Although the crisis caused by SVB appears to be over, there are still many questions that will continue to plague the markets. SVB could have exposed issues in the financial market that could lead to further problems.
For a bit of context, the collapse of SVB – the largest bank to go under since Lehman Brothers – happened around the anniversary of the failure of Bear Stearns back in 2007. This happened as markets were poised to plunge into the subprime crisis just a few months later. Bear Stearns’ failure to recognize major problems in the financial market was obvious in hindsight. But the company’s buyout by JPMorgan at the time was seen as providing relief to the markets, which continued their trajectory until the underlying issues that were first seen in Bear Stearns became manifest in the whole market.
What happened?
There is a lot of speculation on the details of what led to SVB’s collapse, with some pointing to bad hedging and moral hazard. Others say it’s because the bank was too focused on one sector. Others point out regulatory problems. It will likely take many years to compile a complete account of all that happened in the bank.
The…
