Silicon Valley Bank’s failure boils down to a simple misstep: It grew too fast using borrowed short-term money from depositors who could ask to be repaid at any time, and invested it in long-term assets that it was unable, or unwilling, to sell.
When interest rates rose quickly, it was saddled with losses that ultimately forced it to try to raise fresh capital, spooking depositors who yanked their funds in two days. The question following the bank’s takeover Friday: How could regulators have allowed it to grow so quickly and take on so much interest-rate risk?
