The stories of Silicon Valley Bank and Signature Bank saw the beginning of their end last week as both mismanagement of risk and unfortunate market conditions created the 2nd and 3rd largest bank failures in US history. We will discuss the ramifications of these failures and regulatory responses in future newsletters, but the truth is, these failures are the result of regulatory failures of the past. Regulators have been so afraid of the political fallout of allowing “systemic” routes, that they have stepped into every problem since the Global Financial Crisis. The logic that followed resulted in businesses and banks taking bigger and bigger risks because they know there is always a backstop. While Signature is interesting for its own reasons, SVB was THE bank at the center of the innovation economy. They’ve been incredibly important to major changes in technology and healthcare and it’s very difficult for many players to accept that they ultimately failed. In the end, they failed to manage risk. They caused a balloon in asset values, and as the air leaves that balloon, increasing interest rates business risks ultimately took them down. Over the last few days, we’ve seen many stories about who and what killed SVB, but if we zoom out, it’s clear, risk without proper management ultimately ends in one way. There will be a lot more to learn from this in coming months.