Update: SVB deposits will be available Monday, according to regulators. Signature Bank has also now been taken over by regulators, the second FDIC receivership in three days
I thought this bank failure was an isolated event. You care to elaborate? Also, please pin this comment so we can see replies at the top of the comment section.
@@MrSupernova111 whoops, thought it was pinned, my bad. Signature was another crypto-focused bank, so it’s been facing the same pressures as Silvergate (a run on crypto exchanges = a run on their deposits). I’m not aware of another big regional crypto-focused bank, but this is still to a large degree a sector-dependant issue, and larger banks with sector diversity are unlikely to face similar pressure. With how quickly things developed, however, it’s impossible to predict what will happen from here.
@@ThePlainBagel . I think you owe it to your subscribers to talk about the underlying issues causing these bank failures: higher interest rates. Many depositors are withdrawing money to invest in CDs and treasurys while the cost of capital for bank rises. In the meantime, the Fed plans to continue raising rates and HTM holdings in balance sheets continue to depreciate. This is a systemic issue. SVB and SBNY are only the first affected (the weakest links out of the bunch). The US government felt the problem was severe enough to bail out these regional banks and find funding to bail out future banks. I'm not asking for predictions. Just a complete and honest picture.
@@ThePlainBagel, I don't see how this can _not_ have spillover into the rest of the banking system. It's not like the crypto banks exist in a vacuum, is it? Sooner or later it's going to hit other banks, no? I'm surely no expert on the global banking system or even knowledgeable but it just seems inevitable that it won't be isolated. How many average people have now heard this story? How many of them are going to head to the bank in the morning and withdraw most of their money? If this does spread do you really think the FDIC is going to be able to cover every depositor in even a single nationwide bank? It seems highly unlikely.
@@MrSupernova111 I think you should watch the video again. Richard mentioned interest rates and treasury bonds around 4:20 in the video. I would hope anyone explaining this current issue at this time (banking crisis???) would do so with a level head - even if they THOUGHT this was a systemic issue - would advise against bank runs. After all, the companies did have the money. It was only the panic withdrawals that made the banks no longer liquid. These banks should have been paying attention to their treasury bonds when interest rates went up. I totally agree that this might be a systemic issue. However, if the general public keeps a level head there's no reason to suggest any legit regional bank is at risk. With nearly all being FDIC insured, most of the public will be totally fine even if one of these banks falls. SVB is an outlier in many respects obviously due to its region.
Wondering if they've figured out what's wrong with their favorite buzzword: disruption. I doubt it, I live here with VC idiots, and it's interesting watching their own psychology problem trip them up like this. I think it just speaks to how anxious and terrified they are.
It was a very bad decision to remove the Glass-Steagall Act in the late 1990s, which led to the spectacular failure of huge banks during the financial crisis of 2007-2008. To prevent another disaster, Dodd-Frank and this statute both need to be reestablished right away. Else what happened with the Dollar recently is only the beginning of what will happen if nothing is done to address the current situation.
I believe SVB was making an effort to reorganize their bond portfolio. Yes, they would lose money if they sold their low-yielding bonds. But, they were trying to make up for it by repurchasing bonds on the open market at the higher interest rate.
@thelastunicorn1987 I've been able to scale from $50K to $189k in this red season because my Financial Advisor figured out Defensive strategies which help portfolios be less vulnerable to market downturns.
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@@Curbalnk Finding financial advisors like KAITLIN ROSE STERNBERG who can assist you shape your portfolio would be a very creative option. There will be difficult times ahead, and prudent personal money management will be essential to navigating them.
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Dude has a real job so he's not dependent upon clicks. If anything it incentivizes him not be a click bait farmer because this very public content reflects on his ability to do his real job. YT is a poison pill and he knows it.
I was listening to the all in podcast and they made the point that the real tragedy is not that investors are losing money - it’s that small start ups and businesses, that were managing their money responsibly up until yesterday, suddenly have their accounts frozen. Suddenly all these businesses cannot pay their employees, cannot pay their suppliers and contractors, all because they had a bank account with the wrong bank. That means that there will be a lot of tech workers who suddenly will not be getting paid this month, through no fault of their own, nor the company they work for. And if you’re not getting paid, since people won’t be able to afford their rent or mortgage, etc Edit: Update - the Fed is bailing out all the depositors! So the startups will get the money in their bank accounts back
Thank you for your video . The market is going down and a lot of people lost huge sums already . I Will advice traders especially newbies to have orientation of trading before they get involved in it because the Crypto market has been unstable , forget predictions and start making good profit now because future valuations are all guesses . I must say trading offers more benefits than just holding and i have made over 7 btc from Investing with Christina Ruth ubl insights and signals in less than 3 weeks . I believe we are in the spring phase ..
One need to have source of income as well as secure and have a profitable investment future.diversified investment crypto if the financial trading market is needed to survive
@@skrejaul8372 I've traded with a lot of individuals but I have never come across anyone as good as CHRISTINARUTH just by applying her new strategies I now trade independently. She's the best I'd advise any novice investing to go and trade with.
I currently started trading with her and my results have been all profits . A lot of people out there don't really know how to trade , they need guidance , but don't know how to go about It
Agreed, but SBVs clients were businesses, and SBV also offered competitive rates to their commercial depositors, otherwise those businesses would have transferred their deposits elsewhere. This gave SBV a further problem, needing to sell off assets and borrow in order to keep funding the attractive rates they were paying their depositors..... For my part, this mainly sits with directors and risk managers of SBV, but also the risk managers of the depositors and investors.
wow you just caught on TOO BIG TO FAIL. remember 2008? they passed laws to stop this from happening again. and trump cancelling some of them laws, and why is it happening again. when laws are changed back to the good old ways.
I appreciate an adult review of these bank failures without the “click bait” nonsense driven by RUclips profitability algorithms! Grounded, sensible, even review of a concerning financial matter. Thank you.
Perhaps, you shouldn't be such aloser who clicks on everything in sight. Blaming 'RUclips profitability algorithms' is just a fancy way of calling yourself amoron.
What's so strange about SVB is how _fast_ things went from "Business as Usual" to "Bank Run". In the 2008 GFC, companies that were going down were telegraphed by the stock market, sometimes for months in advance. This thing imploded in 48hrs.. I think the speed that this happened is what is unnerving people. And the bank stocks that have fallen hard in the past day or two could make depositers pull their money in a self-reinforcing cycle.
It's a bit like the movie Margin Call, where the CEO character is alerted to the massive exposure and says we have 3 ways to win on a deal: be first, be smarter, or cheat. He says I don't cheat, but we can be first. Sell everything. He who panics first, panics best, in this case. FDIC insurance is really meant for individuals, not businesses, so most of the customers will be facing serious losses. Fun fact: there is probably only 3% cash floating around for all of the bank deposits there are. So if things get weird, you have to end up being in the first 3% to demand money to get the full amount.
Essentially the bank didn't shut it self down, the government swooped in and try to contain it because it had no confidence that svb is going to have enough in it to cover the hole created by selling the treasure bond confirming their losses, if banks are allowed to hold the line like Michael B they would in this case, but that's not legal for banks. Who's to blame? Rising inflation, so yeah Joe Biden and the left wing in house sponsoring someone else's war in the 3 digital billions, but no plan for inflation.
@@500dollarjapanesetoaster8 i think the 3% cash flow number is like 10 years old or more. i doubt we have even 1% in cash, rather go into the 0,1% region
it wasnt people doing bank runs tho...thats not why this is happening...bank runs are a symptom of the problem... the problem is greed and hubris....all the ceos took their money out weeks before this so its not the bank runs doing this...thats the narrative of the far left....reality shows otherwise we had this problem in 1929 and it surprises me nobody talks about 1929 right now...they only bring up 08 which wasnt that far back...this is more akin to 29 than 08 were going to see bread lines and soup lines... if you look at the bank sell off its all 60 70 80 in the red..monday wil be a dark dark blood bath of sell offs...its going to be nasty af...
They all start the same, because nobody is ever held responsible. It makes no sense for them to follow the law, cause that makes them less money and they are always bailed out anyway. In 12 years we will be saying the same thing, and so many people will be completely stunned that it happened.
@Studeb What? These banks are taken over by the FDIC, and all their assets are sold off to pay back their customers. The stockholders lose all their money, and all employees lose their jobs. I get that this system isn't perfect, but the CEO and stockholders are NOT getting a handout from the government.
Success depend on the action or step you take to achieve it. Show me a man who has no investments I will tell you how soon he will go broke. Investment is building a safe Heaven for the future....
@@johnnymaxwell8284 I agree with you friend investing is the key to maintaining your financial longevity and not just investment , but an investment with guaranteed profitability..
OVER 586 BANKS CLOSED IN THE USA THIS YEAR. NOW THIS. AND BANK OF AMERICA AND WELLS FARGO. PEOPLE ARE SHOWING EMPTY ACCOUNTS. DIRECT DEPOSIT FOF PAYDAY. ACCOUNTS STILL EMPTY!!! WHILE THEY SEND HUNDREADS OF BILLIONS TO UKRAINES MILITARY, THAT DOES NOT HAVE ONE. ALL OUR MILITARY AMMO. WEAPONS. TO ???? AND ITS NOT IN THE MILITARY HANDS OF USA. AND THIS CH. IS SAYING WE ARE OK!!! OMG. REALLY??!!! WILL NOT BE BACK TO THIS CH. VERY BAD INFO
What happens now? Well, for the people that led these institutions to collapse, I forecast large bonuses and probably another seven to eight figure position on another board.
Considering the massive downsizing across the tech sector in the past 3 months it makes sense that a bank who's entire pool of funding is in tech would experience a massive bank run.
