Silicon Valley Bank -- More Government, Less Reality
"The nine most terrifying words in the English language are 'I'm from the government, and I'm here to help.'" - President Ronald Reagan
Shock waves are rippling through the country after the announcement of the second largest bank failure in the country's history last week -- Silicon Valley Bank.
This just 15 years after the largest bank failure in the country's history -- Washington Mutual.
Research shows that the great collapse in 2008, one casualty of which was Washington Mutual, was one more example of the damage done by excessive government.
Then, standards for issuing mortgages deteriorated as a result of pressure from government entities Fannie Mae, Freddie Mac and the Department of Housing and Urban Development on lenders to meet affordable housing goals. More and more substandard loans were issued, all taking place under the illusion of government protection, until the house of cards came down.
After the total collapse, originating in government policy designed to allegedly make our lives better, the Dodd-Frank Act was passed, now with some 8,000 pages of regulations to supposedly strengthen America's financial system.
Time and again, a crisis caused by government is supposedly solved by creating even more government.
So now, with the Dodd-Frank Act in place, passed under the pretense of "solving" the problems of instability in our financial system, here we are again.
I make no claims as any kind of expert in finance. But reading through articles by those who are, the amazing story that emerges behind SVB is its violation of principles that any undergraduate student in business learns. That is, banks make a profit by lending, investing at higher rates of interest than they pay on deposits.
So, managing interest rate risk is finance 101. Yet mismanagement of risk -- the bank ignoring huge problems they would have if interest rates increased -- is what brought it down.
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