Silicon Valley Bank was shut down by the Federal Deposit Insurance Corp. on Friday, March 10, for running out of money. It is of course bad for a bank to run out of money. But it is also a little hard to understand how a bank like SVB could have run out of money, in the US, in 2023. The structure of the modern banking system is supposed to prevent that, and SVB seemed in some ways like a bank that was particularly unlikely to run out of money. But it did.

The very stylized facts of SVB are that it had about $190 billion of deposits and invested much of that money — call it $120 billion — in a portfolio of mostly Treasury and agency bonds. The rest was invested in more complicated, riskier, traditional banking assets (loans, etc.), but SVB actually did relatively little lending, for a bank, and had rather a lot of safe bonds.