The Fed Insisted Silicon Valley Bank Posed No Risk to the Financial System
In 2021, the Fed approved a merger application from Silicon Valley Bank with Boston Private Bank and Trust, believing that the newly enlarged institution presented no danger to the financial system. After SVB’s collapse, the Fed is changing its tune.
Federal Reserve chairman Jerome Powell during a Senate Banking, Housing, and Urban Affairs Committee hearing in Washington, DC, on March 7, 2023. (Al Drago / Bloomberg via Getty Images)
Less than two years before Federal Reserve chairman Jerome Powell cited systemic risk as a justification to rescue Silicon Valley Bank (SVB)’s depositors, Powell approved the same bank’s merger application, insisting that the new, larger institution would present no significant danger to the wider financial system, according to documents reviewed by the Lever.
“SVB Group’s management has the experience and resources to ensure that the combined organization would operate in a safe and sound manner,” wrote Federal Reserve officials in June 2021, as they approved the company’s $900 million acquisition of Boston Private Bank and Trust. “The organization would not be a critical services provider or so interconnected with other firms or markets that it would pose significant risk to the financial system in the event of financial distress.”
All six members of the Federal Reserve Board voted to approve the merger.
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