SVB Fallout
Arrogance, Incompetence or Both: What SVB’s Failure Really Means
The implosion of Silicon Valley’s favorite bank, which became increasingly dependent on venture capital and private equity, was rooted in hubris as much as its balance sheet.
Photo Illustration: 731; Photos: Getty Images
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Banks aren’t supposed to fail. If they did so with any regularity, one of the most critical cogs in our economic machinery—the transformation of deposits (a liability) into loans (an asset)—would just seize up and stop functioning.
We rely on the magic of credit creation for everything from leasing cars to buying homes to funding city budgets. That’s why, when a bank fails, it’s so essential to figure out what happened and ensure the same mistakes won’t be made again.