The 10 alleged reasons Silicon Valley Bank failed, from sleeping at the switch to being too woke
SVB tried to live up to its high-flying customers, but that made it an accident waiting to happen; it didn't have to wait long after being whipsawed by interest rates
March 21, 2023 at 4:03 AM
Brooke Southall and Keith Girard contributed to the editing of this article.
March 21, 2023 — 10:47 AM
Regulators assigned to SVB should have forced the bank to modify the long treasury portfolio strategy or, at a minimum, hedge against rising rates. Regulators obviously did not properly evaluate board and management performance and should have required the bank to raise more capital or find a buyer many months ago. Bank regulatory supervision has become politicized. Recent bank failures are the result.
March 22, 2023 — 1:12 AM
Consider the following: If the SVB manager(s) in charge of the bank's Treasury investment portfolio had believed the September Fed projections of raising its own (Fed Funds) interest rate, they would have sold their long bonds much closer to cost and this mess would have been avoided. The Summary of Economic Projections has the famous Dot Plot and by 9/22 it projected well over 4% for the 2023 Fed Funds interest rate. In other words it was well telegraphed, many months ahead of time. See: https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20220921.pdf Also, SVB would have had to offer lower yields on bank deposits as they shifted into short term Treasury Bills, so this would have deterred (not attracted) the massive increase in its deposits that later unfolded. So the winning journalist will be the one who can get an interview with the main SVB investment manager(s). Were they directed into not acting on the published Fed intention to boost interest rates soon and in a big way? How about the SF Fed field office regulators? If there is a contagion to come, could it be due to similarly lax regulators of other regional banks everywhere? Finally, the SVB Board of Directors bears ultimate responsibility for internal investment policy and execution of it. Interview the Board's committee on investment supervision. Main point here is that the Fed is not the villain, Dodd Frank and subsequent bank regs changes are not the villain, etc. etc. If SVB's investment managers had not been asleep, we wouldn't be pointing fingers at anyone else today. The run would not have happened.