Until last Friday Silicon Valley Bank was the 16th largest bank in the US,
worth more than $200bn

The California-headquartered organisation grew to become the 16th largest
bank in the US, catering for the financial needs of technology companies
around the world, before a series of ill-fated investment decisions led to
its collapse.

https://www.theguardian.com/business/2023/mar/13/silicon-valley-bank-why-did-it-collapse-and-is-this-the-start-of-a-banking-crisis

What happened to SVB?

As the preferred bank for the tech sector, SVB’s services were in hot
demand throughout the pandemic years.

The initial market shock of Covid-19 in early 2020 quickly gave way to a
golden period for startups and established tech companies, as consumers
spent big on gadgets and digital services.

Many tech companies used SVB to hold the cash they used for payroll and
other business expenses, leading to an influx of deposits. The bank
invested a large portion of the deposits, as banks do.

The seeds of its demise were sown when it invested heavily in long-dated
US government bonds, including those backed by mortgages. These were, for
all intents and purposes, as safe as houses.

But bonds have an inverse relationship with interest rates; when rates
rise, bond prices fall. So when the Federal Reserve started to hike rates
rapidly to combat inflation, SVB’s bond portfolio started to lose
significant value.

If SVB were able to hold those bonds for a number of years until they
mature, then it would receive its capital back. However, as economic
conditions soured over the last year, with tech companies particularly
affected, many of the bank’s customers started drawing on their deposits.

SVB didn’t have enough cash on hand, and so it started selling some of its
bonds at steep losses, spooking investors and customers.

It took just 48 hours between the time it disclosed that it had sold the
assets and its collapse.

What triggered the run on the bank?

Given banks only keep a portion of their assets as cash, they are
susceptible to a rush of demand from customers.

While SVB’s problems stem from its earlier investment decisions, the run
was triggered on 8 March, when it announced a $1.75bn capital raising. It
told investors it needed to plug a hole caused by the sale of its
loss-making bond portfolio.

“Suddenly everyone became alarmed that the bank was short of capital,”
says Fariborz Moshirian, professor at UNSW and director of the Institute
of Global Finance.

Customers were now aware of the deep financial problems at SVB, and
started withdrawing money en masse.

Unlike a retail bank that caters for business and households, SVB’s
clients tended to have much larger accounts. This meant the bank run was
swift.

Two days after it announced it would raise capital, the US$200bn company
collapsed, marking the largest bank failure in the US since the global
financial crisis.

Is this the start of a banking crisis?

Immediate concerns of widespread contagion have been contained by the US
government’s quick response in guaranteeing all deposits of the banks
customers.

Financial futures, which allow investors to speculate on future price
movements, rallied for the US technology sector in response to the
guarantees.

There had been concerns that if that guarantee wasn’t implemented, SVB
account holders would not have been able to pay employees, sending ripples
through the economy.

“In terms of stability, they’ve avoided supply chain consequences,” says
Moshirian.

Governments and regulators around the world, including in the UK and
Australia, are checking for SVB exposure in their corporate and banking
sectors.

The longer term questions is whether SVB’s vulnerability to rising
interest rates is paralleled in other banks through an over-exposure to
falling bond prices.

While Moshirian says he doesn’t think the banking system is about to
unravel, he notes that people also initially felt that the sub-prime
mortgage crisis was contained. That went on to spark the global financial
crisis.

***

### - other banks now seriously affected:

"San Francisco’s First Republic shares lost 65% in premarket trading
Monday after declining 33% last week. PacWest Bancorp dropped 24%, and
Western Alliance Bancorp lost 61% in the premarket. Zions Bancorporation
shed 21%, while KeyCorp fell 12%. Bank of America lost 4% in premarket
trading, while Charles Schwab tumbled 8% early Monday."

https://www.cnbc.com/2023/03/13/first-republic-drops-bank-stocks-decline..html

well, here we go folks: banks, and then whole economies going down the
drain as the west struggles to PAY for this war??

plus we've seen/been exposed to this banking-shit/scam before in 2008
wherein 'everybody' around the 'globe' lost money! everyone! followed by
'years' of so-called "austerity" as the debt was paid off!

dunno 'bout you guys, but am removing ALL my savings in 'cash' TODAY!

while it's still possible!

(Ps. couldn't help thinking/observing that biden looked particularly frail
during his national address re SVB? more than usual anyway...)