A big lender to American startups goes under
. Gradually, then suddenly. That is how Silicon Valley Bank and the rate they are paid by borrowers, having a far larger deposit base than loan book is a problem.needed to acquire other interest-bearing assets. By the end of 2021, the bank had made $128bn of investments, mostly into mortgage bonds and Treasuries.. Interest rates soared as inflation became entrenched. This killed off the bonanza in venture capital and caused bond prices to plummet, leavinguniquely exposed.
The question now is whether there will be a bail-out and, if so, how big it would need to be to make depositors whole.“is the lifeblood of the tech ecosystem,” notes Ro Khanna, a congressman from California’s 17th district, which includes some of the valley. “They can’t let the bank fail. Whether that means that it should be acquired by another company…or get assistance from or even a statement from the Treasury department so that the depositors feel secure—I will leave that to the experts.
clearly did not hold enough to cover the losses it was being forced to take on assets. Larry Summers, a former treasury secretary, has said that so long as the state steps in, there is no reason to worry thatwill harm other parts of the financial system. Lots of people will be hoping that it does, and that he is right.
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