THE CANARY IN THE SILICON VALLEY

Written by on March 13, 2023

THE CANARY IN THE SILICON VALLEY

Shared By Peter Boykin – American Political Commentator / Citizen Journalist

THE CANARY IN THE SILICON VALLEY

 

Silicon Valley Bank (SVB) collapsed, becoming the second-largest bank collapse in U.S. history and stoking fears of a domino effect that could lead to a financial crisis.

What is SVB? It is [was] the 16th largest bank in the United States and essentially the go-to bank for tech start-ups, holding over $200 billion in assets. A large portion of those assets came in 2021 when the bank grew 86%.

Etsy, Coinbase, Vimeo, Vox, Roku, and many more companies you’ve heard of have deposits in SVB.

What went wrong? SVB invested a large portion of those assets into an asset class called Mortgage Backed Securities (MBS).

MBS allows investors to buy a portion of a pool of mortgages, which pays them based on the payments made by homeowners on their mortgages.

SVB bought $80 billion in MBS, which at the time was giving an average yield of 1.5%

When interest rates were near-zero, this was a solid investment. But when inflation started running out of control in the U.S., the Federal Reserve was forced to raise interest rates.

As interest rates rose, the value of SVB’s MBS holding began to fall.

Exacerbating the issue: Around the same time, the tech industry started to decline. So all the start-up investments that were getting deposited into SVB started to dry up too.

A run on the bank: SVB decided it would sell some of its stock (at a loss) so it would have more liquid cash on hand. This terrified investors and companies who banked with them. Investors and depositors ran to pull their money out of SVB.

Closed doors: The California Department of Financial Protection & Innovation shut down SVB and handed it over to the Federal Deposit Insurance Corporation (FDIC).

A second domino falls: If SVB was the first domino to fall into a potential financial crisis, Signature Bank became the second domino, as federal regulators shut down the New York-based bank, which caters to the crypto industry.

Canary in the coal line: There are fears that this all could be leading to a financial crisis, similar to 2008. The San Francisco-based First Republic bank led a decline in shares with premarket trading down 65% after losing 33% last week.

Bail out? Treasury Secretary Janet Yellen told CBS News that the government will not be “bailing out” SVB bank.

But several hours later…

The federal government stepped in: The FDIC, along with the Treasury Department and Federal Reserve made a joint announcement, stating:

“Depositors will have access to all of their money starting Monday, March 13, 2023.”

The Federal Reserve was establishing a new “Bank Term Funding Program” which will offer one-year loans to banks.

The Treasury will offer $25 billion from its “exchange-stabilization fund” to backstop those loans.

A senior Treasury official said this was not a bailout because stock and bondholders for SVB and Signature won’t be protected. Time will tell whether or not this is a bailout…

What to look out for next: There is already a massive push for a more formal Congressionally-approved bailout package. MSNBC’s Chris Hayes [of all people] put it well:

“These billionaire [investors] started a bank run on their own bank and then *immediately* pivoted to screaming for a government backstop. Incredible stuff.”

Biden will speak about this.

Let’s see what direction he takes…

 

[Source: WSJ, CNBC, CNBC, WSJ]

https://www.wsj.com/articles/svb-financial-pulls-capital-raise-explores-alternatives-including-possible-sale-sources-say-11de7522

 

https://www.cnbc.com/2023/03/12/regulators-close-new-yorks-signature-bank-citing-systemic-risk.html

 

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

 

https://www.wsj.com/articles/federal-reserve-rolls-out-emergency-measures-to-prevent-banking-crisis-ba4d7f98

 

Like what you see?

#GoRight with Peter Boykin

https://PeterBoykin.com

Follow Telegram

https://T.me/RealPeterBoykin

https://T.me/GoRightNews

 

Rumble

https://Rumble.com/GoRightNews

 

Tags:

 

#ncpol #NCpolitics #ncltgovernor #ncltgov #LtGovernor #Boykin4NC #BoykinFor2024 #BoykinForNC

#Android #Apple #Trump #trumptrain #Trump2024 #TRUMP2024ToSaveAmerica #2024Election #election #election2023 #electionchallenge #ElectionIntegrity #ElectionsMatter #ElectionCommission #GoRightNews #GaysForTrump #tuesday #GoRight #ihatemondays #applemusic #applewatch #applepodcasts #ApplePay #appleiphone #bidenisnotmypresident #BIDENSAMERICA #BidenBorderCrisis #Bidenflation #Biden #BidenCrimeFamily #northcarolina #government #Governor #politics #political #politicians #politicalchallenge #politicalmeme

 

Shared by

#GoRightNews https://GoRightNews.com

Each Month GoRightNews Spends Hundreds of Dollars and Hours To Run This Site and Podcast, with no sponsors or ads this comes out of our pockets, if you like what you see consider donating to the podcast. Thanks!

Support The Podcast


#GoRight with Peter R Boykin

#GoRightNews

Donate To Support GoRightNews

GoRightNews.com

GoRightNews's Twitter

Go Right News Facebook


Join Peter Boykin on Telegram

@RealPeterBoykin on Telegram


Join Peter Boykin on Facebook

Peter Boykin's Facebook


Join Peter Boykin on GAB

Peter Boykin's GAB


Support The Podcast and Website
To Donate to the Podcast (NOT THE CAMPAIGN)

Support The Podcast





[There are no radio stations in the database]