The 17th largest bank in the United States, Silicon Valley Bank, was shut down by the FDIC on Friday in an attempt to protect customers.
The reason for the shutdown is fairly simple. The bank and its customers were squeezed out by the rising interest rates and the slowing economy.
Another major reason for the shutdown is over half of Silicon Valley Bank’s assets were in bonds, and they had a lack of variety in their clients.
Douglas Holtz-Eakin had an explanation as to why the bank collapsed saying,
“This looks like a business model failure. The Silicon Valley Bank had poor management of its Tier 1 capital, heavily concentrated in one asset. And it had a very narrow client base. It’s all tech companies. It’s literally just Silicon Valley. So, I think of this as a real management failure. I don’t think it’s a financial system failure.”
The shutdown of the bank is just the beginning. Other banks have since been shut down. Tony Katz will be sure to keep you in the loop going forward.
