile, an international phone service. Bloomberg
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