This piece was originally published in RealClearMarkets.
The failure of tech-heavy Silicon Valley Bank (SVB) and the initial uncertainty over its causes led to public fear of contagion to other banks simply because of the raw numbers -- $212 billion in assets, including the high-dollar deposits of some of the most prominent tech start-ups. But the facts have started coming out, where the two biggest sins of SVB appear to be a heavy bet on long-term U.S. Treasury bonds until the Federal Reserve started hiking rates, and the delayed decision to shift away from them that triggered a run on the bank.
While they could be signals of the consequences of the Fed’s heavy-handed monetary policy, weak senior management at one bank and social media-enhanced panic in tightly knit Silicon Valley don’t seem to be credible ingredients for a global financial meltdown.
Of course, that didn’t stop the defenders of the administrative state from rushing into the haze of initial confusion to capitalize on the fear. Senator Elizabeth Warren (D-MA) had an opinion piece ready to go for the New York Times within hours of SVB’s failure, declaring that “we all know who was responsible” even though the facts weren’t clear yet. One has to dig through 1000 words of hysteria and demands for more regulations to find a begrudging reference to the “toxic” asset at the heart of SVB’s failure being U.S. Treasurys.
