As the United States economy came to a disruptive halt in 2020, Silicon Valley Bank (SVB) experienced a wave of deposits totaling $140 billion. This was the first in a cascade of events which ultimately led to its collapse. As SVB mismanaged its deposits into long-term securities, interest rates rose, resulting in $22 billion in unrealized losses. When investors became spooked, SVB could not survive the inevitable run on the bank thanks in large part to its high proportion of uninsured deposits. Amit Seru shows how SVB’s collapse exposed the vulnerabilities in the United States banking system, raising questions about moral hazard, future bank failures, and bailouts for failing institutions.

Be sure to visit The Hoover Institution at https://www.hoover.org/ and PolicyEd at https://www.policyed.org/

The opinions expressed on this website are those of the authors and do not necessarily reflect the opinions of the Hoover Institution or Stanford University. © 2024 by the Board of Trustees of Leland Stanford Junior University.