Understanding the Cobra Effect in Finance
Examine how financial risk management strategies sometimes lead to crises instead of preventing them.
What has been corrected on this page?
Every accepted correction to this page is recorded with the exact change, so readers can see how the page improved over time.
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Corrected the remaining factual errors: removed the claim that Silicon Valley Bank passed a 2022 Federal Reserve stress test (per the Fed's own SVB review, SVB Financial Group's first supervisory stress test would not have occurred until 2024); corrected the description of Value at Risk, which is a loss threshold at a confidence level, not a maximum loss (actual losses can far exceed the VaR figure in the tail); and corrected the claim that SVB's held-to-maturity bond losses were invisible on its balance sheet (they were excluded from carrying value and headline capital ratios but were disclosed in the notes to its financial statements). The article's Lehman/SCAP passage was already accurate (Lehman failed in 2008, before the 2009 SCAP stress-test regime) and the originate-to-distribute securitization discussion was appropriately nuanced.
What the page claimedThe article's comparison table stated SVB passed a 2022 stress test, described VaR as a maximum-loss probability, and said SVB's HTM losses were invisible in public reporting.
What was correctedRemoved the SVB stress-test claim and dated its first supervisory test to 2024, corrected VaR to a threshold measure that does not bound tail losses, and clarified that SVB's HTM losses were disclosed in footnotes though excluded from headline capital.
Why: These were verifiable factual errors about stress-test history, the definition of VaR, and financial-statement disclosure. Corrections use the Federal Reserve's SVB review and standard risk definitions rather than new unverified sources.
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Original sentence is factually impossible (Fed stress tests did not exist until 2009; Lehman failed in 2008).
BeforeIn 2018, Lehman Brothers passed a Federal Reserve stress test scenario - shortly before its collapse in 2008 was, in retrospect, the subject of thorough post-mortem analysis...
AfterLehman Brothers collapsed in 2008, before the Federal Reserve's formal bank stress-testing regime (SCAP) was introduced in 2009 in response to that crisis - so no such test ever certified its soundness.
Why: Verified live: the correction was already applied to the article body exactly as suggested (the chronologically impossible claim was removed). FAQ/excerpt/meta_description/seo_keywords contained no leftover reference to the fabrication. No further action needed.
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