The Fed-Induced Bank Wobble

Source: The American Prospect
by David Dayen

“[Silicon Valley Bank] was mostly invested in long-term government bonds, which are normally pretty safe. (They also had a large batch of those mortgage-backed securities, which you might remember from 2008.) The bank really succumbed to the wild swings in the tech industry, which soared in the immediate aftermath of the pandemic but has plummeted recently, as rising Federal Reserve interest rates put cheap money out of reach. … In total, the bank was underwater by around $15 billion, according to the Financial Times. The bank run from the startup world forced the realization of some of those losses. There are a couple of important lessons here. First and foremost, the Fed’s rapid pivot on interest rates couldn’t help but spill over into the broader economy.” (03/10/23)