A+ A A-

Before the collapse of Silicon Valley Bank, the Fed spotted big problems

The Liquidity Crunch predicted in our pages has now begun. The Fed was on a clear path towards tightening into economic weakness, very similar to what they did in the late 1970s and early 1980s during the stagflation era and also somewhat similar to what they did at the onset of the Great Depression. Former Fed Chairman Ben Bernanke even openly admitted that the Fed caused the depression to spiral out of control due to their tightening policies. This past week the US Bond's yield curve has been inverted, signaling a potential liquidity crunch.


Silicon Valley Bank was the biggest bank failure since the 2008 Global Financial Crisis.



Sydney, Mar.19.– Silicon Valley Bank’s risky practices were on the Federal Reserve’s radar for more than a year — an awareness that proved insufficient to stop the bank’s demise.

The Fed repeatedly warned the bank that it had problems, according to a person familiar with the matter.

Silicon Valley BankIn 2021, a Fed review of the growing bank found serious weaknesses in how it was handling key risks. Supervisors at the Federal Reserve Bank of San Francisco, which oversaw Silicon Valley Bank, issued six citations. Those warnings, known as “matters requiring attention” and “matters requiring immediate attention,” flagged that the firm was doing a bad job of ensuring that it would have enough easy-to-tap cash on hand in the event of trouble.

But the bank did not fix its vulnerabilities. By July 2022, Silicon Valley Bank was in a full supervisory review — getting a more careful look — and was ultimately rated deficient for governance and controls. It was placed under a set of restrictions that prevented it from growing through acquisitions. Last autumn, staff members from the San Francisco Fed met with senior leaders at the firm ...

[ Full text ]

Market Overview