SILICON VALLEY BANK BIGGEST US LENDER...

TO FAIL SINCE 2008 FINANCIAL CRISIS — A FINANCE EXPERT EXPLAINS THE IMPACT

Diplomatic Deal Between Saudi And Iran Is Bad Augury For Us

China is emerging as a dominant player in geopolitics, slowly trying to dislodge the US from its pedestal. Its latest diplomatic move to help revive diplomatic ties between Saudi Arabia and Iran, the two powerful adversaries in the Gulf region, marks USA’s receding influence. The two countries have not had diplomatic relations for the past seven years. Iran is already against America and Israel because of their attempt to isolate Teheran over its nuclear weapons programme. Iran and Saudi Arabia will also revive a security cooperation pact. Israel must be as concerned over this diplomatic coup by China as the US which is being increasingly marginalized in global politics.

Silicon Valley Bank, which catered to the tech industry for three decades, collapsed on March 10, 2023, after the Santa Clara, California-based lender suffered from an old-fashioned bank run. State regulators seized the bank and made the Federal Deposit Insurance Corporation its receiver.

SVB, as it’s known, was the biggest U.S. lender to fail since the 2008 global financial crisis – and the secondbiggest ever. We asked William Chittenden, associate professor of finance at Texas State University, to explain what happened and whether Americans should be worried about the safety of their financial system.

WHY DID SILICON VALLEY BANK COLLAPSE SO SUDDENLY?

While these losses are just on paper - meaning they’re not realized until the assets are sold – they still can increase a bank’s overall risk. How much the risk will go up will vary from bank to bank.

The good news is that most banks currently have enough capital to absorb these losses – however large –in part because of efforts taken by the Fed after the 2008 financial crisis to ensure financial firms can weather any storm. So rest easy for now, the banking system is sound

The short answer is that SVB did not have enough cash to pay depositors so the regulators closed the bank. The longer answer begins during in the pandemic, when SVB and many other banks were raking in more deposits than they could lend out to borrowers. In 2021, deposits at SVB doubled. But they had to do something with all that money. So, what they could not lend out, they invested in ultra-safe U.S. Treasury securities. The problem is the rapid increase in interest rates in 2022 and