close video Silicon Valley Bank had a duration problem: Robert Heller
Former Federal Reserve Governor Robert Heller reacts to pressure Fed Reserve Chair Jerome Powell is facing to halt rate hikes on ‘Kudlow.’
Silicon Valley Bank, the nation's 16th-largest bank, failed because its managers made a textbook mistake, according to former Treasury Secretary Larry Summers.
Summers, a Harvard University professor who served in both the Clinton and Obama administrations, said Monday the bank "committed one of the most elementary errors in banking: borrowing money in the short term and investing in the long term."
SVB collapsed Friday after depositors ran on the bank, which didn't have cash on hand to cover their withdrawals. It was the second-biggest bank failure in U.S. history and the largest since Washington Mutual went under in 2008. Ticker Security Last Change Change % SIVB SVB FINANCIAL GROUP 106.04 -161.79 -60.41%
What happened is fairly simple: when interest rates were at historic lows, SVB invested depositors' funds in long-term Treasury bonds. But as the Federal Reserve increased interest rates to combat inflation, the price of those bonds cratered, taking SVB with it.
MORTGAGE RATES POST BIG DECLINE AMID SILICON VALLEY BANK FALLOUT
FDIC member Dedra Dorn, center left, speaks with people in line outside Silicon Valley Bank’s headquarters in Santa Clara, California, Monday, March 13, 2023. Dozens of bank customers waited in line to withdraw funds. (AP Photo/Benjamin Fanjoy / AP Images)
"When interest rates went up, the assets lost their value and put the institution in a problematic situation," Summers explained on Twitter.
On Wednesday, SVB suffered a $1.8 billion after-tax loss and attempted to address its liquidity crisis by selling equity. The move backfired – in just 24 hours, SVB lost over $160 billion in value and spooked depositors, who rushed to withdraw their money before the situation got worse.
SILICON VALLEY BANK COLLAPSE: HERE'S WHO BENEFITTED FROM THEIR EXECUTIVE, PAC DONATIONS
People look at signs posted outside an entrance to Silicon Valley Bank in Santa Clara, California, March 10, 2023. (AP Photo/Jeff Chiu / AP Newsroom)
Regulators stepped in on Friday, when the Federal Deposit Insurance Corporation took control of the bank. The FDIC said in a statement that SVB had $209 billion in assets and $175.4 billion in deposits at the end of 2022. It guaranteed that insured deposits, up to the statutory limit of $250,000, would be made available by Monday.
The FDIC created a new entity, called Silicon Valley Bank N.A., and transferred all of SVB's deposits there, where depositors can access their money.
FEDS HOLD AUCTION FOR FAILED SILICON VALLEY BANK, MOVE TO PROTECT UNINSURED DEPOSITORS
A Silicon Valley Bank logo displayed on a smartphone. (Photo Illustration by Avishek Das/SOPA Images/LightRocket via Getty Images / Getty Images)
Former Fannie Mae head Tim Mayopoulos was appointed CEO of the new bridge bank, Reuters reported.
"I look forward to getting to know the clients of Silicon Valley Bank… I also come to this role with experience in these kinds of situations," Mayopoulos wrote in a letter to clients. "I was part of the new leadership team that joined Fannie Mae in the wake of the financial crisis in 2008-09, and I served as the CEO of Fannie Mae from 2012-18."
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In an interview on CNN, Summers called for increased supervision and regulation of the banking industry.
"It doesn't appear on current facts that a very good job was done regulating and supervising Silicon Valley Bank," he said.
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The UK and four allies have criticised Israel’s decision to launch a new large-scale military operation in Gaza – warning it will “aggravate the catastrophic humanitarian situation” in the territory.
The foreign ministers of Britain, Australia, Germany, Italy and New Zealand said in a joint statement that the offensive will “endanger the lives of hostages” and “risk violating international humanitarian law”.
It marks another escalation in the war in Gaza, sparked by the Hamas attack of 7 October 2023.
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2:20
Can Netanyahu defeat Hamas ideology?
In their joint statement, the UK and its allies said they “strongly reject” the decision, adding: “It will endanger the lives of the hostages and further risk the mass displacement of civilians.
“The plans that the government of Israel has announced risk violating international humanitarian law. Any attempts at annexation or of settlement extension violate international law.”
The countries also called for a permanent ceasefire as “the worst-case scenario of famine is unfolding in Gaza”.
In a post on X, the Israeli prime minister’s office added: “Instead of supporting Israel’s just war against Hamas, which carried out the most horrific attack against the Jewish people since the Holocaust, Germany is rewarding Hamas terrorism by embargoing arms to Israel.”
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Inside plane dropping aid over Gaza
US ambassador hits out at Starmer
Earlier on Friday, the US Ambassador to Israel, Mike Huckabee, criticised Sir Keir Starmer after he said Israel’s decision to “escalate its offensive” in Gaza is “wrong”.
Mr Huckabee wrote on X: “So Israel is expected to surrender to Hamas & feed them even though Israeli hostages are being starved? Did UK surrender to Nazis and drop food to them? Ever heard of Dresden, PM Starmer? That wasn’t food you dropped. If you had been PM then UK would be speaking German!”
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In another post around an hour later Mr Huckabee wrote: “How much food has Starmer and the UK sent to Gaza?
“@IsraeliPM has already sent 2 MILLION TONS into Gaza & none of it even getting to hostages.”
Sir Keir has pledged to recognise a Palestinian state in September unless the Israeli government meets a series of conditions towards ending the war in Gaza.
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Mr Vance described a “disagreement” about how the US and UK could achieve their “common objectives” in the Middle East, and said the Trump administration had “no plans to recognise a Palestinian state”.
