I wish I’d been wrong. But on Friday, S.V.B. executives were busy paying out congratulatory bonuses hours before the Federal Deposit Insurance Corpor… - Elizabeth Warren

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I wish I’d been wrong. But on Friday, S.V.B. executives were busy paying out congratulatory bonuses hours before the Federal Deposit Insurance Corporation‌‌ rushed in to take over their failing institution — leaving countless businesses and non‌profits with accounts at the bank alarmed that they wouldn’t be able to pay their bills and employees. S.V.B. suffered from a toxic mix of risky management and weak supervision. For one, the bank relied on a concentrated group of tech companies with big deposits, driving an abnormally large ratio of uninsured deposits‌. This meant that weakness in a single sector of the economy could threaten the bank’s stability. Instead of managing that risk, S.V.B. funneled these deposits into long-term bonds, making it hard for the bank to respond to a drawdown. S.V.B. apparently failed to hedge against the obvious risk of rising interest rates. This business model was great for S.V.B.’s short-term profits, which shot up by nearly 40 ‌percent over the last three years‌ — but now we know its cost. S.V.B.’s collapse set off looming contagion that regulators felt forced to stanch, leading to their decision to dissolve Signature Bank. Signature had touted its F.D.I.C. insurance as it whipped up a customer base tilted toward risky cryptocurrency firms. Had Congress and the Federal Reserve not rolled back the stricter oversight, S.V.B. and Signature would have been subject to stronger liquidity and capital requirements to withstand financial shocks. They would have been required to conduct regular stress tests to expose their vulnerabilities and shore up their businesses. But because those requirements were repealed, when an old-fashioned bank run hit S.V.B‌., the‌ bank couldn’t withstand the pressure — and Signature’s collapse was close behind.