If you think this is limited to niche techy startups which seems to be the prevailing narrative that is being put out there regarding this, you will have a major surprise very soon ;)
@Vincent Wisehoon but the diminishing returns for tech started way before this bear market. Those startups getting a ton of money at the beginning was due to easy money fiscal policy more than tech still having a lot to offer. People and investors had more money than they knew what to do with, so they invested it all in the idea of the next big thing. Rinse and repeat. Spigot gets turned off, the industry that naturally got the most speculative money also is the first to have it pulled. Straightforward
@Vincent Wisehoon I'm talking about people seeing too big to fail banks experiencing bank runs. This is not some tech bubble backlash more than it is actually the final death throes of fractional reserve banking. Do you seriously think that SVB's monetary management was any more risky than say Bank of America, or (insert any big name American bank here)? They're all over leveraged, and trying to use the same tricks to be able to keep paying their creditors, except with the rate hikes, it's all finally coming to a head. This is not about big tech. This is a banking issue. Last time I checked, there's no difference between Warren Buffett depositing 500 million in a bank or some startup. People make it sound as if having banking clients that are silicon valley "startups" suddenly makes the banking model riskier. That's completely false, same old bank takes your deposits then loans that out and borrows against it.
@@spechund7109 tech in general is screwed. Companies, in a true capitalist soceity, cannot exist without making money. Sillicon valley is a system that needs to rot and die. I feel TERRIBLE for the working class who pray that a system built off lies can sustain them, and wish we had enough blue collar jobs, and other non-tech jobs they had skills in to collect each and every one of them and provide a living for them. Though sadily we've become too married to profitless shells of companies which are basiclally a bunch of collage kids going "wouldn't it be cool if we stuck everyones brains into a headset and called it VR. Shit will never be profitable, but damn it would be cool." they hype it up to a bunch of VC firms they go "huh that could posisbly work, here's some cash" and all these people get hired while the initial founder "makes their exit" as soon as someone like facebook buys it up and goes "ok look, we know we haven't turned a profit in the entire lifespan of the newest generation BUUUUUUUT this time it's legit. I hope the scammers at the top burn, I hope the working class (this includes white collar people who are at say 80k a year with kids and aren't actively involved in the scam) can find all of the success in another field. But my nihilist side knws it will be more of the same. The tax payers getting fucked, the workers getting fired, and no one seeing a DAY inside a non-gucci jail for their crimes. gotta love oligarchies
I've been following this story closely and researching since it first popped up before the bank run. This is one of the best pieces I've seen to date. Appreciate the level headed view.
None of these banks invested money into crypto, they took deposits from companies whose cashflow correlated with low interest rate (ie startups or crypto companies) and invested a lot of it into assets (say 5yr govt bonds) whose market value drops when interest rates rise. The government guarantees you’ll get the money back after 5yrs, but if someone gave you $6bn in deposits and you put $5bn of it into these bonds, you can’t wait 5 years and have to sell them at a loss if people start withdrawing more than $1bn. This is the same as if you took most of your savings and put it into a 3-year savings account and suddenly lost your job two years in. Yeah you’ll get the money back in a year but that does not help you if you run out of money from your checking account - you’re still insolvent because you won’t be able to pay me if you owe me money.
@@newagain9964 I think what you mean is 15% of the liabilities were insured. That would mean that of the money the depositors kept in the bank, the government’s insurance scheme for depositors would still leave 85% of the money unavailable. This is the same as with any other bank, if you hold money in a bank account, and that bank becomes insolvent, the FDIC will make sure you’ll be able to withdraw up to $250k no matter what, even if the bank blew all your money on hookers the government will still pay out of pocket up to $250k of your balance that you can withdraw. This is a good thing because the presence of this insurance makes it incredibly unlikely a bank run can happen. In most cases most people have less than that amount with a bank, meaning rumors of insolvency will not cause a stampede to withdraw money or lose it all, which is what ultimately causes the run to begin with. In this case most of the clients had far more than $250k in the bank, meaning this help will only recover ~15% of the money people put into the bank. Mind you this is not a bank bailout, if you had money invested in shares of SVB or held its bonds, you are going to lose your money in all likelihood. This is about depositors, ie companies banking with SVB who held money there.
Thank you for explaining what happened without the sensationalism that is plaguing this topic. Its so important to have a trustworthy and knowledgable source
SVB probably brought bonds of these risky startups and loaned them money to pay back the bonds. These startups are not profitable and revenue drying up, they are going back to SVB for more cash or loans/bonds. This create a vicious cycle of borrower/lender sell off. Top management of SVB knew this months ago and tried to use the worthless bonds or notes as collateral. No other banks want a piece of these junk loans or bonds. The Fed is trying to get rid of their own junk bonds. This is just part of the zombie companies going BK due to very low rates the past 10 years.
it wasnt people doing bank runs tho...thats not why this is happening...bank runs are a symptom of the problem... the problem is greed and hubris....all the ceos took their money out weeks before this so its not the bank runs doing this...thats the narrative of the far left....reality shows otherwise we had this problem in 1929 and it surprises me nobody talks about 1929 right now...they only bring up 08 which wasnt that far back...this is more akin to 29 than 08 were going to see bread lines and soup lines... if you look at the bank sell off its all 60 70 80 in the red..monday wil be a dark dark blood bath of sell offs...its going to be nasty af...!!!!
I recommend the Financial Times or the Wall Street Journal unless, of course, you mean that you want to be hand fed information instead of seeking it on your own.
SVB was “not large enough to fail”. Back during the previous financial crisis, the USA bailed out numbers us banks which would have failed. So, historically, SVB is one of the “largest” banks that failed, but it could have been bailed out like other banks. SVB has been taken over by FDIC, and *deposits* are still insured.
I think they looked at the industries of their clients and thought that was diversified. That they were almost all tied to the start-up VC ecosystem never crossed their minds.
With SVB, I was envisioning normal people doing a run on the bank, but then I realised it was *investors* withdrawing billions. Got to love them. Edit: I wonder how many bonuses the bank executives are still going to get despite running the bank into the ground
You should be asking how many people will be fired because their firms lost most of their cash held at SVB. Many of those firms won't be able to make payroll. But I supposed you don't care about that.
@@MrSupernova111 No, you dont get it. This NEEDS to happen. People need to learn that banks are NOT to big to fail, and they should be FAR more scrutinous with who they park their money with, how exposed they are, and what risks they carry. Its about damn time people stop treating capitalism and the stock exchange like its the goddamn casino.
In this unstable environment, one must ensure their wealth is preserved. The best way to protect your hard-earned cash, from the ravages of the printing press is to buy cryp... LOL! Just kidding, anything but that.
Bad loans and investments? Bad loans to whom? It`s a common rule that banks are "giving" away loans when it`s over..... when the insiders of the bank know it`s done. There is almost always some loans that will not stand the light of truth and investigation. But that`s eazy to fix. The loan taker will by all clams for next to nothing (5% - 10%) and the case is closed. Go back about two years and then you will find some "crazy" loans that is not paid back and will not be either. But no one will see it because the loan taker will close all possibility about seeing into it by buying the clams for as little as nothing. Nice friends!!
I think this is one of the major problems with this world along with no accountability. If people are given golden parachutes then they won't learn from their mistakes. I believe a lot more is to come due to the great can kick of 2008.
@@Palo-jm7xc honestly it's not as if things were much different before the intense financialization of the world economy. financial crises were more frequent and brutal pre-20th century. there's no such thing as a capitalist economy that doesn't go through cyclical crises
At 200 billion in assets it’s a very big bank and if they can’t pay the depositors it will be a huge hit to US financial system because people will lose trust in the system. It will cause more bank runs and then we will have a real financial crisis like 1929.
Holy crap, I remember buying Silvergate in 2020 and sold it at $120. I felt like an idiot for selling too early after seeing it go to $200 but I'm glad I stayed away from it after watching it implode the past twelve months. I would imagine a lot of HODLers got burnt.
Dear Patrick, I know nothing about high finance--but I have money in banks and I know that when people get really scared, it causes trouble. Your video helped bring the nuance, and more "plain and simple" information to help people like me. Blessings to you, my friend.
The people trying to calm things down by saying more bank fails are unlikely are the same ones that said SVB was OK not too long ago. Clown Crammer from CNBC just weeks ago emphatically stated SVB was not a risk.....he also said the same of Bears Stearns just days before it folded....when will Crammer get sued to the poor house and prevented from ruining people's lives?
it wasnt people doing bank runs tho...thats not why this is happening...bank runs are a symptom of the problem... the problem is greed and hubris....all the ceos took their money out weeks before this so its not the bank runs doing this...thats the narrative of the far left....reality shows otherwise we had this problem in 1929 and it surprises me nobody talks about 1929 right now...they only bring up 08 which wasnt that far back...this is more akin to 29 than 08 were going to see bread lines and soup lines... if you look at the bank sell off its all 60 70 80 in the red..monday wil be a dark dark blood bath of sell offs...its going to be nasty af.........
I think not. He's juwish. They're not exactly famous for trustworthyness. He also blamed the failiure of a bank on people collecting their money back. And not on embezzlement and gambling away deposits as if the bank is a ponzi.
Ironic how a Swedish company called Alecta (who manage occupational pensions) actually shifted investment strategy relatively recently into focusing more on American banking which included, unfortunately, SVB. Apparently, individual people will barely notice a difference, if any at all on their pensions. But this highlights how remarkably large the reach the effects of these kinds of events has. There’s a dangerous amount of trust in these institutions to act responsibly and intelligently.
It is a very funny argument from investment bankers that when they "earn" money, they need bonuses. And when they perform "above average" on shrinking market, they need bonuses. And when they screw up "it makes a barely noticeable difference". I mean, to some extend, you need risk diversification and risk diversification naturally means taking on risks, but... how can investment bankers "earn" an above average salary, then bonuses on top and then claim "responsibility" while at the same time claiming "market forces" being in control of every down turn (ignoring the very fact that collectively, "investment bankers" are "the market forces")?
