Passing the buck in the SVB bank run

For the past 72 hours, the disappearance of Silicon Valley Bank has been dissected in the media. What went wrong seems perfectly clear. The SVB received a deluge of short-term deposits in the bank during the pandemic. Nearly 90% of these deposits exceeded the FDIC’s insurance limits of $250,000. The bank invested those deposits in billions of dollars of low-rate, long-term debt issued by the federal government and government agencies. When rising interest rates eroded the value of these investments, their depositors, fearing SVB’s bankruptcy, withdrew their deposits from the bank. Unable to meet…