Policy Lessons From the Silicon Valley Bank Collapse

Silicon Valley Bank certainly got everyone’s attention in a hurry. Outside Silicon Valley—which, broadly defined, extends beyond Northern California—few Americans had ever heard of SVB. Fewer still knew that it was running into trouble from deposit flight and losses on its bond portfolio—two huge danger signs to which management and supervisors paid too little heed.

Now, having teetered on the brink of insolvency, forcing the Federal Reserve, the Federal Deposit Insurance Corp. and the Treasury into unusual—though not unprecedented—actions, SVB is a household name. But not in a way anyone associated with that ill-fated bank ever wanted. It’s more like Long Term Capital Management or Lehman Brothers. The memories of those spectacular failures aren’t pleasant ones. Nor will these be.