The media says SVB’s failure was the second-biggest ever and that New York-based Signature Bank’s was the third-biggest. Scary. But they weren’t really No. 2 and No. 3.
Inconsistency instills fear.
But in relevant economic impact — what really matters — SVB, for example, was only about 4% as big relative to the economy’s size in 2023 versus what Bank of the United States was when it failed in 1931. Nominal GDP growth since then accounts for the difference. Relative to contemporary GDP, Signature and SVB were smaller than 1984’s Continental Illinois failure — relative pimples, not huge hemorrhages.
Britain’s finance minister Jeremy Hunt said many UK companies would have failed without government intervention.If upper management had been fired last weekend the FDIC would have had nobody to talk to at SVB to enable customers to redeem deposits. Chaos would reign.SVB’s main problem? Its depositor base was way too concentrated in firms and employees from the venture capital realm.
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