Federal Reserve head Jerome Powell criticized the leadership of Silicon Valley Bank on Wednesday, painting the second-largest bank failure in U.S. history as an isolated instance caused by poor judgment.
Federal Reserve head Jerome Powell excoriated the leadership of Silicon Valley Bank on Wednesday, painting the second-largest bank failure in U.S. history as an isolated instance caused by poor judgment.
"At a basic level, Silicon Valley Bank management failed badly," Powell said in a press conference to discuss the Fed's latest move to hike its benchmark interest rate."They grew the bank very quickly. They exposed the bank to significant liquidity risk and interest rate risk. Didn't hedge that risk.
California regulators seized SVB on March 10, while the federal government was forced to step in to guarantee the money held at the bank and at a smaller lender, New York'sAlthough more than 90% of deposits at both banks were uninsured — meaning beyond the Federal Deposit Insurance Corp.'s $250,000 insurance cap — the government opted to safeguard all the funds out of fear that a major loss of depositor money could trigger other bank runs, Powell said.
"The issue was not about those specific banks but about the risk of contagion to other banks and the financial markets more broadly," he said.
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