The recent collapse of Silicon Valley Bank was partly the result of rising interest rates. But that doesn’t mean the lesson is to stop raising rates, as some are now calling for. At least part of what went wrong at SVB is that the bank invested too much in long-term Treasury and mortgage bonds. But when interest rates rise, they lose their value temporarily. At SVB, that situation scared depositors, who pulled their money out en masse, leading to a classic “It’s a Wonderful Life”-style run on the bank.
Source: Washington Post March 18, 2023 12:11 UTC