The regulatory debacle behind SVB’s meltdown
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Today we’re talking about the topic of the day, week, month, and maybe even year — banking. Bet that wasn’t on your 2023 bingo card.
The combination of Silicon Valley Bank’s tech startup-centric clientele and its remarkably high amount of uninsured deposits made it different from a lot of other banks. But there’s a regulatory landscape in the background of SVB’s downfall story, and while some experts have pointed to the rollback of the Dodd-Frank banking regulations enacted in the wake of the 2008 financial crisis, others believe the failure goes back even further.
“It is a regulatory failure. I think with Silicon Valley Bank, it’s very clear that there were risks they were engaging in that regulators had the authority to sort of check … And there’s some things that maybe they had legal loopholes for,” said Mehrsa Baradaran, a banking law professor at the University of California Irvine and author of the books “The Color of Money” and “How the Other Half Banks.”
On the show today, Baradaran explains how regulatory changes made back in the 80s landed us where we are now; the psychological nature of bank runs; and what regulators can learn from this SVB-triggered banking episode.
In the News Fix, the case for incorporating more lentils and other climate-friendly foods into the American diet. Also, we’ll give an economics crash course on “Minsky moments.” And, why commercial real estate debt could become another problem for banks.
Later, listeners weigh in on TikTok and coastal erosion. Plus, the president of the National Women’s Studies Association explains why she was wrong about motherhood.
Here’s everything we talked about today:
- “How Silicon Valley Bank & Signature Bank Lobbied to Weaken Regulations That Could Have Prevented Collapse” from Truthout
- “Opinion | After Silicon Valley Bank collapse, scrap the deposit insurance limit” from The Washington Post
- “Federal Reserve and Lawmakers Eye Bank Rules After Collapse” from The New York Times
- “What Is a Minsky Moment? How Do World Debt Levels Look Now?” from Bloomberg
- “Why Americans should eat more lentils” from The Washington Post
- “Commercial Property Debt Creates More Bank Worries” from The Wall Street Journal
What have you been wrong about lately? We want to hear your answer to the Make Me Smart question! Leave us a voice message at 508-U-B-SMART, and your submission may be featured in a future episode.
