It might be invisible to you because they're not selling it, so you don't see it, basically. And so a lot of banks, not just Silicon Valley Bank, have a lot of losses on the actual market value of their investments. And that was both on some of the riskier investment loans that they made but also on various other securities.īasically, as interest rates go up, the value of previous promises to pay at lower interest rates go down. And so their investments started losing money. And there were businesses that had large deposits uninsured by the FDIC, which only covers up to $250,000. So what ended up happening was all this money that Silicon Valley Bank had coming was invested, some of it in loans in the Silicon Valley area to all kinds of businesses and especially startups and venture capital and others. And historically, it has often been the precursor of some trouble.īut the other thing is that there were a lot of deposits kind of sloshing around the system, a lot of people looking for what to do with the money. And when you increase interest rates, all kinds of things start happening in banking. One is the fact that inflation picked up, and the Federal Reserve started increasing interest rates. And basically, there are two main things here. It was a much longer thing in that bank in particular but across the banking system more broadly.

RASCOE: How did this bank fail - it feels like in 48 hours, but was it a longer-term thing going on here? Like, what happened?ĪDMATI: Oh, definitely. We're joined now by Anat Admati, professor at Stanford University's business school.

That's the Federal Deposit Insurance Corporation. The bank was shut down and went under FDIC receivership. Companies started withdrawing their money, and by Friday, trading of SVB shares had halted. It also sold over $2 billion in new shares to bolster its bottom line, but panic had already set in. Signs of trouble appeared on Wednesday, when SVB announced the sale of securities at a loss. The rapid collapse of Silicon Valley Bank, or SVB, on Friday has left a lot of people in the banking and financial sectors shook.

Bank bust