It seems like the root of the problem was SVB’s failure to hedge interest rate risks with duration. It makes me wonder if other banks also messed up their durations too.
Absolutely. I wonder what their risk management was doing ALL THROUGH 2022, were they on holiday. The central banks actually reacted pretty slow first, to the inflation. If you held bonds, you could see this coming from a mile away. They could have hedged or diversified. And shifted to more class A liquidity assets, as they were already losing lots of deposits during 2022 as the balance sheet in the video showed. Running out of cash and class a in a bank run is no shame, but not preparing, is. But I guess, hedging, diversifying, restructuring the portfolio costs money and takes the cherry off the top of your profitability and off your bonuses too. So you just go on, drive it into the ground and scramble to get your bonus, hours before getting shut down. Perfectly executed. A beautiful lecture in American Manager Capitalism.
@@catriona_drummond No doubt that SVB's top execs dropped the ball on risk management. The top execs ignored warnings from employees to buy shorter term bonds, and instead doubled-down on high yielding assets. And SVB's CEO, Greg Becker, lobbied Congress back in 2018 to exempt banks like his from Dodd-Frank regulations, saying: “Without such changes, SVB likely will need to divert significant resources from providing financing to job-creating companies in the innovation economy to complying with enhanced prudential standards and other requirements...Given the low risk profile of our activities and business model, such a result would stifle our ability to provide credit to our clients without any meaningful corresponding reduction in risk.”
Let this be a lesson that these "people" aren't financial geniuses. They just got to their position by bribes, nepotism, and connections. And then virtue signal about how smart they are for pulling their own bootstraps while the rest of us work.
@Catriona I am guessing they were just way too specialized, and their whole business model is specialization. It's too hard for them to specialize. So the fact that they failed can be argued as simply capitalism at work.
Not necessary the duration. They could have done enough receive float to keep the book short, but still won’t stop deposit running off. Liquidity issue, given concentrated customer base. Things went wrong 3 years ago when surge deposit coming in, and they decided to invest in bond market.
It must be extremely horrible to have money sometimes for a lifetime in a bank and simply lose it. I hope that all people manage to get their money back, and that this doesn't spread to other banks.
@@Morcap Complete fearmongering nonsense... "All the banks" aren't involved in crypto, and "all the banks" aren't servicing venture capitalists. The average person hold *FAR* less than $250k in their account, which is what the FDIC *actually* insures. Both of these banks have unwound in more-or-less the honorable way. There does not appear to be any fraud at this point. Businesses fail, and neither of these banks were entwined so deep into the US economy their loss will affect much more than a quarter's balance sheet.
@@ultimaIXultima The reason SVB collapsed is a systemic failure and not because some investment in some crypto Ponzi or some bad loaning practice. It was because a critical mass of depositors just purely asked for their deposits back. And that is every single bank Achille's. Nothing can save a bank - anywhere in the world - if a number of people above bank' cash capacity will withdraw at the same time.
REMINDER: On March 26th, 2020 the Federal Reserve FOMC's change of bringing the bank reserve requirements from 10% to 0% became effective. This means that banks could and may loan 100% of deposits and keep $0 in the vault leaving them highly exposed to a bank run. This is how a significant amount of money is entered into supply, through fractional reserve banking... the entire banking system is VERY fragile. Over $250k? You're an uninsured lender not a depositor
This conflates two concepts (reserves vs insurance) and misses an important piece of context. The Reserve also went to an "abundant reserve" model while also requiring the banks to "show their work" on the loans. There is fragility, as there will be in a highly developed financial system, but you are choosing fear rather than understanding.
@@onothankyou We understand that a bank will have a natural tendency to loan out a larger ratio of deposits, if allowed, in order to make more money, as they are a for profit business. It would be naïve to trust lenders to act in good faith always if you look at history, especially GFC (The "show your work" and "Oh please act in good faith" is worthless unless regular audits are expected and penalties are severe). FDIC insurance exists but doesn't not protect >$250k in deposits meaning they are exposed. We are seeing massive transfers (Large account holders) to the big banks as we speak, "just in case", which is a bank run of some magnitude. Will it get bad enough to implode? Probably not as the Fed and Gov will always step in to save their own
The amount of people comparing it to 2008 makes me question whether the public has already forgotten what even happened in 2008 and what were the reasons for it. Such an amount of worry just for the sake of being worried.
@@cursethesemetalhans And in 2008, everyone seems to forget that banks giving mortgages to ppl that couldn’t pay, KNOWING they were going to default, then bundled the bad loans and sold them to unknowing institutions. It was a scam from criminal lenders from the beginning.
I feel the average person has no real clue on what is going on, or what went on. They just see news clips and take it as the gospel, instead of actually reading about why. Things are more knee jerk than ever, and that's really not helpful.
PB - some corrections. SVB was not shut down by the FDIC. The bank was shut down by the California Bank regulatory which named the FDIC as receiver. Plus for you a deeper dive. Basically for all of 2022, no chief risk officer. Think about that for a bank with over a 100 billion in assets. Next, the "run" as you indicated was entirely corporate. When the bank announced that it had sold $5 bb in treasuries and lost $1.8 bb, corporate customers went back and looked at their 10K and noticed that the held to maturity portfolio of R/C MBS and treasuries had an unrealized loss in excess of 17 bb. THeir NBV was only $16 bb. They than ran for the exits, all at ounce. However, they had plenty of risk officers around the world it would seem really concerned about things like equity in meetings and global warming, but not soo concerned about doing any hedging of their 100 billion plus portfolio. Tha's right, they were completely unhedged. Again, no chief risk officer in 2022. They had more important things to do.
Thanks for putting this into perspective. I'm in school for finance and people are always looking to say the next collapse is coming. Love your videos!!!
The London branch has also collapsed, and that affects some of the companies we manage. They are certainly not the second largest bank to collapse in the UK, that I think was Halifax Bank of Scotland, Royal Bank of Scotland was definitely the largest in the UK, and indeed company of any kind in the world to collapse.
Yes but all our banks (except perhaps Barclays) are still technically bankrupt, but are all fortunately backed by HM Government and our money tree, so none will be allowed to ask for receivership.
@@drpeterc12 The Financial Services and Markets Bill started in the HoC and now at the Committee Stage in the HoL is worth a look. HM Government has never been tested, to date, in compensating individual personal deposits to the current amount of £85,000. Let's hope you are right that sufficient funds are directed to such individuals who do not hold private banking accounts whom, I'm sure would be first in the queue to be protected.
Excellent summary Richard, one minor point, silicone is the soft rubber material used in sealants and kitchen utensils while silicon is used for semiconductors
I caught that one as well... quite the pet peeve of mine. Also, silicon is an element. I think the only one that irks me more is "duel-core", though at least now that multi-core CPU's are the mainstream that's become less frequent.
Thanks Richard - well done! I appreciate 'less fluff' in order to get this produced quickly. I am not in the finance industry nor am I a Tech Start-up so this is just 'general information' to me. This is developing so fast - and has such powerful implications for the future of MANY financial organizations - that I thought there was only one bank that failed - names too close and SO FAST! Thank you!
Oh goody - I've been looking forward to the Plain Bagel's take on all this... ...yup, that was great! I strongly suspected the breathless "holy flippity flip flop flap" (yes, you know who you are) guys were getting out in front of their skis on this.
This reminds me of 2008. We were invested with Merrill Lynch, Bank of America and AIG. Long story short. The financial advisers we talked to at these companies had no idea what was coming down on us. I had to explain to them what a "SWAP" is. ML got caught by abuses of speculators in their London office. It went down fast. This feels similar.
Yeah, people forget that 2008 started with Bear Stearns and other niche institutions. While it could stay contained, because of credit tightening overall I'd be surprised if it did. We'll see in the Fall.
In my experience, financial advisors are undereducated fools who are programmed to sell products. The tragedy is that their superiors in the C Suite aren't much better.
@@yuglesstube This is true to a point. I am a specialist in robotics and automation. It takes all I got to keep up. Knowing various financial instruments is beyond my skills and I need to get advise where I can. But, you are correct except I know less.
This was video outdated within 24 hours. We are now up to 3 banks closed in 5 days. Signature Bank, also closed by regulators, had over $110 Billion in assets which is the third largest bank closure in history.
If we punish CEO's incompetence, it will kill every innovation. Failed innovation attempt is hard to distinguish from incompetence. Things are not that simple bro.
It was a bank run... not from a greedy ceo or whatever you are saying. Also if their salary is 7 million its not like it would have made a difference if their salary was like 70000$ instead.
CFO of silicon valley was upper management at Lehman Brothers. You can't make a script for a movie with more incompetent players than what life gives us. I've never fully believed in bitcoin...but 1 btc = 1 btc
Also, you said that these banks serve Silicon Valley startups. Those startups can be quite susceptible to failure even without external factors like this… We may see a lot of startup failures out of this
No, we don't need banking like this at all. That fear was put in place by the very reptiles (bankers) that want you to think that and act like a scared little creepy hermit with your less than a year shelve life stock pile of crappy processed foods that will likely spoil months prior to the posted expiration date anyway. Keep you scared and stupid. We certainly don't need banks regulating themselves. That's bat shit; all one has to do is look at the last 40 years and look around at the majority of American's income... 80% have only had their salaries decline in real terms... almost in nominal terms too.
It’s unfortunate, but there were so many red flags prior to the collapse of SVB. #1, the bank took its tens of billions of customer deposits and invested heavily in bonds with sizable interest-rate risk. Worse, it was overloaded on long-duration bonds with more than 10 years to maturity, leading to a mismatch of assets and liability. Not quite sure if this is normal for most banks, but this is definitely a red flag. #2, SVB did employ a Chief Administrative Officer, Joseph Gentile, who had been with the company since 2007. His previous employer? Lehman Brothers! 🤦🏾♂️ Perhaps he just found himself in the wrong place at the wrong time. Twice… in a row though?! This could be a coincidence. 🤷🏾♂️
Quick question on FDIC insurance: Can a person/business have 2 or more accounts with the same bank in order to have more than $250,000 insured, or is it a maximum of $250,000 per bank? If it is per account like the FDIC webpage implies, wouldn't full insurance only be a matter of the time spent to create and manage multiple accounts?
