Passing the Buck on the SVB Bank Run
Over the last 72 hours, the demise of Silicon Valley Bank has been dissected in the media. What went wrong seems perfectly clear. SVB had a deluge of short-term deposits coming into the bank during the pandemic. Almost 90% of those deposits exceeded the FDIC’s insurance limits of $250,000. The bank invested those deposits in billions of dollars of low-rate, long-term debt issued by the federal government and government agencies. When rising interest rates eroded the value of those investments, their depositors, fearing SVB would fail, pulled their deposits out of the bank. Unable to meet the…
