Silicon Valley Bank’s History of Recklessness Went Back Decades
Run-ins with regulators, financial troubles, and a highly publicized penchant for dangerous risk was what Silicon Valley Bank was best known for in the decades before its collapse this year. So why was it allowed to grow so big, and so unregulated?
A Silicon Valley Bank logo is seen in Tempe, Arizona, on March 14, 2023. (Rebecca Noble / AFP via Getty Images)
As the fallout from the collapse of Silicon Valley Bank (SVB) continues to fan outward, a mountain of questions remains about the regulatory failures that let it happen. Federal Reserve chair Jerome Powell — who cited systemic risk as a reason to bail out the bank’s depositors despite explicitly declaring that there was no such risk just two years ago — recently called out its management for having “failed badly.”
“They grew the bank very quickly,” he said. “They exposed the bank to significant liquidity risk and interest-rate risk, didn’t hedge that risk.”
Powell’s statement begs the question of why regulators went so easy on the bank, given the reckless behavior of its management, let alone why elected officials went along with the bank’s lobbying campaign to exempt itself from stricter regulations. These questions are even more pertinent when you consider that SVB’s penchant for riskiness wasn’t a recent development, but a core, highly prominent feature of its public-facing image for decades — and one that had gotten it in financial trouble many times before.
This article is for subscribers only. Please login or subscribe to access our full archives and beautiful print and digital magazine starting at just $3 a month.