A Mismanaged Silicon Valley Bank Failure Has Grave Consequences

Errors by Treasury, the Fed, and the FDIC have constructed a veritable 'doom loop' for regional banks and the economy

A Silicon Valley Bank office in Tempe, Ariz., on March 14, 2023. Rebecca Noble/AFP via Getty Images

Commentary

This was undoubtedly the week that was. Silicon Valley Bank’s (SVB) failure sent the markets into the worst turmoil since the 2008 financial crisis. And, as I write this Friday morning, St. Patrick’s Day, there are “little fires everywhere” in regional banks that have unsettled markets. Most of them could have been avoided.

What Happened

SVB, the sixteenth largest bank in the United States, catered primarily to an elite cadre of venture capitalists and wealthy individuals. As of December 31, 2022, it held over $26 billion in assets held for sale (AFS) and another $91.3 billion in assets held to maturity (HTM). Some 94 percent of SVB’s deposits were largely venture capital (VC) funds, and their portfolio companies were largely uninsured.