Project SyndicateProject Syndicate

A bank murder mystery

By Barry Eichengreen

13 Apr 2023 · 3 min read

Editor's Note

As the dust settles after the collapse of Silicon Valley Bank, Barry Eichengreen analyzes four interpretations of the factors that contributed to the crisis in his latest piece for PS.

BERKELEY – When a banking crisis erupted in early March, pundits rushed to the battlements, or at least to their studies, to hammer out columns assigning the blame. Unsurprisingly, those early assessments, based on still-incomplete information, often contradicted one another. It is worth recalling Walter Raleigh’s dictum: those who follow too close on the heels of history risk getting kicked in the teeth.

A month later, the narrative has coalesced around four aspects, or interpretations, of the crisis. The first is what might be called the incompetent-management view. Silicon Valley Bank’s top management was better at glad-handing tech firms than taking prudent investment decisions. Astoundingly, for much of 2022, SVB, a $200 billion financial firm, had no chief risk officer. While their counterparts at other banks had returned to the office, work from home remained the norm for SVB’s key managers, who were spread across six time zones, from Hawaii to the US East Coast. Anyone who has first-hand experience with remote work will know that such arrangements are not conducive to taking hard decisions.

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