The Federal Reserve released a report confirming its staff should have noticed Silicon Valley Bank was about to implode. Vice Chair Michelle Bowman announced this breakthrough in retrospective analysis with the confidence of someone who just realized their house was on fire yesterday.
The central bank's employees missed signs. Which signs? The ones that became obvious after the bank collapsed. Revolutionary stuff.
SVB failed in March 2023 after a run on deposits exposed what everyone now agrees were glaring vulnerabilities. The Fed's own supervisors were watching the bank. They had access to the data. They had the regulatory authority. They had one f*cking job.
But here we are. A new report indicates the staff missed things. Missed is doing heavy lifting in that sentence. A pilot misses the runway. A shooter misses the target. Fed supervisors missed a bank holding $209 billion in assets circling the drain like a frat house toilet.
Bowman says the report indicates they should have known. Should have known. Not could have. Should have. That word choice matters. It means the information was there. The red flags were waving. Someone just needed to look at them and think thoughts.
The Fed now knows what it failed to know then. This is called learning. Most people do it before the test. The Fed prefers the post-mortem approach. Examine the corpse. Write a report. Indicate things could have gone differently.
Retail traders who bought SVB stock at $320 in February 2023 watched it go to zero by March. They did not receive a report indicating they should have known better. They just lost everything while the Fed's supervisors were busy not noticing a bank run in real time.
The report has been filed. Lessons have been indicated. Next time will surely be different because this time they wrote it all down.
Photo by Mariia Berezovsky on Unsplash
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