Paul Krugman: 'SVB isn’t Lehman, and 2023 isn’t 2008. We probably aren’t looking at a systemic financial crisis. And while the government has stepped in to stabilize the situation, taxpayers probably won’t be on the hook for large sums of money.'
Silicon Valley Bank’s headquarters in Santa Clara, Calif., on Friday, on March 10, 2023.If there is one thing almost all observers of the economic scene have agreed about, it is that the issues facing the U.S. economy in 2023 are very different from those it faced in its last crisis, in 2008.
Oh, there were some echoes of past follies, because there always are. Hype springs eternal; the crypto cult shares some obvious features with the rise and fall of subprime mortgages, with people lured into complex financial arrangements they don’t understand. But nobody expected a repeat of those frightening weeks when the bottom seemed to be falling out of the world financial system.
But SVB isn’t Lehman, and 2023 isn’t 2008. We probably aren’t looking at a systemic financial crisis. And while the government has stepped in to stabilize the situation, taxpayers probably won’t be on the hook for large sums of money.Silicon Valley Bank portrayed itself as “the bank of the global innovation economy,” which might lead you to think that it was mostly investing in highly speculative technology projects.
Second, while the value of bank deposits is federally insured, that insurance extends only up to $250,000. SVB, however, got its deposits mainly from business clients with multimillion-dollar accounts — at least one client had $3.3 at SVB. Since SVB’s clients were effectively uninsured, the bank was vulnerable to a bank run, in which everyone rushes to withdraw their money while there’s still something left.
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