How one bank's collapse reflects a broader anxiety in Silicon Valley
The Washington Post
March 10, 2023 at 4:24 p.m. EST
Most Americans were probably familiar with Lehman Brothers when the storied investment house collapsed in 2008, a victim of bad bets on soured mortgage-related investments.
But relatively few would ever have heard of Silicon Valley Bank, the country’s 16th largest before it was seized Friday by the Federal Deposit Insurance Corporation, a banking regulator.
Silicon Valley Bank’s demise on one level is a straightforward tale of a financial screwup. A massively bad bet on interest rates caused painful paper declines in its investments, forcing the bank to sell securities at an actual loss. This could have happened to any bank. Once depositors learned they might lose access to their cash, they panicked and began withdrawing en masse. Poof: Silicon Valley Bank incinerated in two days. In purely technical terms, this had nothing to do with the tech industry clients it served.
Yet, at another level, the bank’s swift fall had everything to do with its clubby clientele of Silicon Valley start-ups and the venture-capital and private-equity firms that fund them.
Read on here.