It's $250k per account type. A checking account is one account type, with a savings account being another account type. So having a checking account and a savings account would provide up to $500k in insured deposits, but 2 checking accounts would only be $250k. However, the insurance is on a per bank basis. If you have both a checking and savings account at 5 banks, that's $2.5 million in insured funds. I used to invest with Betterment and their cash sweep program would deposit your savings into checking accounts at multiple banks for up to $1 million in FDIC insured deposits. Why there isn't a fintech company that networks together 100 banks to offer FDIC insurance of $25 million per client, I don't know.
My girlfriend’s brother in law was a part of the tech layoffs at Cap One’s West Creek Campus recently. It’s wild seeing the tech world in a downward spiral.
You nailed it Bagel - I work at SVB and my #1 focus now is to help my clients land on their feet. I can say that my own loan book was of utmost quality
The risk for Silicon Valley Bank is the potential “fake-it-till-you-make-it” accounting used by many tech startups. I don’t know how aggressively the bank’s auditors reviewed the books of the startups before approving the loans.
The issue with SVB wasn't VC loans, it was VC depositors, who proceeded to bank run them. Also, they invested large amount is very long-durariom debt, which got his hard by high interest rates.
It's wonderful that no youtubers, no fundamental anyalyts were able to predict the bank run. Says something that how much all these people are aware of it. It's so so easy to start making videos and do explanations after the fact.
One of the ways from here for SVB is to have some large bank to step in, acquire SVB at peanuts and provide customers the full confidence. Big Bank could halt customer withdrawals by imposing daily limits for certain time periods and meanwhile slowly offloading bonds. Loss made in bonds would be the cost of acquisition for the parent bank.
Thanks for the info Richard. Although one thing that could have been mentioned that could make this video more useful is about exposures that financial institutions hold on U.S gov bond. It's an asset that most financial institutions hold certain amount for 'risk free' return. There may be more financial institutions with unrealized loss on gov bond that can be later revealed, which may lead to another bankruns.
Good, level-headed observations. I started watching a couple of the fringe videos saying "the economy is going to collapse, go get your money out of the bank right now" videos, which will only incite panic. I think people should go watch the movie "It's a Wonderful Life" before attempting to extract their money from a bank to understand how bad a bank run is. Banks can generally handle a load of maybe 5% extraction at the most before serious problems kick in. So if some people take their money out, it's something that can be absorbed. If more than roughly 5% take their money out, that can't be absorbed as easily and runs the risk of collapsing the bank and that would cause far more problems, including triggering rampant global inflation, which would devalue the USD to nothing. The result would be a total disaster. If you want to point fingers, Peter Thiel is primarily to blame for SVB failing as he incited the panic. The FDIC should extract every last penny from him to help cover the losses.
That's an optimistic and short sighted view. The businesses that have lost their working capital won't be able to operate. This will kill the tech stocks, ie silicon valley, and the employees. This trickles through to commercial real estate and the overinflated west coast housing market which affects SVB's "assets" in addition to other banks assets. This doesn't even include direct investment from banks in SVB nor pay any attention to the perceptual potential for bank failure, as was the cause in this case. This is just the beginning.
Good explanation. But as someone who worked in financial regulation I think there should be questions to the regulators on the stress testing and LCR submissions for SVB.
Or why fed reserve didn’t step in and buy the government bonds for cash ? There should be standard procedures for dealing with ban runs, esp when there are high quality assets.
My spouse mentioned that SBV fell just below the threshold for stricter stress testing, due to the weakening of Frank-Dodd in 2018. Yet another thing to blame on the 2016 elections.
Page 87 of their most recent 10-K. "As a banking organization, our liquidity is subject to supervision by our banking regulators. Because we are a Category IV organization with less than $250 billion in average total consolidated assets, less than $50 billion in average weighted short-term wholesale funding and less than $75 billion in cross-jurisdictional activity, we currently are not subject to the Federal Reserve’s LCR or NSFR requirements, either on a full or reduced basis."
@@katarh The reduction was Republican policy that a couple of Republican senators (probably Manchin and Sinema, though I'm not sure) also supported. I wouldn't be surprised if some rich people bought those votes because I don't have much belief that R senators are smart enough or would have any incentive to go for those changes to the law on their own.
I like your presentation and knowledge, subbed. However, I think you underestimate the fallout. The problem here is that many well known companies funds are being held up which is impacting their own clients funds being held up. Not sure of the exact list but let's say Airbnb needs to pay property owners, that can be held up. Things like that tend to create a much larger panic and it's not going to be just a single company that this happens to. Crypto banks collapsing probably gets more smiles than frowns but when normal banks fail and their client list has loads of household level name recognition, you might have a problem, Houston.
Fractional reserves aren't new or generally a problem. It is worth noting that SVB petitioned to get laws changed so that they didn't have to increase their reserve percentage as their size increased. They got the change in 2017, if memory serves.
There's a lot of tech companies that might go under because of SVB since a lot of tech companies parked their money there. Some of them couldn't even make payroll because of this.
Thanks for that straight forward, no frills explanation. As soon as I saw you had posted this video I thought "uh huh! now this will explain what's happening with none of the crap." Please keep up your high quality videos. 5 stars!
Confidence in the US government. Riiiiight. I haven't seen anything in several years that would have me trust the US government to do anything other than make endless mistakes.
Brother, I just sent a huge invoice payment to a company that uses them. I’m sitting at home watching this video right now and fortunately because of you I was able to get in contact with my bank and cancel it before it got cleared on Monday. Thank you.
Funny how you call it the banks assets but its just them buying stuff with your money. My question is what happens if i am paying a mortgage and the bank closes?
Great video. It’s so refreshing to hear economic news in a concise, straightforward way without the drama. Plus, I always learn something new with each video. Thank you!
One might ask, "Why don't these companies have tons of different bank accounts at different banks so as to get more protection from the FDIC and avoid a concentration of credit risk?" The main reason behind this I suspect is the slow time to clear payments between banks and the hassle of trying to give different vendors different banking information in order to be sure that you have enough money in the account that you give them so the bill gets paid. Because they can't instantaneously transfer the money or demand that customers pay them RIGHT NOW, they have to have a bunch of slack in the system because they can't predict which banks are going to have enough money to cover the bills they're trying to pay. This means they have to somewhat centralize operations, which means a lot of cash in a single bank.
The prices of bonds have an inverse relationship to interest rates. The recent rapid rise in interest rates has caused bond prices to fall. SVB failed because a large portion of its bond portfolio was "marked to market" and they were forced to recognize losses. The question that is unanswered is, are there other banks with bond portfolio losses that will soon have to be recognized? Was SVB a one-off or do we have a real problem in the banking sector? The Fed was expected to raise interest rates another 50 basis points next week to fight inflation. Will they still raise rates as expected? Or will they allow inflation to remain high in order to save the bond portfolios of banks nationwide? The Fed is facing a real dilemma!
Big banks are fine. It’s the smaller banks that can quickly go under and it will cause people to panic and multiple bank runs which can lead to major crisis.
@@HotDogLaws None of them go far in excess of market cap like SIVB and bond losses are not likely to be realized being held to maturity whilst it may be a drag on their ROTCE. None of them did stupid shit like dumping the majority of deposits into long term MBS with 0 interest rate risk hedges. All banks are always subject to a risk of a bank run and that is why we always subject the biggest ones to stringent stress tests unlike SVB. The major difference is that they do not have a concentrated client base like SVB.
They need to do what it takes to stop inflation. You don’t want rampant inflation. If the government could get their shit together and ban stock buybacks, tax long term capital gains 25% on a million up to 50% on a billion, reduce defense spending, and lift the income cap on social security we could see progress with inflation declining but government just wants to spend…. And implement a 5% vacancy tax to punish the greedy corporations holding houses for no reason but to keep prices high.
After the last financial crisis you would've thought that they'd have more safeguards in place. Just be careful where you invest your money because many banks have applied for a licence but not been granted it which means that they cannot provide cover for its depositors. What worries me is that Chase Bank is offering better interest rates than other banks - how is that possible?
Should we be concerned about banks that have recently been offering above-market sweetheart rate CDs (e.g. Capital One's 5% 11-month CD)? They do that when they need a short-term infusion of new depositors and their cash so I wondered if they're on shaky ground similar to SVB.
Thank you so much for this information. Very easy to understand, and appreciate the straightforward approach. It really means a lot to a layperson like myself to get this type of quality analysis in a manner I can understand. :)
I want thank you for your calm, straightforward, and thoughtful analysis. I passed by many videos in my search [including big media networks and other clickbait] looking for you because I wanted an honest, analytical take on the situation. Thank you!
Great explanation. My coworkers and I (in tech) were trying to break this down and we came to same conclusion that is not 2007 2.0. But don’t tell that to main stream media. It’s the end of times there.
When there was an organized attack on Adani by US short sellers, his company's total valuation dropped by approx $100 billion. Although his FPO was fully subscribed, yet he returned the money to his investor, pre-paid his loans, had no impact on his assets, No Pink Slips, and No Job losses. Now when US Startup Bubble busted with the SVB Collapse, the total valuation dropped by approx $200 billion, Out of which total of $175 billion was public money that to UNINSURED. i.e. 90% of SVB bank account holders probably won't get their money back. People queuing outside the banks, and management calling the police. Tons of small to midsize companies don't have money to pay salaries, hundreds of startups fall, thousands of jobs are gone, and chaos in US markets. Just last month the same people were wondering why the Indian Economy was NOT doomed after the attack on Adani.
Update: SVB deposits will be available Monday, according to regulators.
