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What is "duration risk"? (And how did it get Silicon Valley Bank into trouble?)

Mar 16, 2023
Investing in long-term government bonds and mortgage-backed securities hurt the bank as interest rates rose and bond prices plummeted.
Some bonds are more sensitive to interest rates than others, depending on how long they take to mature. That “duration risk” hurt SVB financially.
Noah Berger/AFP via Getty Images

Silicon Valley Bank's collapse reveals deeper flaws in the venture capital industry

Mar 16, 2023
VCs have been among the loudest voices calling for government insurance amidst SVB’s collapse, after pulling their funds out of the struggling bank.
Prominent venture capitalists were quick to call for government insurance of all Silicon Valley Bank's deposits after its collapse Friday.
Michael Cohen/Getty Images

Increased scrutiny on banks raises specter of tightening credit

Mar 16, 2023
Banks may get stingier and more selective with loans, and that could hurt businesses that need them.
Smaller businesses often turn to small and midsize banks to help expand their operations. But those banks may be getting more selective with loans.
Drazen Zigic/Getty Images
Fed Chair Jerome Powell has been used the phrase "financial conditions" 29 times in his last three press conferences.
Saul Loeb/AFP via Getty Images

What is "moral hazard," and why does Silicon Valley Bank have us talking about it again?

Mar 16, 2023
Insurance can create perverse incentives, making risk seem less risky. Is "moral hazard" to blame for SVB's meltdown?
The show "Seinfeld" provides more than just laughs. It also provides a great example of "moral hazard."
Screenshot via YouTube/Castle Rock

Banks working on rescue plan for First Republic, AP sources say

Mar 16, 2023
A group of Wall Street banks is planning a rescue package of around $30 billion for First Republic Bank, sources told The Associated Press on Thursday.
First Republic serves a similar clientele as Silicon Valley Bank, which failed Friday after depositors withdrew about $40 billion.
Justin Sullivan/Getty Images

For public good, not for profit.

Could the Fed's new emergency bank lending program encourage risky behavior?

The Fed's new program may incentivize banks to take more risks, says analyst Joseph Wang.
The Fed's freshly created Bank Term Funding Program could reduce the incentives for banks to follow good practices, says analyst Joseph Wang.
Mark Wilson/Getty Images