Silicon Valley Bank’s Bankruptcy and Offshore Oil and Gas
On Friday, the Federal Deposit Insurance Company seized the assets of Silicon Valley Bank, the nation’s 16th largest bank, located in the heart of the global tech industry. This is the largest bank failure since the 2008 financial crisis and the second largest in U.S. banking history.
SVB failed when there was a “run on the bank.” It happens when depositors ask for their money back and the bank lacks sufficient cash. Banks operate by “borrowing short and lending long.” The difference between the interest rate paid and received is the “interest spread” and it funds a bank’s operations and generates its profits. That spread has been upended by the Federal Reserve’s campaign to control inflation.
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WorkBoat by G. Allen Brooks. Published March 13, 2023.