Silicon Valley bank collapse: Is the Fed to blame?

it turns out Federal Reserve He was Moves fast and breaks thingsbut few people even noticed Collapses to Silicon Valley Bank.

Over the past year, the Fed has been raising interest rates at a rapid and aggressive clip in an effort to tame it High inflation in the United States of America. A common saying on Wall Street is that the Fed increases interest rates until something breaks. Until last week, the question was what, if anything, would be asked. The interest rate increases Generally it takes some time To make their way through the economy, however some people They were kind of scratching their heads at the time this lag appeared. The labor market, which interest rate increases are meant to calm, has stayed strong. economy in general Surprisingly decent shape. Sure, things looked a little ugly encryption And Techniquebut perhaps the problem will be contained there.

Now, the landscape looks very different, and we know what the Fed broke: Silicon Valley Bank, or SVB. (Disclosure: Vox Media, which owns Vox, did business with SVB before it closed.)

It will be a long time before we fully understand what exactly happened in the rapid and dizzying decline of SVB, but there is no doubt that the rise in interest rates was a contributor. They also likely played a role in the demise of Silvergate and Signature Bank, both of which closed in March.

“It’s always a surprise. We didn’t know what could break, obviously this was it,” said Alexander Yocum, an analyst at CFRA Research who covers banking. underwater a lot.”

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