WTH is Going On with Silicon Valley Bank? Michael Strain on how Federal Policy Helped Cause the Disaster

Before Friday, Silicon Valley Bank was the sixteenth largest bank
in America. Now it bears the standard of being the second largest
bank failure in US history, only upstaged by the 2008 financial
crisis. As the initial shock – both to the market and to news
headlines – is wearing off, some things are clear: SVB was badly
run, had mismanaged its asset investments, and as a truly silicon
valley-centric bank, had an un-diversified portfolio tied to tech
start-ups, crypto, and its California clientele. But the real
catalyst? A long year of the Biden administration’s failure to
combat inflation caused the Fed to hike interest rates, resulting
in a major loss of asset value for the bonds SVB owned. Now, the
Fed, FDIC, and Treasury Department have decided to protect
depositors – but not shareholders – beyond the standard $250,000
insured cap for deposits. In short, the average taxpayer is
bailing out the Silicon Valley elite.


Michael Strain is the Director of Economic Policy Studies at the
American Enterprise Institute. Dr. Strain is also the author of
The American Dream Is Not Dead: (But Populism Could Kill It).


Download the transcript here.