Introduction

The holding company for Silicon Valley Bank planned to raise $2.2 billion through new stock issuance. The purpose was to replenish capital that it had lost after selling $2 billion of U.S. Treasuries and mortgage-backed securities. Moody's Investor Service was threatening to downgrade S. V. B.'s debt rating due to the large amount of unrealized losses on its bond portfolio.

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Episode notes

What caused Silicon Valley Bank to collapse in only 44 hours, and how likely will the contagion spread, leading to other bank failures?

Topics covered include:

How losses on bonds blew up SVB's balance sheet
How is Silicon Valley Bank similar and different than other regional banks
What the FDIC and Federal Reserve are trying do to restore confidence and stop bank runs
How a weakening of the Frank-Dodd bank regulation act set the stage for SVB's failure
Why bailing out uninsured depositors is controversial
Three scenarios of what might happen next
Actions we can take to protect ourselves when private money fails

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Show Notes

Silicon Valley Bank launches $2.25bn share sale to shore up capital base by Joshua Franklin and Antoine Gara—The Financial Times

US Bank Capital Regulation: History and Changes Since the Financial Crisis by John Walter—Economic Quarterly

SVB's 44-Hour Collapse Was Rooted in Treasury Bets During the Pandemic by Brian Chappatta—Bloomberg

Remarks by FDIC Chairman Martin Gruenberg at the Institute of International Bankers—FDIC

How Silicon Valley Turned on Silicon Valley Bank by Ben Foldy, Rachel Louise Ensign, and Justin Baer—The Wall Street Journal

SEC Filings Details—Silicon Valley Bank

FDIC Creates a Deposit Insurance National Bank of Santa Clara to Protect Insured Depositors of Silicon Valley Bank, Santa Clara, California—FDIC