Signature Bank has also now been taken over by regulators, the second FDIC receivership in three days
I thought this bank failure was an isolated event. You care to elaborate? Also, please pin this comment so we can see replies at the top of the comment section.
@@MrSupernova111 whoops, thought it was pinned, my bad.
Signature was another crypto-focused bank, so it’s been facing the same pressures as Silvergate (a run on crypto exchanges = a run on their deposits). I’m not aware of another big regional crypto-focused bank, but this is still to a large degree a sector-dependant issue, and larger banks with sector diversity are unlikely to face similar pressure. With how quickly things developed, however, it’s impossible to predict what will happen from here.
@@ThePlainBagel . I think you owe it to your subscribers to talk about the underlying issues causing these bank failures: higher interest rates. Many depositors are withdrawing money to invest in CDs and treasurys while the cost of capital for bank rises. In the meantime, the Fed plans to continue raising rates and HTM holdings in balance sheets continue to depreciate.
This is a systemic issue. SVB and SBNY are only the first affected (the weakest links out of the bunch). The US government felt the problem was severe enough to bail out these regional banks and find funding to bail out future banks.
I'm not asking for predictions. Just a complete and honest picture.
@@ThePlainBagel, I don't see how this can _not_ have spillover into the rest of the banking system. It's not like the crypto banks exist in a vacuum, is it? Sooner or later it's going to hit other banks, no?
I'm surely no expert on the global banking system or even knowledgeable but it just seems inevitable that it won't be isolated. How many average people have now heard this story? How many of them are going to head to the bank in the morning and withdraw most of their money? If this does spread do you really think the FDIC is going to be able to cover every depositor in even a single nationwide bank? It seems highly unlikely.
@@MrSupernova111 I think you should watch the video again. Richard mentioned interest rates and treasury bonds around 4:20 in the video.
I would hope anyone explaining this current issue at this time (banking crisis???) would do so with a level head - even if they THOUGHT this was a systemic issue - would advise against bank runs. After all, the companies did have the money. It was only the panic withdrawals that made the banks no longer liquid.
These banks should have been paying attention to their treasury bonds when interest rates went up. I totally agree that this might be a systemic issue. However, if the general public keeps a level head there's no reason to suggest any legit regional bank is at risk. With nearly all being FDIC insured, most of the public will be totally fine even if one of these banks falls. SVB is an outlier in many respects obviously due to its region.
Silicon Valley: move fast and break things
SBV: breaks
Silicon Valley: no, not like that
It's all fun and games until you're forced to clean up after the bull in the China shop.
Wondering if they've figured out what's wrong with their favorite buzzword: disruption. I doubt it, I live here with VC idiots, and it's interesting watching their own psychology problem trip them up like this. I think it just speaks to how anxious and terrified they are.
*SVB
@@reformedchaterCorrect. Apparently SBF still haunts me
@@MissMaserati Well the financial system has truly been disrupted now
I really love your nuanced takes in a sea of drama and clickbait. Thanks for your amazing work!
Thank you for this explanation!
A much needed reasonable voice in a sea of RUclips click bait.
It literally happened so fast that I wasn't aware there was more than one.
Doesn't help that the two failed banks and the third failing one have very similar names.
Treu
For Real. It hapened sooo fast.
@Willie Jonathan scammer Alert
@williejonathan9222oh my! How can I pay you to teach me...🤡
It was a very bad decision to remove the Glass-Steagall Act in the late 1990s, which led to the spectacular failure of huge banks during the financial crisis of 2007-2008. To prevent another disaster, Dodd-Frank and this statute both need to be reestablished right away. Else what happened with the Dollar recently is only the beginning of what will happen if nothing is done to address the current situation.
I believe SVB was making an effort to reorganize their bond portfolio. Yes, they would lose money if they sold their low-yielding bonds. But, they were trying to make up for it by repurchasing bonds on the open market at the higher interest rate.
@thelastunicorn1987 I've been able to scale from $50K to $189k in this red season because my Financial Advisor figured out Defensive strategies which help portfolios be less vulnerable to market downturns.
@@louisairvin3052 've been looking into the potential of speaking with consultants lately. I require direction because I am an adult, but I wonder how really beneficial their services might be.
@@Curbalnk Finding financial advisors like KAITLIN ROSE STERNBERG who can assist you shape your portfolio would be a very creative option. There will be difficult times ahead, and prudent personal money management will be essential to navigating them.
@@louisairvin3052 Thanks for sharing, I just looked her up on the web and I would say she really has an impressive background in investing. I will write her an e-mail shortly.
One of the only financial RUclipsrs that actually knows what he’s talking about and gives us straight facts and no bs clickbait. Thank you good sir!
Dude has a real job so he's not dependent upon clicks. If anything it incentivizes him not be a click bait farmer because this very public content reflects on his ability to do his real job. YT is a poison pill and he knows it.
He actually IS a real professional, working as an analyst for an investment management company in Ottawa.
Was just about to write the same thing until I saw your comment
Try Patrick Boyle as well
A true legend
I was listening to the all in podcast and they made the point that the real tragedy is not that investors are losing money - it’s that small start ups and businesses, that were managing their money responsibly up until yesterday, suddenly have their accounts frozen. Suddenly all these businesses cannot pay their employees, cannot pay their suppliers and contractors, all because they had a bank account with the wrong bank. That means that there will be a lot of tech workers who suddenly will not be getting paid this month, through no fault of their own, nor the company they work for. And if you’re not getting paid, since people won’t be able to afford their rent or mortgage, etc
Edit: Update - the Fed is bailing out all the depositors! So the startups will get the money in their bank accounts back
A fellow all in Fan!! Here's an upboat 👍😁
Surely there are protections in place to get these employees paid. This is insane!! Wild times we are living through.
What % of startups fail? Isn't it like 90% why do we have to bail them out too...
Thank you for your video . The market is going down and a lot of people lost huge sums already . I Will advice traders especially newbies to have orientation of trading before they get involved in it because the Crypto market has been unstable , forget predictions and start making good profit now because future valuations are all guesses . I must say trading offers more benefits than just holding and i have made over 7 btc from Investing with Christina Ruth ubl insights and signals in less than 3 weeks . I believe we are in the spring phase ..
One need to have source of income as well as secure and have a profitable investment future.diversified investment crypto if the financial trading market is needed to survive
I'm new to trading how can I make more profitable investment in the market now
@@skrejaul8372 I've traded with a lot of individuals but I have never come across anyone as good as CHRISTINARUTH just by applying her new strategies I now trade independently. She's the best I'd advise any novice investing to go and trade with.
I currently started trading with her and my results have been all profits . A lot of people out there don't really know how to trade , they need guidance , but don't know how to go about It
I never thought about how harmful a bank monopoly could be, but having one bank that controls half of a sector’s capital seems hazardous
Agreed, but SBVs clients were businesses, and SBV also offered competitive rates to their commercial depositors, otherwise those businesses would have transferred their deposits elsewhere.
This gave SBV a further problem, needing to sell off assets and borrow in order to keep funding the attractive rates they were paying their depositors..... For my part, this mainly sits with directors and risk managers of SBV, but also the risk managers of the depositors and investors.
wow you just caught on TOO BIG TO FAIL. remember 2008? they passed laws to stop this from happening again. and trump cancelling some of them laws, and why is it happening again. when laws are changed back to the good old ways.
I don't think it 'controls' the sector. Even though it serves half of the companies in it, one company can have more than one banks.
VCs created & tolerated this risk
Having an institution that can print and decide interest rates for the short term is too 😬
I appreciate an adult review of these bank failures without the “click bait” nonsense driven by RUclips profitability algorithms! Grounded, sensible, even review of a concerning financial matter. Thank you.
YUP. I got sick of combing through click bait “shocked face” thumbnails. So fake and off putting. This was a breath of fresh air.
Perhaps, you shouldn't be such aloser who clicks on everything in sight. Blaming 'RUclips profitability algorithms' is just a fancy way of calling yourself amoron.
What's so strange about SVB is how _fast_ things went from "Business as Usual" to "Bank Run". In the 2008 GFC, companies that were going down were telegraphed by the stock market, sometimes for months in advance. This thing imploded in 48hrs.. I think the speed that this happened is what is unnerving people. And the bank stocks that have fallen hard in the past day or two could make depositers pull their money in a self-reinforcing cycle.
It's a bit like the movie Margin Call, where the CEO character is alerted to the massive exposure and says we have 3 ways to win on a deal: be first, be smarter, or cheat. He says I don't cheat, but we can be first. Sell everything.
He who panics first, panics best, in this case.
FDIC insurance is really meant for individuals, not businesses, so most of the customers will be facing serious losses.
Fun fact: there is probably only 3% cash floating around for all of the bank deposits there are. So if things get weird, you have to end up being in the first 3% to demand money to get the full amount.
Essentially the bank didn't shut it self down, the government swooped in and try to contain it because it had no confidence that svb is going to have enough in it to cover the hole created by selling the treasure bond confirming their losses, if banks are allowed to hold the line like Michael B they would in this case, but that's not legal for banks. Who's to blame? Rising inflation, so yeah Joe Biden and the left wing in house sponsoring someone else's war in the 3 digital billions, but no plan for inflation.
This is definitely not a natural decline, it is manufactured. Whoever manufactured it is the benefactor.
@@500dollarjapanesetoaster8 i think the 3% cash flow number is like 10 years old or more. i doubt we have even 1% in cash, rather go into the 0,1% region
@@TheLastLineLive sounds archaix
It's truly a momentous occasion when I can get something explained by Patrick Boyle and The Plain Bagel in quick succession
Ben Felix, please
*Fingers crossed
I was literally eating a bagel when I saw this video pop up on my feed.
