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What WaMu’s Failure Can—and Can’t—Teach Us About Silicon Valley Bank

WaMu’s mortgage losses and SVB’s rate and funding risks were different vulnerabilities. Their histories show how weak risk management, deposit flight, and delayed supervisory action can combine in a bank failure.
From TheFinanceBase Team7 min to read
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Washington Mutual (WaMu) and Silicon Valley Bank (SVB) both failed after depositors withdrew money faster than the banks could withstand. But they did not fail for the same underlying reason: WaMu’s central weakness was risky mortgage lending and the losses exposed by the housing collapse; SVB’s was a combination of interest-rate exposure, concentrated deposits, and poor management of rapid growth. Their histories offer useful clues about how bank vulnerabilities can become crises—not a blueprint for predicting an identical next failure.

How were WaMu and SVB different?

The comparison is most useful when it separates what was shared—the pressure of deposit flight—from what made each bank vulnerable in the first place. The Treasury and FDIC inspectors general’s joint 2010 evaluation of WaMu and the Federal Reserve and Federal Reserve Office of Inspector General’s 2023 reviews of SVB describe distinct balance-sheet and management failures.

Dimension Washington Mutual (2008) Silicon Valley Bank (2023)
Underlying vulnerability High-risk mortgage lending, liberal underwriting, and inadequate risk controls; housing and mortgage losses undermined the bank. Long-maturity securities lost value as interest rates rose, while the bank relied on a concentrated base of science and technology customers with substantial uninsured deposits.
How funding came under pressure Depositors withdrew funds amid high-profile bank failures and rumors about WaMu; the bank could not raise capital fast enough to keep pace. Large, irregular customer cash flows and ineffective communication about financial moves preceded a rapid run. News of Silvergate Bank’s liquidation was also part of the immediate context.
Supervisory concern Examiners identified recurring problems in underwriting, management, and internal controls, but the Office of Thrift Supervision did not ensure timely correction. The Federal Reserve’s supervisory approach did not adapt adequately as SVB grew, and supervisors did not sufficiently scrutinize its rising-rate exposure.

That distinction matters. WaMu’s losses were rooted primarily in credit risk: borrowers and mortgage assets performed worse as housing markets collapsed. SVB’s key exposure was interest-rate and liquidity risk: rising rates reduced the value of long-term securities, and customers’ concentrated cash needs made withdrawals harder to absorb. Both failures involved management and supervision, but the balance-sheet mechanisms were not interchangeable.

Why did Washington Mutual fail?

Mortgage risk turned into a solvency and funding problem

The joint Treasury and FDIC inspectors general concluded that WaMu failed primarily because its management pursued a high-risk lending strategy, including liberal underwriting standards and inadequate risk controls. When the housing and mortgage market collapse began in mid-2007, loan losses mounted. The deterioration also constrained the bank’s ability to borrow and contributed to a falling stock price, making it harder to obtain fresh capital.

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WaMu was a large institution: the FDIC’s receivership record reports $307 billion in assets and $188 billion in deposits at failure, with more than 2,300 branches in 15 states. The FDIC described it as the largest insured depository institution failure in its history at that time. On September 25, 2008, the Office of Thrift Supervision closed the bank. The FDIC-facilitated sale of its banking operations to JPMorgan Chase resulted in no loss to the Deposit Insurance Fund.

Depositor withdrawals accelerated the end

WaMu’s asset problems had been building before the final run. In September 2008, after other high-profile failures and rumors about WaMu’s condition, depositors withdrew significant funds. The bank could not raise enough capital to keep up with the pressure. The Federal Reserve’s 2023 SVB review cites an estimate that WaMu had about $19 billion in deposit outflows over 16 days. That estimate is useful context, not a directly comparable measure of SVB’s withdrawals: the figures come from different accounts and time windows.

Why did Silicon Valley Bank fail?

Rate exposure and rapid growth left little room for error

SVB’s balance sheet was vulnerable to rising rates. The Federal Reserve’s April 2023 review found that the bank managed interest-rate risk with an emphasis on short-term profits and protection against falling rates, rather than long-run exposure to rising rates. It also removed hedges that could have reduced that exposure. As rates rose, the value of its long-maturity securities fell, leaving significant unrealized losses.

The Federal Reserve OIG’s September 2023 material-loss review also points to a distinctive funding profile: SVB served a concentrated group of science and technology customers, many with large and irregular cash flows, and held a high share of uninsured deposits. Management and the board failed to manage the risks associated with rapid, unchecked growth and customer concentration. That mix made the bank more vulnerable when customers began moving money at the same time.

