4 min
The Collapse of SVB Retirement Quick Tips with Ashley
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- Investing
This week’s theme on the Retirement Quick Tips Podcast is: Why Banks Are Going Bust & What To Do About It
Today I’m talking about what happened with Silicon Valley Bank.
Customer base: SVB catered to venture capital, tech startups, and even crypto, all of which have pretty much dried up in the last year, so when customers started taking their money out, there was no fresh capital coming in to offset withdrawals, they were forced to start selling assets to raise the funds to satisfy customer withdrawals. And this is the problem. Silicon Valley Bank had tied up a lot of their assets in treasuries that didn’t mature for several years. After the Fed started aggressively raising rates last year, those treasury bonds on their books started to rack up massive losses - $17 billion by the end of 2022. Then, once they have to sell those treasuries to pay out customer withdrawal requests, the losses are realized, & now they forced to sell their treasury bonds at huge losses, and because of these massive losses, SVB tried to raise additional capital from investors, which they were unable to do.
Then in the 2nd week of March, bank customers started to get really spooked, and more customers because to withdraw their money, creating a death spiral continued to unravel rapidly until collapse and the FDIC had to step in to shut the bank down on Friday, March 10.
https://www.wsj.com/articles/silicon-valley-bank-svb-financial-what-is-happening-299e9b65?mod=markets_major_pos2
Even though SVB is in a niche market that made it especially exposed to this type of situation, the contagion spread to other banks with stocks of several other regional banks tanking in the aftermath.
As of this recording, it’s uncertain how far the contagion will spread, but it seems unlikely to spread far at this point, because on Sunday, March 12th, “Regulators including the Federal Reserve, the Federal Deposit Insurance Corp. and the Treasury Department said the depositors of SVB, which failed last week, would have full access to their money starting Monday. They also said they would protect all the depositors of another bank, Signature Bank, that was forced to close on Sunday.” - https://www.wsj.com/articles/were-banks-just-bailed-out-by-the-government-6b0a582f?mod=markets_major_pos2
That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the Retirement Quick Tips podcast.
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>>> Subscribe on Apple Podcasts: https://apple.co/2DI2LSP
>>> Subscribe on Amazon Alexa: https://amzn.to/2xRKrCs
>>> Visit the podcast page: https://truenorthra.com/podcast/
----------
Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance
This week’s theme on the Retirement Quick Tips Podcast is: Why Banks Are Going Bust & What To Do About It
Today I’m talking about what happened with Silicon Valley Bank.
Customer base: SVB catered to venture capital, tech startups, and even crypto, all of which have pretty much dried up in the last year, so when customers started taking their money out, there was no fresh capital coming in to offset withdrawals, they were forced to start selling assets to raise the funds to satisfy customer withdrawals. And this is the problem. Silicon Valley Bank had tied up a lot of their assets in treasuries that didn’t mature for several years. After the Fed started aggressively raising rates last year, those treasury bonds on their books started to rack up massive losses - $17 billion by the end of 2022. Then, once they have to sell those treasuries to pay out customer withdrawal requests, the losses are realized, & now they forced to sell their treasury bonds at huge losses, and because of these massive losses, SVB tried to raise additional capital from investors, which they were unable to do.
Then in the 2nd week of March, bank customers started to get really spooked, and more customers because to withdraw their money, creating a death spiral continued to unravel rapidly until collapse and the FDIC had to step in to shut the bank down on Friday, March 10.
https://www.wsj.com/articles/silicon-valley-bank-svb-financial-what-is-happening-299e9b65?mod=markets_major_pos2
Even though SVB is in a niche market that made it especially exposed to this type of situation, the contagion spread to other banks with stocks of several other regional banks tanking in the aftermath.
As of this recording, it’s uncertain how far the contagion will spread, but it seems unlikely to spread far at this point, because on Sunday, March 12th, “Regulators including the Federal Reserve, the Federal Deposit Insurance Corp. and the Treasury Department said the depositors of SVB, which failed last week, would have full access to their money starting Monday. They also said they would protect all the depositors of another bank, Signature Bank, that was forced to close on Sunday.” - https://www.wsj.com/articles/were-banks-just-bailed-out-by-the-government-6b0a582f?mod=markets_major_pos2
That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the Retirement Quick Tips podcast.
----------
>>> Subscribe on Apple Podcasts: https://apple.co/2DI2LSP
>>> Subscribe on Amazon Alexa: https://amzn.to/2xRKrCs
>>> Visit the podcast page: https://truenorthra.com/podcast/
----------
Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance
4 min