Wall Street Millennial's video goes into the financials far more in depth as well.
l000l patrick boyle the dude who makes over 100k a year off youtube but still begs for peatron lol that guys a scammer.
it wasnt people doing bank runs tho...thats not why this is happening...bank runs are a symptom of the problem...
the problem is greed and hubris....all the ceos took their money out weeks before this so its not the bank runs doing this...thats the narrative of the far left....reality shows otherwise
we had this problem in 1929 and it surprises me nobody talks about 1929 right now...they only bring up 08 which wasnt that far back...this is more akin to 29 than 08
were going to see bread lines and soup lines...
if you look at the bank sell off its all 60 70 80 in the red..monday wil be a dark dark blood bath of sell offs...its going to be nasty af...
I feel like I'm living in the montage at the beginning of a movie about a financial collapse.
LOL! No, that was nothing.
This is going to be even more spectacular.
More like a civilizational collapse. Soon we all be driving muscle cars and wearing cool leather suits.
They all start the same, because nobody is ever held responsible. It makes no sense for them to follow the law, cause that makes them less money and they are always bailed out anyway. In 12 years we will be saying the same thing, and so many people will be completely stunned that it happened.
@Studeb What? These banks are taken over by the FDIC, and all their assets are sold off to pay back their customers. The stockholders lose all their money, and all employees lose their jobs.
I get that this system isn't perfect, but the CEO and stockholders are NOT getting a handout from the government.
thats pretty dramatic lol. especially for an event we'll likely forget about in a week
It hurt that banks are crashing.
I will try and invest in stocks and crypto.
Success depend on the action or step you take to achieve it. Show me a man who has no investments I will tell you how soon he will go broke. Investment is building a safe Heaven for the future....
To earn more you need to have multiple diversified means of income so investing is a way to earn more money once it is profitable...
If you find a way multiply your money one day you’ll wake up and realize that the money you thought you had is gone .investment is the key!!!
@@johnnymaxwell8284 I agree with you friend investing is the key to maintaining your financial longevity and not just investment , but an investment with guaranteed profitability..
3:10 Silvergate Bank
6:18 Silicon Valley Bank
8:29 What Now?
10:20 Effects on Economy and other Financial Institutions
11:11 Points to Consider
Watch Monday and the ides of March.
Weird how both of them can be labeled ""SVB".
Paul, thanks!
OVER 586 BANKS CLOSED IN THE USA THIS YEAR. NOW THIS. AND BANK OF AMERICA AND WELLS FARGO. PEOPLE ARE SHOWING EMPTY ACCOUNTS. DIRECT DEPOSIT FOF PAYDAY. ACCOUNTS STILL EMPTY!!! WHILE THEY SEND HUNDREADS OF BILLIONS TO UKRAINES MILITARY, THAT DOES NOT HAVE ONE. ALL OUR MILITARY AMMO. WEAPONS. TO ???? AND ITS NOT IN THE MILITARY HANDS OF USA. AND THIS CH. IS SAYING WE ARE OK!!! OMG. REALLY??!!! WILL NOT BE BACK TO THIS CH. VERY BAD INFO
First republic bank is next good luck guys
What happens now? Well, for the people that led these institutions to collapse, I forecast large bonuses and probably another seven to eight figure position on another board.
True words
Considering the massive downsizing across the tech sector in the past 3 months it makes sense that a bank who's entire pool of funding is in tech would experience a massive bank run.
If you think this is limited to niche techy startups which seems to be the prevailing narrative that is being put out there regarding this, you will have a major surprise very soon ;)
@Vincent Wisehoon but the diminishing returns for tech started way before this bear market. Those startups getting a ton of money at the beginning was due to easy money fiscal policy more than tech still having a lot to offer. People and investors had more money than they knew what to do with, so they invested it all in the idea of the next big thing. Rinse and repeat. Spigot gets turned off, the industry that naturally got the most speculative money also is the first to have it pulled. Straightforward
@Vincent Wisehoon I'm talking about people seeing too big to fail banks experiencing bank runs. This is not some tech bubble backlash more than it is actually the final death throes of fractional reserve banking. Do you seriously think that SVB's monetary management was any more risky than say Bank of America, or (insert any big name American bank here)? They're all over leveraged, and trying to use the same tricks to be able to keep paying their creditors, except with the rate hikes, it's all finally coming to a head. This is not about big tech. This is a banking issue. Last time I checked, there's no difference between Warren Buffett depositing 500 million in a bank or some startup. People make it sound as if having banking clients that are silicon valley "startups" suddenly makes the banking model riskier. That's completely false, same old bank takes your deposits then loans that out and borrows against it.
@@spechund7109 tech in general is screwed. Companies, in a true capitalist soceity, cannot exist without making money. Sillicon valley is a system that needs to rot and die. I feel TERRIBLE for the working class who pray that a system built off lies can sustain them, and wish we had enough blue collar jobs, and other non-tech jobs they had skills in to collect each and every one of them and provide a living for them. Though sadily we've become too married to profitless shells of companies which are basiclally a bunch of collage kids going "wouldn't it be cool if we stuck everyones brains into a headset and called it VR. Shit will never be profitable, but damn it would be cool." they hype it up to a bunch of VC firms they go "huh that could posisbly work, here's some cash" and all these people get hired while the initial founder "makes their exit" as soon as someone like facebook buys it up and goes "ok look, we know we haven't turned a profit in the entire lifespan of the newest generation BUUUUUUUT this time it's legit.
I hope the scammers at the top burn, I hope the working class (this includes white collar people who are at say 80k a year with kids and aren't actively involved in the scam) can find all of the success in another field. But my nihilist side knws it will be more of the same. The tax payers getting fucked, the workers getting fired, and no one seeing a DAY inside a non-gucci jail for their crimes. gotta love oligarchies
So it had nothing to do with crypto?
What I really, really always appreciate this channel is how level headed it is.
Literally just subbed to the channel for this reason.
US bank run start now!! Withdraw yr money and invest in house and property is the safest invest.
I've been following this story closely and researching since it first popped up before the bank run. This is one of the best pieces I've seen to date. Appreciate the level headed view.
Banks that gamble on crypto or NFTs SHOULD NOT be bailed out with taxpayer dollars
The only banks that should be insured be the govt are public banks…but we don’t have any in USA. Save one.
Excepy they didn't, they died because they invested heavily in government bonds which are treated as 100% safe assets.
None of these banks invested money into crypto, they took deposits from companies whose cashflow correlated with low interest rate (ie startups or crypto companies) and invested a lot of it into assets (say 5yr govt bonds) whose market value drops when interest rates rise.
The government guarantees you’ll get the money back after 5yrs, but if someone gave you $6bn in deposits and you put $5bn of it into these bonds, you can’t wait 5 years and have to sell them at a loss if people start withdrawing more than $1bn.
This is the same as if you took most of your savings and put it into a 3-year savings account and suddenly lost your job two years in. Yeah you’ll get the money back in a year but that does not help you if you run out of money from your checking account - you’re still insolvent because you won’t be able to pay me if you owe me money.
@@newagain9964 I think what you mean is 15% of the liabilities were insured. That would mean that of the money the depositors kept in the bank, the government’s insurance scheme for depositors would still leave 85% of the money unavailable.
This is the same as with any other bank, if you hold money in a bank account, and that bank becomes insolvent, the FDIC will make sure you’ll be able to withdraw up to $250k no matter what, even if the bank blew all your money on hookers the government will still pay out of pocket up to $250k of your balance that you can withdraw.
This is a good thing because the presence of this insurance makes it incredibly unlikely a bank run can happen. In most cases most people have less than that amount with a bank, meaning rumors of insolvency will not cause a stampede to withdraw money or lose it all, which is what ultimately causes the run to begin with. In this case most of the clients had far more than $250k in the bank, meaning this help will only recover ~15% of the money people put into the bank.
Mind you this is not a bank bailout, if you had money invested in shares of SVB or held its bonds, you are going to lose your money in all likelihood. This is about depositors, ie companies banking with SVB who held money there.
No-one cares about Silvergate.
The thing everyone's eyes are on right now is SVB.
Thank you for explaining what happened without the sensationalism that is plaguing this topic. Its so important to have a trustworthy and knowledgable source
SVB probably brought bonds of these risky startups and loaned them money to pay back the bonds. These startups are not profitable and revenue drying up, they are going back to SVB for more cash or loans/bonds. This create a vicious cycle of borrower/lender sell off. Top management of SVB knew this months ago and tried to use the worthless bonds or notes as collateral. No other banks want a piece of these junk loans or bonds. The Fed is trying to get rid of their own junk bonds. This is just part of the zombie companies going BK due to very low rates the past 10 years.
Billions of dollars isn’t worth sensationalizing, that’s for trillions.
it wasnt people doing bank runs tho...thats not why this is happening...bank runs are a symptom of the problem...
the problem is greed and hubris....all the ceos took their money out weeks before this so its not the bank runs doing this...thats the narrative of the far left....reality shows otherwise
we had this problem in 1929 and it surprises me nobody talks about 1929 right now...they only bring up 08 which wasnt that far back...this is more akin to 29 than 08
were going to see bread lines and soup lines...
if you look at the bank sell off its all 60 70 80 in the red..monday wil be a dark dark blood bath of sell offs...its going to be nasty af...!!!!
I recommend the Financial Times or the Wall Street Journal unless, of course, you mean that you want to be hand fed information instead of seeking it on your own.
@@MrSupernova111 Why the insult? I just said I appreciate the explanation
In this bank run, most of the customers withdrew money in hard cash? Or just transferred it to a different Bank? Curious to know
Invest in a “bank” known for startup and VC’s during a recession when IPO’s are at a 30-year low. What could possibly go wrong?
SVB was “not large enough to fail”. Back during the previous financial crisis, the USA bailed out numbers us banks which would have failed. So, historically, SVB is one of the “largest” banks that failed, but it could have been bailed out like other banks. SVB has been taken over by FDIC, and *deposits* are still insured.
