Ezra Klein notes
https://www.nytimes.com/2023/03/18/opinion/svb-banks-change.html
Regulators did nothing, even though Silicon Valley Bank’s woes had been widely noticed. Bank managers failed at the basic work of hedging against the risk of interest rates rising. Midsize banks, including Silicon Valley Bank itself, successfully lobbied Congress and the Trump administration to be exempted from the regulations attached to too-big-to-fail banks. Venture capitalists sparked a needless panic that annihilated an institution central to their own industry. The Federal Reserve ignored inflation for too long, and the whiplash of its response has become a risk factor all its own.
https://www.nytimes.com/2023/03/18/opinion/svb-banks-change.html
Regulators did nothing, even though Silicon Valley Bank’s woes had been widely noticed. Bank managers failed at the basic work of hedging against the risk of interest rates rising. Midsize banks, including Silicon Valley Bank itself, successfully lobbied Congress and the Trump administration to be exempted from the regulations attached to too-big-to-fail banks. Venture capitalists sparked a needless panic that annihilated an institution central to their own industry. The Federal Reserve ignored inflation for too long, and the whiplash of its response has become a risk factor all its own.
Inside the Collapse of Silicon Valley Bank
https://www.nytimes.com/2023/03/14/business/silicon-valley-bank-gregory-becker.html
While its leader extolled innovation and the future of tech, the bank paid less attention to risk management and was caught flat-footed by economic change.
While its leader extolled innovation and the future of tech, the bank paid less attention to risk management and was caught flat-footed by economic change.
How SVB ‘Profited’ From Interest-Rate Risk
https://www.wsj.com/articles/how-svb-profited-from-interest-rate-risk-accounting-rules-deposit-fdic-federal-reserve-coupon-held-to-maturity-ec43418a
SVB held tens of billions of dollars in long-term government bonds. On its face, this may seem like a prudent investment for a bank, but Treasury securities are riskless only when held to maturity. If you have to sell before then, you can easily lose money if market rates have risen since you first purchased the bond. For example, buying a 10-year U.S. Treasury bond with a 2% coupon at par and holding it for 10 years earns you 2% per annum. But if you sell early and rates have jumped—say, 4% since you bought the bond—then the price will have declined to about $838 per $1,000 face value, meaning you incur a loss of $162 per $1,000 bond.
https://www.wsj.com/articles/how-svb-profited-from-interest-rate-risk-accounting-rules-deposit-fdic-federal-reserve-coupon-held-to-maturity-ec43418a
SVB held tens of billions of dollars in long-term government bonds. On its face, this may seem like a prudent investment for a bank, but Treasury securities are riskless only when held to maturity. If you have to sell before then, you can easily lose money if market rates have risen since you first purchased the bond. For example, buying a 10-year U.S. Treasury bond with a 2% coupon at par and holding it for 10 years earns you 2% per annum. But if you sell early and rates have jumped—say, 4% since you bought the bond—then the price will have declined to about $838 per $1,000 face value, meaning you incur a loss of $162 per $1,000 bond.
Why Didn’t Anyone Do Anything About Silicon Valley
Bank?
https://www.theatlantic.com/ideas/archive/2023/03/silicon-valley-bank-collapse-predicted-natasha-sarin/673400/
Federal agencies’ assessments of banks’ stability leave a lot out, a former Treasury Department official explains.
Federal agencies’ assessments of banks’ stability leave a lot out, a former Treasury Department official explains.
Federal Reserve and Lawmakers Eye Bank Rules After Collapse
https://www.nytimes.com/2023/03/15/business/economy/silicon-valley-bank-federal-reserve-regulation.html
https://www.nytimes.com/2023/03/15/business/economy/silicon-valley-bank-federal-reserve-regulation.html
Banks are designed to fail — and they do
https://www.ft.com/content/09bfbb8d-22f5-4c70-9d85-2df7ed5c516e
https://www.ft.com/content/09bfbb8d-22f5-4c70-9d85-2df7ed5c516e
Banking Is Always a Risky Business
https://www.wsj.com/articles/banking-is-always-a-risky-business-fdic-silicon-valley-bank-deposit-insurance-panic-bank-run-2c276cd1
https://www.wsj.com/articles/banking-is-always-a-risky-business-fdic-silicon-valley-bank-deposit-insurance-panic-bank-run-2c276cd1
There Were a Few Savvy Investors Who Saw Silicon Valley Bank’s Collapse Coming
https://nymag.com/intelligencer/2023/03/a-few-investors-saw-silicon-valley-banks-collapse-coming.html
The Fed Might ‘Fix’ the Economy by Breaking Banks
https://nymag.com/intelligencer/2023/03/svb-silicon-valley-bank-federal-reserve-inflation-interest-rates.html
https://nymag.com/intelligencer/2023/03/svb-silicon-valley-bank-federal-reserve-inflation-interest-rates.html
SVB shows that there are few libertarians in a financial foxhole
https://www.ft.com/content/ebba73d9-d319-4634-aa09-bbf09ee4a03b
Like banking titans in 2008, tech tycoons favour the privatisation of profits and the socialisation of losses
Like banking titans in 2008, tech tycoons favour the privatisation of profits and the socialisation of losses
What Is the Fed Discount Window and Why Are Banks
Using It So Much?
https://www.washingtonpost.com/business/2023/03/17/what-is-the-fed-discount-window-why-are-banks-using-it-so-much/f7c07198-c4de-11ed-82a7-6a87555c1878_story.html
https://www.washingtonpost.com/business/2023/03/17/what-is-the-fed-discount-window-why-are-banks-using-it-so-much/f7c07198-c4de-11ed-82a7-6a87555c1878_story.html
What triggered Silicon Valley Bank’s collapse? BY VIVEKANAND JAYAKUMAR, The Hill, 03/14/23
https://thehill.com/opinion/finance/3898758-what-triggered-silicon-valley-banks-collapse/
https://thehill.com/opinion/finance/3898758-what-triggered-silicon-valley-banks-collapse/
On a Lighter Note (the silliness of American politics in full display):
Republicans Blame Silicon Valley Bank Failure on ‘Wokeness’. Buying too many Treasury bonds is extremely woke, obviously.
Republicans Blame Silicon Valley Bank Failure on ‘Wokeness’. Buying too many Treasury bonds is extremely woke, obviously.