Consequences of Bank FailureThe failure of Silicon Valley Bank and New York-based Signature Bank is complicating the Fed’s upcoming decisions about how high to raise its benchmark interest rate in the fight against chronically high inflation. Unusual Banking ModelBy all accounts, Silicon Valley was an unusual bank. Its management took excessive risks by buying billions of dollars of mortgage-backed securities and Treasury bonds when interest rates were low. As the Fed continually raised interest rates to fight inflation, leading to higher rates on Treasurys, the value of Silicon Valley Bank’s bonds steadily lost value. Fed to Review Supervision of Silicon Valley BankChair Jerome Powell announced on Monday that the Fed would review its supervision of Silicon Valley to understand how it might have better managed its regulation of the bank.

Source: ABC News March 15, 2023 14:15 UTC