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The Bank Failures, Explained

Silicon Valley Bank and other bank failures could lead to broader financial and economic calamity, prompting the Federal Reserve to take action.

  • The collapse of Silicon Valley Bank and others has left many rushing to understand the financial system.
  • Banks don't keep enough cash to pay out all depositors, so bank runs can lead to broader financial calamity.
  • SVB invested its customers' money in US bonds, but the interest rates were very low.
  • SVB failed to diversify its portfolio, which led to it selling bonds for a discount and taking a loss.
  • The Fed is trying to contain the fallout of SVB's collapse to prevent a financial crisis.
The Bank Failures, Explained
Officials are worried that a few banks’ collapse is only the beginning.