@@advancetotabletop5328 well yes and no up to 250.000 is but since it’s mostly for businesses they will have a lot more then 250.000
I think they looked at the industries of their clients and thought that was diversified. That they were almost all tied to the start-up VC ecosystem never crossed their minds.
Silicon and Silicone are two different things. I had fun hearing you say Silicone, lol. Silicone Valley has to be in Las Vegas or Hollywood.
Yeah I got it right the first time, and messed up later on in the video. In my defence, I filmed late last night after a day of working 😅
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😂😂😂. Nothing like two bots jacking each other off.
@@Lemariecooper don't fall for those scammers homie, just them trying to suck money from the pockets of the already beaten down.
With SVB, I was envisioning normal people doing a run on the bank, but then I realised it was *investors* withdrawing billions.
Got to love them.
Edit: I wonder how many bonuses the bank executives are still going to get despite running the bank into the ground
You should be asking how many people will be fired because their firms lost most of their cash held at SVB. Many of those firms won't be able to make payroll. But I supposed you don't care about that.
normal people would need to show up in numbers of roughly the population of Rhode Island as a whole to make a difference.
@@MrSupernova111 No, you dont get it. This NEEDS to happen.
People need to learn that banks are NOT to big to fail, and they should be FAR more scrutinous with who they park their money with, how exposed they are, and what risks they carry.
Its about damn time people stop treating capitalism and the stock exchange like its the goddamn casino.
Eye watering amount no doubt.
@@Seneric 2008 should have taught people that, any crash will be promptly forgotten as soon as someone finds a way to make money in a dodgy way again
In this unstable environment, one must ensure their wealth is preserved. The best way to protect your hard-earned cash, from the ravages of the printing press is to buy cryp... LOL! Just kidding, anything but that.
Diamond handing farmland and tanks to the moon
The safest place for your money is meme NFTs, obviously.
Bad loans and investments? Bad loans to whom?
It`s a common rule that banks are "giving" away loans when it`s over..... when the insiders of the bank know it`s done.
There is almost always some loans that will not stand the light of truth and investigation. But that`s eazy to fix. The loan taker will by all clams for next to nothing (5% - 10%) and the case is closed.
Go back about two years and then you will find some "crazy" loans that is not paid back and will not be either. But no one will see it because the loan taker will close all possibility about seeing into it by buying the clams for as little as nothing. Nice friends!!
Bad businesses are SUPPOSED TO FAIL
I think this is one of the major problems with this world along with no accountability. If people are given golden parachutes then they won't learn from their mistakes. I believe a lot more is to come due to the great can kick of 2008.
@@Palo-jm7xc honestly it's not as if things were much different before the intense financialization of the world economy. financial crises were more frequent and brutal pre-20th century. there's no such thing as a capitalist economy that doesn't go through cyclical crises
At 200 billion in assets it’s a very big bank and if they can’t pay the depositors it will be a huge hit to US financial system because people will lose trust in the system. It will cause more bank runs and then we will have a real financial crisis like 1929.
Are they not being allowed to fail? I hope they are, and i hope the people at the top don’t find a way to profit off failure.
This was caused by high interest rates by the fed not by bad banking.
Holy crap, I remember buying Silvergate in 2020 and sold it at $120. I felt like an idiot for selling too early after seeing it go to $200 but I'm glad I stayed away from it after watching it implode the past twelve months. I would imagine a lot of HODLers got burnt.
Why would you be an idiot if you earned money 🤷🏻♂️
@@moccamixer cuz they felt like they could've earned more had they sold at 200
@@moccamixer🤦♂️ not to good with human thoughts and feelings huh
GG WP
Celebrate getting out when you did, that was wise. Hype is a very dangerous thing to believe in!
Dear Patrick, I know nothing about high finance--but I have money in banks and I know that when people get really scared, it causes trouble. Your video helped bring the nuance, and more "plain and simple" information to help people like me. Blessings to you, my friend.
Patrick? Or Richard?
Thanks for explaining what is going on. There is no better place to get clear and trustworthy information than The Plain Bagel.
The people trying to calm things down by saying more bank fails are unlikely are the same ones that said SVB was OK not too long ago. Clown Crammer from CNBC just weeks ago emphatically stated SVB was not a risk.....he also said the same of Bears Stearns just days before it folded....when will Crammer get sued to the poor house and prevented from ruining people's lives?
it wasnt people doing bank runs tho...thats not why this is happening...bank runs are a symptom of the problem...
the problem is greed and hubris....all the ceos took their money out weeks before this so its not the bank runs doing this...thats the narrative of the far left....reality shows otherwise
we had this problem in 1929 and it surprises me nobody talks about 1929 right now...they only bring up 08 which wasnt that far back...this is more akin to 29 than 08
were going to see bread lines and soup lines...
if you look at the bank sell off its all 60 70 80 in the red..monday wil be a dark dark blood bath of sell offs...its going to be nasty af.........
Also Patrick Boyle - top quality nonsensational financial knowledge spiced with Patrick's driest of dry top quality humor!
@@piuthemagicman both are great! :)
I think not. He's juwish.
They're not exactly famous for trustworthyness.
He also blamed the failiure of a bank on people collecting their money back. And not on embezzlement and gambling away deposits as if the bank is a ponzi.
Ironic how a Swedish company called Alecta (who manage occupational pensions) actually shifted investment strategy relatively recently into focusing more on American banking which included, unfortunately, SVB.
Apparently, individual people will barely notice a difference, if any at all on their pensions. But this highlights how remarkably large the reach the effects of these kinds of events has. There’s a dangerous amount of trust in these institutions to act responsibly and intelligently.
It is a very funny argument from investment bankers that when they "earn" money, they need bonuses.
And when they perform "above average" on shrinking market, they need bonuses.
And when they screw up "it makes a barely noticeable difference".
I mean, to some extend, you need risk diversification and risk diversification naturally means taking on risks, but... how can investment bankers "earn" an above average salary, then bonuses on top and then claim "responsibility" while at the same time claiming "market forces" being in control of every down turn (ignoring the very fact that collectively, "investment bankers" are "the market forces")?
@@sarowie because people are biased and don't want to attribute their success to luck.
@@sarowie It doesn’t sound like you know what investment bankers do lol
@@sarowie As far as I know, investment bankers just get laid off when they screw up.
It seems like the root of the problem was SVB’s failure to hedge interest rate risks with duration. It makes me wonder if other banks also messed up their durations too.
Absolutely. I wonder what their risk management was doing ALL THROUGH 2022, were they on holiday. The central banks actually reacted pretty slow first, to the inflation. If you held bonds, you could see this coming from a mile away. They could have hedged or diversified. And shifted to more class A liquidity assets, as they were already losing lots of deposits during 2022 as the balance sheet in the video showed. Running out of cash and class a in a bank run is no shame, but not preparing, is.
But I guess, hedging, diversifying, restructuring the portfolio costs money and takes the cherry off the top of your profitability and off your bonuses too. So you just go on, drive it into the ground and scramble to get your bonus, hours before getting shut down.
Perfectly executed. A beautiful lecture in American Manager Capitalism.
@@catriona_drummond No doubt that SVB's top execs dropped the ball on risk management. The top execs ignored warnings from employees to buy shorter term bonds, and instead doubled-down on high yielding assets.
And SVB's CEO, Greg Becker, lobbied Congress back in 2018 to exempt banks like his from Dodd-Frank regulations, saying: “Without such changes, SVB likely will need to divert significant resources from providing financing to job-creating companies in the innovation economy to complying with enhanced prudential standards and other requirements...Given the low risk profile of our activities and business model, such a result would stifle our ability to provide credit to our clients without any meaningful corresponding reduction in risk.”
Let this be a lesson that these "people" aren't financial geniuses. They just got to their position by bribes, nepotism, and connections. And then virtue signal about how smart they are for pulling their own bootstraps while the rest of us work.
@Catriona I am guessing they were just way too specialized, and their whole business model is specialization. It's too hard for them to specialize. So the fact that they failed can be argued as simply capitalism at work.
Not necessary the duration. They could have done enough receive float to keep the book short, but still won’t stop deposit running off. Liquidity issue, given concentrated customer base. Things went wrong 3 years ago when surge deposit coming in, and they decided to invest in bond market.
If I wasn’t already subscribed, I would have done it again after this video. You’re a national (and international) treasure.
You made me check and so I subbed! Thanks for the reminder comment
Things could have been worse: CDOs for sub-prime mortgages on land in the metaverse
The fact that this is almost in the realm of possibility with NFTs is shocking and alarming LOL
if it wasn't for the downturn and interest rate hikes things probably would have gotten to this point after a few years.
Bruh 😭😭😭😭😭😭
Omg!!! That made me spit my coffee out.
🤣🤣🤣
Let's take it one further: credit default swaps on CDOs for sub-prime mortgages on land in the metaverse 🤣
It must be extremely horrible to have money sometimes for a lifetime in a bank and simply lose it. I hope that all people manage to get their money back, and that this doesn't spread to other banks.
Allocating (not having all your eggs in one basket) is the lesson learn here
@@zegur21 the lesson is clearly to never trust fractional reserve banking. When banks fail, people are free
This wasn’t a traditional bank. Most are far above the fdic limits.
@@Morcap Complete fearmongering nonsense... "All the banks" aren't involved in crypto, and "all the banks" aren't servicing venture capitalists. The average person hold *FAR* less than $250k in their account, which is what the FDIC *actually* insures. Both of these banks have unwound in more-or-less the honorable way. There does not appear to be any fraud at this point. Businesses fail, and neither of these banks were entwined so deep into the US economy their loss will affect much more than a quarter's balance sheet.
@@ultimaIXultima The reason SVB collapsed is a systemic failure and not because some investment in some crypto Ponzi or some bad loaning practice. It was because a critical mass of depositors just purely asked for their deposits back. And that is every single bank Achille's. Nothing can save a bank - anywhere in the world - if a number of people above bank' cash capacity will withdraw at the same time.
