shutdown and takeover by banking regulators on Friday can be traced to the U.S. Federal Reserve raising interest rates and souring the risk appetite of investors.The Federal Reserve has been raising interest rates from their record-low levels since last year in its bid to fight inflation. Investors have less appetite for risk when the money available to them becomes expensive due to the higher rates.
A man puts a sign on the door of the Silicon Valley Bank as an onlooker watches at the bank’s headquarters in Santa Clara, California, U.S. March 10, 2023. REUTERS/Nathan FrandinoTo fund the redemptions, Silicon Valley Bank sold on Wednesday a $21 billion bond portfolio consisting mostly of U.S. Treasuries. The portfolio was yielding it an average 1.79%, far below the current 10-year Treasury yield of around 3.9%. This forced SVB to recognize a $1.
High interest rates discourage investors and entrepreneurs from going into high risk tech startups might be part of the problem as well as loans to those new startups.
Greed
The question is who's next?
DEI
Weak regulations
Yikes! What a mess