As most know by now, Silicon Valley Bank has collapsed (and as this is being sent out...the government has taken the step to bail them out).
In case you didn't know, they are (were) one of the largest banks in the world specializing in funding tech startups and other Silicon Valley initiatives.
SVB had been a bank for 40 years, providing services and nurturing the venture capital community. But within 48 hours, panic spread throughout this same community like wildfire - and that was all it took to bring SVB's run to an abrupt end.
I cannot remember a bank coming out of nowhere and failing this fast.
SVB total client funds equate to $342 Billion. (Dollars, not pesos).
Well, the FDIC will insure the SVB depositors like they're supposed to...yeah, all 3 PERCENT of them
The FDIC (Federal Deposit Insurance Corporation) insures bank depositors up to $250,000 of their funds in any federally insured bank.
There's just one small problem:
Only 2.7% of Silicon Valley Bank deposits are less than $250,000.— Genevieve Roch-Decter, CFA (@GRDecter) March 10, 2023
Meaning, 97.3% aren't FDIC insured.
Sorry, it's actually 2.7%. I can be math challenged on occasion.
The FDIC took receivership of the bank. I guess they'll bail everybody out?
But hey, when a bank is about to fail...sell sell sell! Wait, what?
Here's some boilerplate advice on protecting your money:
When a bank is at risk of failing, you should move your money to a different bank as soon as possible. It is important to do this quickly in order to avoid any potential losses due to the failure of the institution. You should also contact your current bank for more information about their financial situation and what their plan is for dealing with this issue. Your deposits may be insured by government programs such as FDIC Insurance, but it’s always better to be safe than sorry when it comes to protecting your hard-earned money.
Hey! It looks like the SVB head guy (Greg Becker) is taking that advice...
NEW: Silicon Valley Bank CEO Greg Becker sold $3.6 million of company stock under a trading plan less than two weeks before the firm disclosed extensive losses that led to its failure https://t.co/3Taaj0HmRe— Bloomberg (@business) March 11, 2023
See? Even the CEO is setting the example of prudent money management. Um...oh...
WHY is this happening?
It would be naive to think any one catalyst is responsible, but you would also be naive not to consider the Jerome Elephant in the room. And he's mighty hungry:
It's wild that even with the Fed pretty much signaling they were going to go on a rate hike orgy for a year, SVB basically bet everything against that possibility— Girth Brooks (@r0wdy_) March 10, 2023
Again, lots of components at play. But how can SVB be this woefully stupid? Or is it greedy?
If the Fed says they're gonna do something, believe them! (it's the President that will BS you)
Hold on to your butts this week...