He said: “I don’t know what it would mean to really recognise a Palestinian state given the lack of functional government there.”
Mr Vance added: “There’s a lot of common objectives here. There is some, I think, disagreement about how exactly to accomplish those common objectives, but look, it’s a tough situation.”
The UN Security Council will meet on Saturday to discuss the situation in the Middle East.
Ambassador Riyad Mansour, permanent observer of the State of Palestine to the United Nations, said earlier on Friday that a number of countries would be requesting a meeting of the UN Security Council on Israel’s plans.
Five days before he was killed by a falling aid package, father-of-two Uday al Qaraan called on world leaders to open Gaza’s borders to food – and criticised the use of airdrops.
“This isn’t aid delivery,” said the 32-year-old medic as a crowd of children rummaged through the remains of an airdrop behind him. “This is humiliation.”
Using footage from social media, satellite imagery, eyewitness testimony and flight tracking data, Sky News has examined the dangers posed by airdrops – and just how little difference they are making to Gaza’s hunger crisis.
A tangled parachute and a crowd in chaos
Based on six videos of the airdrop that killed Uday, we were able to locate the incident to a tent camp on the coast of central Gaza.
We determined that the drop occurred at approximately 11.50am on 4 August, based on metadata from these videos shared by three eyewitnesses.
Flight tracking data shows that only one aid plane, a UAE Armed Forces C-130 Hercules, was in the area at that time.
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Footage from the ground shows 12 pallets falling from the plane. The four lowest parachutes soon become tangled, and begin to fall in pairs.
As a crowd surges towards the landing zone, a gunshot rings out. Nine more follow over a 90-second period.
Sakhr al Qaraan, an eyewitness and Uday’s neighbour, says that Uday was among those running after the first pallet to land.
“He didn’t see the other pallet it was tangled up with, and it fell on him moments later,” says Sakhr.
“People ran to collect the aid in cold blood, devoid of humanity, and he suffocated under that damned blanket – under the feet of people who had lost all humanity.”
The scene descended into chaos as Palestinians, some armed, tussled over the limited food available.
By the time Uday was pulled from the crowd and rushed to hospital, it was too late.
The UAE Ministry of Foreign Affairs did not respond to a request for comment.
Image: Medic and father-of-two Uday al Qaraan, 32, was killed on 4 August by an aid package dropped from a UAE Armed Forces plane.
Parachutes failed in half of airdrops analysed
This was not the first time that airdrops at this location had posed a threat to those on the ground.
The day before Uday was killed, the same plane had dropped aid over the site.
The footage below, shared by the UAE Armed Forces, shows the view from inside the plane. Just before the footage ends, it shows that one of the parachutes was broken.
Hisham al Armi recorded the scene from the ground. His video shows the broken parachute, as well as another that had failed completely.
Military planes dropped aid at the site on eight consecutive days between 30 July and 6 August. Sky News verified footage showing parachute failures during four of those eight airdrops.
Flight tracking data shows that almost all of the 67 aid flights over that period followed a similar route along the coast, which is densely packed with tent camps.
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An Israel Defence Forces (IDF) official told Sky News that the airdrops are routed along the coast, because this is where much of Gaza’s population is now concentrated.
An IDF spokesperson added the Israeli military “takes all possible measures to mitigate the harm to uninvolved civilians”.
Hisham al Armi told Sky News he is grateful to the countries that donated the aid, but “the negatives outweigh the positives”.
“Fighting occurs when aid is dropped, and some people are killed … due to the crush and parachutes.”
Other dangers are also posed by the airdrops.
The footage below, taken on 29 July, shows Palestinians venturing into the sea in order to chase aid that had drifted over the water. The IDF has banned Palestinians from entering the sea.
One woman, a relative of Uday who witnessed his death, described the airdrops as the “airborne humiliation of the people”.
“There is not enough aid for them,” she said. “It creates problems among the people, and some are killed just to obtain a little aid. And most people don’t receive any aid, they remain hungry for days.”
Between 27 July and 1 August, Gaza received an estimated 1,505 tonnes of food aid per day via land routes – 533 tonnes short of what the UN’s food security agency says is needed to meet basic needs.
Based on flight tracking data, we estimated that airdrops added just 38 tonnes daily, 7% of the shortfall.
“The quantities involved are minuscule in terms of the scale of the need,” says Sam Rose, Gaza director of UNRWA, the UN agency previously responsible for distributing food in the territory.
UNRWA claims it has enough food stationed outside of Gaza to feed the population for three months, but that Israel has not allowed the agency to bring in any food since 2 March.
“We should be dealing with that rather than introducing something else which is costly, dangerous, undignified and somehow legitimises … the access regime by suggesting that we found a way round it through airdrops,” Rose says.
COGAT, the Israeli agency responsible for coordinating aid deliveries, referred Sky News to a statement in which it said there is “no limit on the amount of aid” allowed into Gaza.
An IDF spokesperson also denied restricting aid, and said the Israeli military “will continue to work in order to improve the humanitarian response in the Gaza Strip, along with the international community”.
In his interview five days before he was killed, Uday al Qaraan appealed to world leaders to open Gaza’s borders.
“What would happen if they just let the aid in?” he asked. “If you can fly planes and drop aid from the sky then you can break the siege, you can open a land crossing.”
The Data and Forensics team is a multi-skilled unit dedicated to providing transparent journalism from Sky News. We gather, analyse and visualise data to tell data-driven stories. We combine traditional reporting skills with advanced analysis of satellite images, social media and other open source information. Through multimedia storytelling we aim to better explain the world while also showing how our journalism is done.