Joseph E. Stiglitz: Another predictable bank failure

The bank’s collapse proves systemic failings of US regulatory and monetary policy, writes Joseph E Stiglitz

By the standards of Citibank, SVB is small. But it’s not small in the lives of the millions who depend on it. Photo: AP/Michael Probst

The run on Silicon Valley Bank (SVB) — on which nearly half of all venture-backed tech start-ups in the United States depend — is in part a rerun of a familiar story, but it’s more than that. Once again, economic policy and financial regulation has proven inadequate.

The news about the second-biggest bank failure in US history came just days after Federal Reserve Chair Jerome Powell assured Congress that the financial condition of America’s banks was sound. But the timing should not be surprising. Given the large and rapid increases in interest rates Powell engineered — probably the most significant since former Fed Chair Paul Volcker’s interest-rate hikes of 40 years ago — it was predicted that dramatic movements in the prices of financial assets would cause trauma somewhere in the financial system.