What It Means to Trust the Banking System
Silicon Valley Bank, the financial industry, and how we move forward
When you’re driving, you have a reasonable assumption that other drivers will follow the rules.
There are laws (like the speed limit and obeying traffic lights) and guidance (maybe not the best idea to speed up to pass when traffic is heavy). Sometimes people break the laws. Sometimes people take risks. And sometimes there are innocent victims as a result.
I’ve been reflecting on the Silicon Valley Bank collapse since it happened. (If you need a detailed explainer, you can read this article). There has been a lot of finger-pointing.
There is no one thing that lead to SBV’s collapse. It was a combination of the bank’s unique clientele, a changing VC-backed tech landscape, rising interest rates, deregulation, and a bad press release. A perfect storm.
But a core concern should be the financial system in the United States. Like driving, it is built on trust. A series of laws, guidance, and relying on the fact that most people are trying to do the right thing most of the time.
If that trust shatters, the system will collapse. That’s been the biggest risk of the SVB failure.
