From WSJopinion: Is Silicon Valley too important to lose money? As far as Gavin Newsom is concerned, the answer appears to be yes, writes Allysia Finley
Journal Editorial Report: Political consequences of the bank failures are inevitable. Images: Reuters/Getty Images Composite: Mark KellyImagine a bank in Houston that caters to the oil-and-gas industry. It makes low-cost loans with credit-friendly terms to unprofitable shale frackers on the condition that they hold their deposits exclusively at the bank, where they earn an above-market return. It also manages the wealth of oil and gas executives.
The bank uses its enormous deposits to fund more risky loans to frackers and acquire Treasury bonds and government mortgage-backed securities. The latter obscure the credit risk on its balance sheet. As frackers burn cash, the bank struggles to redeem deposits and has to sell assets at a loss.
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