Is the Silicon Valley Bank’s Failure Another “Canary in the Coal Mine”?
If you watched the Fed Chair Jerome Powell testify before the senate and the House, you heard over and over that banks are well capitalized. The non-sequitur should inspire the Shakespearean quote “Methinks you protest too much.” The very next day after the hearings, shares of SVB Financial Group, parent of Silicon Valley Bank, fell 60 percent (and another 30 percent in afterhours trading at this writing) after a Wall Street Journal article revealed, the bank “had sold large portions of its securities portfolio and would raise fresh capital, highlighting a broader problem for U.S. lenders who have seen rising interest rates hammer the values of their bond holdings.”
In What Has Government Done to Our Money? Murray Rothbard reminded us:
The bank creates new money out of thin air, and does not, like everyone else, have to acquire money by producing and selling its services. In short, the bank is already and at all times bankrupt; but its bankruptcy is only revealed when customers get suspicious and precipitate “bank runs.”
Silicon Valley Bank depositors ran for the exits along with shareholders the same day the WSJ article appeared and the FDIC promptly closed the bank Friday morning saying:
Silicon Valley Bank, Santa Clara, California, was closed today by the California Department of Financial Protection and Innova
Article from Mises Wire