The failure of Silicon Valley Bank, a forty-year old, $200 billion bank, has caused many to worry about the country's economic stability.
The failure of SVB would not have been prevented by more government intervention.
Passing new regulations might give us a semblance of comfort, but all it would do is create the conditions for more bank failures in the future.
As she writes in her op-ed, "The bank relied on a concentrated group of tech companies with big deposits, driving an abnormally large ratio of uninsured deposits. This meant that weakness in a single sector of the economy could threaten the bank's stability." SVB was also heavily invested in long-term bonds, which made it difficult for it to get more liquidity when depositors began pulling out their funds.
As researchers at the Cato Institute point out, SVB "Was extremely well capitalized, with ratios roughly twice as high as the requirements." In other words, SVB had more than enough funds to cover its liabilities-barring an unexpected bank run.
So why did SVB fail? While SVB executives of course deserve most of the blame, the federal government is also at fault.
Rather than demonstrate the need for more regulation, the collapse of SVB proves that the government not only can't prevent bank failures but often creates the conditions under which banks are more likely to fail.
https://mises.org/wire/svbs-failure-not-excuse-more-regulation
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