The Search for Lessons From Another US Banking Crisis

Over 10 turbulent weeks earlier this year, a string of US banks with combined assets of more than $500 billion collapsed. The rapid demise of these midsize banks, seemingly out of the blue, raised fears of a repeat of the financial system meltdown of 2008. Those fears soon faded. What remained were thorny questions about what had gone wrong, what damage the episode might do to the banking system and the broader economy, and whether the swift government response had been a model of damage control — or the cause of potentially more trouble down the road.

In March, Silvergate Capital, Silicon Valley Bank and Signature Bank of New York collapsed, followed by First Republic Bank on May 1. Silvergate and Signature were hurt by their connections to a cryptocurrency market that had boomed and faltered. SVB and First Republic were hurt by investments that proved to be vulnerable to a risk the banks hadn’t adequately prepared for – rapid interest rate hikes by the Federal Reserve after years of near-zero rates.