We are still learning exactly how much of this industry’s genius was a mere LIRP, or low-interest-rate phenomenon.
Who killed SVB—and triggered the mini–banking crisis sweeping the United States?
You could blame the bank’s executives, who bet $80 billion on long-term bonds that bled value when interest rates went up, thus torching their portfolio with fantastic efficiency.
You could blame the Federal Reserve for falling behind inflation and then quickly raising interest rates, bludgeoning investors who watched in horror as their bold portfolios melted down.
You could blame regulators, such as KPMG, who gave SVB a clean bill of health when they looked into its portfolio just weeks before its historic collapse.
You could blame the phalanx of interests—President Donald Trump, Senate Republicans, tech titans, bankers, and even a handful of Democrats—who called to roll back midsize-bank regulations in 2018, potentially setting the stage for this catastrophic mismanagement.
You could, abandoning all common sense, blame “woke” banking culture, under the bizarre assumption that only an all-white, all-male banking team can properly steward a financial institution. (Never mind, say, the entire crisis-strewn history of mostly white, mostly male banking.)
Or you could blame venture capitalists. One week ago, SVB was technically insolvent but far from doomed. Without a massive run on its deposits, the bank likely would have puttered along as its long-term bonds matured. Surely, SVB had put itself in an awful position by tossing fresh cash into the Dumpster fire of the 2022 bond market. But actual bank death required one further step: Clients, led by the venture-capital community, had to turn on a trusted financial partner.
That’s exactly what happened. As SVB’s leadership scrambled to raise funds, Founders Fund and other large venture investors told their companies late last week to pull out all of their cash. When other start-ups banking with SVB caught wind of this exodus on group chats and Twitter, they, too, raced for the exits. On Thursday alone, SVB customers withdrew $42 billion—or $1 million a second, for 10 straight hours—in the largest bank run in history. If SVB executives, regulators, and conservative politicians built a barn out of highly flammable wood and filled it with hay and oil drums, venture capitalists were the ones who tipped over the barrels and dropped a lit match.
