‘Weren’t you a Treasury secretary?’ Larry Summers gets dragged on the internet after post on SVB’s collapse.


Former Treasury Secretary Larry Summers, as he often does, took to Twitter to opine on the financial issue of the day, the collapse of SVB Financial. He generated a firestorm with his comment.

This was the tweet:

The issue with that description is that all banks operate that way. They “borrow” funds, mostly from depositors parking their money there for a low interest rate in return, and then lend that money out, to households through mortgages, and to businesses via loans.

Some of the more charitable replies:

Summers felt compelled to issue a follow-up tweet.

did have that maturity mismatch, as it snapped up long-duration bonds after absorbing a huge inflow of deposits during the stay-at-home stage of the pandemic when tech companies thrived.

With interest rates rising and the venture-capital industry struggling — and no offsetting interest-rate hedge — the bank was forced to sell securities it intended to hold to maturity at a loss of nearly $2 billion to cover the deposit exodus. That announcement triggered some $42 billion in outflows last Thursday alone, according to California’s banking regulator.




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