Silicon Valley Bank: why did it collapse and is this the start of a banking crisis?

[marmar]

(Guardian UK) Four decades ago, Silicon Valley Bank (SVB) was born in the heart of a region known for its technological prowess and savvy decision making.

The California-headquartered organisation grew to become the 16th largest bank in the US, catering for the financial needs of technology companies around the world, before a series of ill-fated investment decisions led to its collapse.

What happened to SVB?

As the preferred bank for the tech sector, SVB’s services were in hot demand throughout the pandemic years.

The initial market shock of Covid-19 in early 2020 quickly gave way to a golden period for startups and established tech companies, as consumers spent big on gadgets and digital services.

....(snip)....

The seeds of its demise were sown when it invested heavily in long-dated US government bonds, including those backed by mortgages. These were, for all intents and purposes, as safe as houses.

But bonds have an inverse relationship with interest rates; when rates rise, bond prices fall. So when the Federal Reserve started to hike rates rapidly to combat inflation, SVB’s bond portfolio started to lose significant value.

....(snip)....

Is this the start of a banking crisis?

Immediate concerns of widespread contagion have been contained by the US government’s quick response in guaranteeing all deposits of the banks customers. .............(more)

https://www.theguardian.com/business/2023/mar/13/silicon-valley-bank-why-did-it-collapse-and-is-this-the-start-of-a-banking-crisis

[Irish_Dem]

1. Who benefits from the SVB collapse?

[roamer65]

2. Jay Powell should be fired.

The moron is not fit for the job as Fed chair.

Thank God we have Janet Yellen as Treasury secretary.

I want to see Timothy Geithner as Fed chair. He and Hank Paulson got us through the initial days 2007-08.