Economics

Lessons From The Hoover Policy Boot Camp

Contributing Scholar: Amit Seru

Anatomy of a Bank Collapse: Lessons from Silicon Valley Bank and First Republic

The collapse of Silicon Valley Bank served as a wake-up call for other financial institutions, regulators, and investors, highlighting the need for more robust risk management practices, more transparency, and greater need to proactively address vulnerabilities in the financial system. Amit Seru, Senior Fellow at the Hoover Institution, examines what factors led up to SVB’s failure and presents innovative short-term and long-term solutions to help stave off bank failures in the future.

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More Subsidies, More Problems: The Real Cost of Cheap Deposits

Comment

Published March 28, 2024

The Silicon Valley Bank collapse exposed the hidden costs of subsidized deposits in the U.S. banking system, particularly those insured by the FDIC. While these cheap deposits may seem beneficial, they create moral hazard by encouraging banks to take on excessive risks, knowing they have a stable funding source. This reduced market discipline and increased risk-taking can lead to a misallocation of resources, increased systemic risk, and a higher likelihood of bank failures which threatens to undermine the stability of the entire banking system.

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