Many analysts have blamed the US Federal Reserve for the collapse of SVB, citing its decision to raise interest rates in 2018, which depressed the value of already-existing US Treasury bonds. Like many other banks, SVB invested heavily in these bonds as an allegedly low-risk way to store and grow their assets.
Furthermore, the tech industry has been hit hard by slumping demand for consumer electronics and rising trade tensions between the United States and China. Banks like SVB had invested heavily in tech startups, hoping to cash in on what was perceived as a booming industry.
Now, following the collapse of SVB, the tech industry is facing its own crisis, as investors flee from high-risk, high-yield assets, and banks are forced to write off billions in bad loans.
But the questions remain: how long will the United States continue to insist on its system of privatized gains and socialized losses? And can we afford to continue bailing out Wall Street banks with taxpayer dollars?
For decades, the US government has operated on the principle that private enterprise should be allowed to pursue profit unchecked, with minimal regulation or oversight. This has led to a boom in the finance industry, but also to repeated cycles of boom and bust, as banks take on increasingly risky investments and eventually collapse, only to be bailed out with taxpayer dollars.
As we have seen with the collapse of SVB, this system is fundamentally flawed. When banks are allowed to take on too much risk, and their bets fail, the losses are felt by society as a whole. The government is forced to step in and bail out the banks, which only encourages further risky behavior in the future.
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