As many of you know by now Silicon Valley Bank collapsed this past week. It had more than 50 billion in deposits after the last quarter and was a major silicon valley and global funding source for startups. This was a weird situation for everyone watching because there was no larger financial scandal than in 2008 and there was no context of a major economic problem (yet). Fifty billion dollars reaches like roots of a giant tree into the earth; there are companies that cannot make payroll and investment funds that the collapse left wandering in the stratosphere. As of now, the Federal Deposit Insurance Corporation has taken over as the receiver of the bank funds.
What I find interesting is the reaction to the bank investment strategy crisis as well as the crisis itself. This seems like a completely avoidable problem and one that arose from very straightforward investment blindness. SVB essentially did not properly diversify investments and only purchased low-risk funds which could not return interest rates to cover the cost of their monies lent. For that, a bank needs to make other investments also that have different yields. Why was such a large bank lacking in long-term investment strategy?