Crossing borders into the abyss

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A month ago, Forbes, an American business magazine, ranked the Silicon Valley Bank (SVB) 20th out of the top 100 US lending institutions. On March 1, Money House’s CEO stated at a conference, “We are proud to be the best partner in this time of great challenge.” A day later, the man received an award for outstanding achievements in the banking sector.

On March 8, a Silicon Valley bank went bankrupt.

SVB had invested most of its assets in long-term, unhedged investments, but large sums were suddenly withdrawn and the bank had to sell its securities at an extremely large loss. Since no bank of this size has closed in the US since the 2008 financial crisis, there are fears that this is only the beginning. However, well-known financial analysts emphasize that in order for this bankruptcy to develop into a systemic crisis, such gross mistakes should have been made by a large number of institutions. The Frankfurter Allgemeine Zeitung writes that “every apprentice in the bank” knows the business better than the alleged slackers from California.

There are two interpretations of history. The more innocuous of the two focuses on the bank’s specific environment. Silicon Valley is the most important place in the tech world. But the name also signifies a lifestyle that has elevated something as binary as computer programming to the level of a religion. When you hear Silicon Valley, you think of innovation and disruption, creativity and heroism.

In fact, the Silicon Valley bank, founded in 1983, invested in Facebook and Uber early on. Until recently, it was “the backbone of the tech startup ecosystem,” as The New York Times put it.

Facebook founder Mark Zuckerberg’s motto is “Move fast and break things.” It was Mark Zuckerberg who once called privacy obsolete and said his company doesn’t feel “trapped in old conventions” like data protection. By contrast, transportation provider Uber considers employee rights in Europe obsolete and has pointedly ignored them in recent years.

Whoever acts in such a biotope as a “rod” cannot but at some point fall into the conviction that the laws of gravity are suspended for him. A bank with Silicon Valley in its name almost inevitably has to do what “any novice banker” would find too dangerous.

Unfortunately, the events of recent days can also be viewed differently. Because boundless pride is probably not a unique advantage in the world of technology. In any case, it would be cheap to attribute Credit Suisse’s precarious position to the collapse of a bank in Silicon Valley. The CS issues are self-made, and it raises an unsettling question: maybe it’s not just a few houses whose bosses think they don’t need to perfect their craft?

After all, and this is our big spark of hope, those in charge of policy, administration and central banks have learned from the cascade of crises of recent years – the financial crisis, the euro crisis, the corona crisis. They are moving faster and bolder today than when the Lehman Brothers investment bank collapsed in September 2008, triggering a major financial crisis. Takeover talks between UBS and CS, initiated by the Swiss Financial Market Authority and the National Bank, testify to this.

Whether things will really be different this time around and we all get away with it again will only be decided in the next few days and weeks. It took a full two weeks after Lehman’s bankruptcy before the global financial system collapsed (despite previous forced mergers of several US financial institutions). It was a full month before UBS was on the brink of collapse.

Source: Blick