Were the seeds of Silicon Valley bank collapse planted by the Federal Reserve’s rapid rate hikes? It’s one of the online debates of the weekend. Michael Green, chief strategist and portfolio manager at Simple Asset Management, is in the camp that it’s the Fed’s fault. “Who really owns SVB’s failure? The Fed,” Green wrote on Substack. “By raising rates in a totally unprecedented manner less than a year after assuring market participants that they would not raise rates until 2024, they created the conditions that predictably led to the second largest bank failure in US history,” Green wrote. On Sunday, Sheila Bair, the former chair of the FDIC, retweeted part of an opinion she wrote in December calling on the Fed to hold off on interest-rate hikes to assess their full impact on financial-system stability. See also: Rap. Katie Porter blames rising interest rates for SVB crash, raises oversight questions On the other hand, Jim Bianco, president of Bianco Research LLC, said bond bulls need to take some heat. Management at SVB SIVB, -60.41% may have heard “non-stop droning” from Wall Street and fintwits that inflation had peaked, and the Fed would pause, pivot or taper, he said. “In other words, did they know that all the bond bulls were full of it. And the bond bulls aren’t mad at him for following their advice,” Bianco said. The Fed has raised its benchmark rate 4.5 percent in the past year. A sharp rise in interest rates has hurt SVB’s bond portfolio. Efforts to raise capital in new funds have left the “old-fashioned bank seems to have accelerated the run,” Barr said in an interview on MSNBC over the weekend. The Fed allows its balance sheet to shrink by up to $95 billion per month under a program known as “quantitative tightening.” Chris Whalen, chairman of Whalen Global Advisors Said the program was not linked to the impact of quantitative tightening on financial markets.
