Samuel Clemens, also known as Mark Twain, didn't live to see the bank runs and market crash of 1929, nor was he around for 1987’s "Black Monday,” the Great Recession of 2008, or the latest banking crisis centered on the demise of Silicon Valley Bank (SVB). But a famous aphorism often ascribed to Twain sums up the financial panics that have come and gone since his time: "History doesn't repeat itself, but it often rhymes."
The reverberations that have spread through the banking system after SVB’s collapse seem to rhyme very closely with a particular panic from the late 1980s: the savings and loan (S&L) crisis. Both then and now, the Federal Reserve was rapidly hiking interest rates to fight stubborn inflation. The ploy worked—and appears to be working again today—but at the cost of devaluing interest rate-sensitive assets, like the U.S Treasuries and mortgage-backed securities that make up a large portion of many banks’ balance sheets. Add to that lax regulations, executive mismanagement, and an overreliance on a single type of depositor, and a potential repeat of the nightmare S&L crisis is creating sleepless nights for many of today’s regional bank executives.
