A bad business was allowed to go bust. But it is what happened next that reveals the flaws in America’s banking architecture
with spectacular speed, making it the biggest lender to collapse since the global financial crisis of 2007-09. Most of’s depositors were Bay Area tech startups with accounts holding well in excess of the $250,000 that is
At the same time regulators have had to contend with the threat that other banks might also face runs. At the end of 2022 there were $620bn of unrealised securities losses on banks’ books. On March 12th regulators also shut down Signature Bank, another midsized lender—the third bank to fail in a week, given that Silvergate, an institution heavily exposed to cryptocurrency, collapsed on March 8th. And the fallout in the markets continues.
In 2018 and 2019, however, Congress and bank regulators watered down both the resolution planning and liquidity rules, particularly for banks with $100bn-250bn of assets, many of which had lobbied for lighter regulation. There have never been bail-in plans for banks of’s size. Instead, the bank briefly sought last week to recapitalise itself via a doomed issuance of new shares.
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