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A fast run overwhelmed the bank

According to the Federal Reserve OIG, ineffective communication about SVB’s financial moves, together with news of Silvergate Bank’s liquidation, preceded $40 billion in deposit withdrawals and a further $100 billion in withdrawal requests that SVB could not meet. The OIG reported that SVB had more than $200 billion in assets and estimated that its failure cost the Deposit Insurance Fund $16.1 billion.

California’s Department of Financial Protection and Innovation separately said digital banking technology and social media accelerated the volume and speed of SVB’s run. That describes how quickly money could move and information spread; it does not replace the balance-sheet explanation. The rate exposure, concentration of customers and deposits, and weak risk management made the bank vulnerable before withdrawal speed became decisive.

What do the two runs reveal about depositor behavior?

In both cases, withdrawals were the immediate pressure on a bank already facing serious vulnerabilities. But the runs took place in different settings, and the available figures should not be treated as an apples-to-apples contest. The WaMu estimate cited by the Federal Reserve covers about $19 billion over 16 days; the SVB OIG account distinguishes $40 billion withdrawn from another $100 billion in requests the bank could not meet. The latter includes requests that were not completed, so it should not be described as $140 billion actually withdrawn.

An FDIC staff-study announcement dated May 14, 2026 reported transaction-level findings from three failed banks—SVB, Signature, and First Republic. Their deposit outflows were unprecedented in size and speed. Depositors with substantial uninsured balances were more likely to run, as were the largest depositors; fully insured retail depositors generally did not run before the banks failed. The study’s scope is those three institutions, so it does not establish that every bank run will follow the same pattern.

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FDIC Chairman Travis Hill said in the announcement, “I have long believed that regulators need to develop a more sophisticated understanding of deposit behavior.” That is Hill’s view, distinct from the study’s reported findings. For readers assessing bank risk, the practical point is that deposit totals alone do not show how stable a bank’s funding may be: who holds the deposits, whether balances exceed insurance limits, and how quickly large customers can move funds also matter.

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What did supervisors miss, and why does the distinction matter?

WaMu: recurring warnings without timely correction

The joint inspectors general review says Office of Thrift Supervision examinations identified repeated concerns, including single-family mortgage underwriting, management weaknesses, and internal controls. The failure was not simply that no warning signs existed; supervision did not ensure that the problems were corrected early enough. The review also says FDIC monitoring identified risks.

SVB: supervision did not keep pace with the bank

The Federal Reserve’s 2023 review concluded that its supervisory approach did not evolve as SVB grew in size and complexity. The Federal Reserve OIG also identified inadequate examiner resources and expertise and insufficient scrutiny of interest-rate risk as rates rose. These are SVB-specific findings; they should not be collapsed into WaMu’s separate supervisory history.

Together, the postmortems show why a warning or examination finding is not the same as effective intervention. Supervisors must identify a material risk, understand how it could threaten the institution, and ensure that management addresses it. The particular risks and missed steps differed at these banks.

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What can WaMu’s history tell us about what comes next?

It cannot identify which bank will fail next, and WaMu’s mortgage crisis does not predict that SVB’s interest-rate and depositor-concentration problems will recur in the same form. The more durable lesson is to look for combinations of vulnerabilities and ask how they could reinforce one another under stress.

  • Examine assets and their risks. Credit quality and underwriting matter for lenders exposed to borrower defaults. For a bank holding long-duration securities, rate sensitivity and how management hedges or otherwise manages it matter too.
  • Look beyond aggregate deposits. Customer or industry concentration, the size of large balances, and the share of deposits above insurance limits can affect how quickly funding might leave.
  • Ask whether liquidity can meet stressed withdrawals. A bank may report substantial assets but still face difficulty meeting rapid cash demands, especially if selling assets would crystallize losses or customers withdraw together.
  • Assess management’s response to growth and changing conditions. Risk controls, board oversight, and clear communication are not substitutes for sound assets and funding, but failures in these areas can compound existing exposures.
  • Distinguish identified risk from corrected risk. The supervisory record matters not only for whether examiners raised concerns, but whether the institution made timely, effective changes.

Those checks do not amount to a prediction about an individual bank. They are a way to understand why stress in one part of a balance sheet can become a broader confidence and liquidity crisis—and why the next failure, if one occurs, may have a different trigger from either WaMu or SVB.

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