How an econ group project accidentally led to the collapse of Silicon Valley Bank!
C/O Yahoo Finance
By Kiera O’Hara-Heinz
Chief Conspiracy Theorist
The Saint Mary’s Community and the United States Federal Reserve, may be equally surprised and disturbed to hear that the recent collapse of Silicon Valley Bank, the largest bank failure since the 2008 financial crisis, was actually the handiwork of a group of SMC economics students.
On March 10, 2023, Silicon Valley Bank, based in Santa Clara CA, collapsed after announcing an alarming $1.8 billion in losses. Two days later, came the fall of Signature Bank, the nation’s 29th largest bank, suggesting a larger banking crisis at place. The story however starts a year earlier, when a group of three inexperienced SMC students were given an irresponsible degree of responsibility at the institution.
In Spring of 2022, three SMC students Jeremy Kitchener ‘22, Melody Wash ‘23, and Trevor Smith ‘23, were assigned a group project partnership with Silicon Valley Bank as a final project for their Economic Theory course. These students were tasked with coming up with business plan proposals for the bank, though the proposals were the purely theoretical musings of a group of young students.
Kitchener described the group’s proposal simply, “We heard that U.S. Treasury bonds were safe so we figured what could be safer than putting all your money into them.”
Smith agreed, saying, “All or nothing baby! That’s what we say!”
The proposal was apparently popular with the higher ups in the company, who seemingly applied it blindly.
Silicon Valley Bank’s deposit bank was based heavily in tech startups, and the deposit amount more than tripled during the pandemic. Instead of investing most of the deposits into other startups or venture firms, the bank instead placed a large share of the funds into long-term Treasury bonds and mortgage bonds. These bonds usually deliver small but rather reliable returns. These bonds however lost significant value over the previous year due to an aggressive series of interest rate hikes from the Federal Reserve.
This plan however was largely unsuccessful, and in response, the U.S. government was forced to take rapid and extraordinary steps to protect the American financial system.
When asked whether they were proud of their project and the subsequent financial crisis it caused, Wash celebrated the collapse saying, “I’m a communist, anything I can do to take down rampant irresponsible capitalism is a win to me.”
President Plumb and the SMC Economics department have declined to comment on the issue.
HAPPY APRIL FOOLS DAY FROM THE COLLEGIAN STAFF!
Madison Sciba '24,