REMINDER:
On March 26th, 2020 the Federal Reserve FOMC's change of bringing the bank reserve requirements from 10% to 0% became effective. This means that banks could and may loan 100% of deposits and keep $0 in the vault leaving them highly exposed to a bank run. This is how a significant amount of money is entered into supply, through fractional reserve banking... the entire banking system is VERY fragile. Over $250k? You're an uninsured lender not a depositor
So then it can't be called fractional reserve if there is now no reserve...
@@snowblind. 0/1 is a fraction
This conflates two concepts (reserves vs insurance) and misses an important piece of context. The Reserve also went to an "abundant reserve" model while also requiring the banks to "show their work" on the loans. There is fragility, as there will be in a highly developed financial system, but you are choosing fear rather than understanding.
@@onothankyou We understand that a bank will have a natural tendency to loan out a larger ratio of deposits, if allowed, in order to make more money, as they are a for profit business. It would be naïve to trust lenders to act in good faith always if you look at history, especially GFC (The "show your work" and "Oh please act in good faith" is worthless unless regular audits are expected and penalties are severe). FDIC insurance exists but doesn't not protect >$250k in deposits meaning they are exposed. We are seeing massive transfers (Large account holders) to the big banks as we speak, "just in case", which is a bank run of some magnitude. Will it get bad enough to implode? Probably not as the Fed and Gov will always step in to save their own
@@runescapefan0001 Simplified to 0.
The amount of people comparing it to 2008 makes me question whether the public has already forgotten what even happened in 2008 and what were the reasons for it.
Such an amount of worry just for the sake of being worried.
There is a huge misallocation of capital in the system just like '08 in housing, I just don't think we know where it's going to blow yet.
@@cursethesemetalhansthis is definitely a different situation the op is right worrying because it’s fun to do is the current trend
@@cursethesemetalhans
And in 2008, everyone seems to forget that banks giving mortgages to ppl that couldn’t pay, KNOWING they were going to default, then bundled the bad loans and sold them to unknowing institutions.
It was a scam from criminal lenders from the beginning.
@@cursethesemetalhans replacement of fiat ...
I feel the average person has no real clue on what is going on, or what went on. They just see news clips and take it as the gospel, instead of actually reading about why. Things are more knee jerk than ever, and that's really not helpful.
PB - some corrections. SVB was not shut down by the FDIC. The bank was shut down by the California Bank regulatory which named the FDIC as receiver. Plus for you a deeper dive. Basically for all of 2022, no chief risk officer. Think about that for a bank with over a 100 billion in assets. Next, the "run" as you indicated was entirely corporate. When the bank announced that it had sold $5 bb in treasuries and lost $1.8 bb, corporate customers went back and looked at their 10K and noticed that the held to maturity portfolio of R/C MBS and treasuries had an unrealized loss in excess of 17 bb. THeir NBV was only $16 bb. They than ran for the exits, all at ounce. However, they had plenty of risk officers around the world it would seem really concerned about things like equity in meetings and global warming, but not soo concerned about doing any hedging of their 100 billion plus portfolio. Tha's right, they were completely unhedged. Again, no chief risk officer in 2022. They had more important things to do.
They had to meet those DEI quotas. 🙄
Thanks for putting this into perspective. I'm in school for finance and people are always looking to say the next collapse is coming. Love your videos!!!
@@markc1682 it’s not that hard
The London branch has also collapsed, and that affects some of the companies we manage. They are certainly not the second largest bank to collapse in the UK, that I think was Halifax Bank of Scotland, Royal Bank of Scotland was definitely the largest in the UK, and indeed company of any kind in the world to collapse.
Yes but all our banks (except perhaps Barclays) are still technically bankrupt, but are all fortunately backed by HM Government and our money tree, so none will be allowed to ask for receivership.
@@drpeterc12 the Magic Money Tree thank you!
The BBC is reporting that the UK Gov is working out a plan to bail out the UK companies affected... it doesn't mention bailing out the bank though.
US bank run start now!! Withdraw yr money and invest in house and property is the safest invest.
@@drpeterc12 The Financial Services and Markets Bill started in the HoC and now at the Committee Stage in the HoL is worth a look.
HM Government has never been tested, to date, in compensating individual personal deposits to the current amount of £85,000. Let's hope you are right that sufficient funds are directed to such individuals who do not hold private banking accounts whom, I'm sure would be first in the queue to be protected.
Finally, a common sense, "world isn't ending" explanation on the situation. Thank you!
Great explanation.
It's a bloody relief to have someone speak authoritivly about economics without the bs emotive driving drama.
I'm subbed bro. 👍
Excellent summary Richard, one minor point, silicone is the soft rubber material used in sealants and kitchen utensils while silicon is used for semiconductors
I deal my pipes with chips.
I caught that one as well... quite the pet peeve of mine. Also, silicon is an element.
I think the only one that irks me more is "duel-core", though at least now that multi-core CPU's are the mainstream that's become less frequent.
It was bothering me too
Ask JP Morgan how many clients they advised to get their funds out of SVB before the run.
Thanks Richard - well done! I appreciate 'less fluff' in order to get this produced quickly. I am not in the finance industry nor am I a Tech Start-up so this is just 'general information' to me. This is developing so fast - and has such powerful implications for the future of MANY financial organizations - that I thought there was only one bank that failed - names too close and SO FAST! Thank you!
Plain bagel , buy bitcoin!
Oh goody - I've been looking forward to the Plain Bagel's take on all this...
...yup, that was great! I strongly suspected the breathless "holy flippity flip flop flap" (yes, you know who you are) guys were getting out in front of their skis on this.
This reminds me of 2008. We were invested with Merrill Lynch, Bank of America and AIG. Long story short. The financial advisers we talked to at these companies had no idea what was coming down on us. I had to explain to them what a "SWAP" is. ML got caught by abuses of speculators in their London office. It went down fast. This feels similar.
"Comming" lol.
Yeah, people forget that 2008 started with Bear Stearns and other niche institutions. While it could stay contained, because of credit tightening overall I'd be surprised if it did. We'll see in the Fall.
@@slofty Yeah. Did not use spell check.
In my experience, financial advisors are undereducated fools who are programmed to sell products. The tragedy is that their superiors in the C Suite aren't much better.
@@yuglesstube This is true to a point. I am a specialist in robotics and automation. It takes all I got to keep up. Knowing various financial instruments is beyond my skills and I need to get advise where I can. But, you are correct except I know less.
This was video outdated within 24 hours. We are now up to 3 banks closed in 5 days. Signature Bank, also closed by regulators, had over $110 Billion in assets which is the third largest bank closure in history.
lol
None of this would happen again if CEO greed and incompetence carried a long jail term.
@@dappercanuck1852 And, no doubt, a WOKE idiot too.
It all goes back to the record profits of companies in this period of “inflation”
@@kaytee7607 You speak Marxist trash, lies and nonsense. Move along.
If we punish CEO's incompetence, it will kill every innovation. Failed innovation attempt is hard to distinguish from incompetence. Things are not that simple bro.
It was a bank run... not from a greedy ceo or whatever you are saying. Also if their salary is 7 million its not like it would have made a difference if their salary was like 70000$ instead.
CFO of silicon valley was upper management at Lehman Brothers. You can't make a script for a movie with more incompetent players than what life gives us. I've never fully believed in bitcoin...but 1 btc = 1 btc
Also, you said that these banks serve Silicon Valley startups. Those startups can be quite susceptible to failure even without external factors like this… We may see a lot of startup failures out of this
Is there anyway we can blame Biden and his diverse whitehouse staff for being asleep at the wheel and allowing this to happen ? lol
Plenty of ways! Trump 2024
At this rate, by 2030, we all going to end up in lord Humangus' warband, scavenging the wasteland for water and fuel.
No, we don't need banking like this at all. That fear was put in place by the very reptiles (bankers) that want you to think that and act like a scared little creepy hermit with your less than a year shelve life stock pile of crappy processed foods that will likely spoil months prior to the posted expiration date anyway. Keep you scared and stupid.
We certainly don't need banks regulating themselves. That's bat shit; all one has to do is look at the last 40 years and look around at the majority of American's income... 80% have only had their salaries decline in real terms... almost in nominal terms too.
Takes a special kind of someone to somehow outdo Well's Fargo in poor customer service.
If you are under the delusion that Well's Fargo can't out Well's Fargo itself, then I have a bridge in Crimea I'd like to sell you.
‘Poor customer service’ - weird euphemism for fraud
Lol this wasn't customer service problem.
Fake Customers inventing service fees
It’s unfortunate, but there were so many red flags prior to the collapse of SVB. #1, the bank took its tens of billions of customer deposits and invested heavily in bonds with sizable interest-rate risk. Worse, it was overloaded on long-duration bonds with more than 10 years to maturity, leading to a mismatch of assets and liability. Not quite sure if this is normal for most banks, but this is definitely a red flag. #2, SVB did employ a Chief Administrative Officer, Joseph Gentile, who had been with the company since 2007. His previous employer? Lehman Brothers! 🤦🏾♂️ Perhaps he just found himself in the wrong place at the wrong time. Twice… in a row though?! This could be a coincidence. 🤷🏾♂️
Quick question on FDIC insurance: Can a person/business have 2 or more accounts with the same bank in order to have more than $250,000 insured, or is it a maximum of $250,000 per bank? If it is per account like the FDIC webpage implies, wouldn't full insurance only be a matter of the time spent to create and manage multiple accounts?
It's $250k per account type. A checking account is one account type, with a savings account being another account type. So having a checking account and a savings account would provide up to $500k in insured deposits, but 2 checking accounts would only be $250k.
However, the insurance is on a per bank basis. If you have both a checking and savings account at 5 banks, that's $2.5 million in insured funds. I used to invest with Betterment and their cash sweep program would deposit your savings into checking accounts at multiple banks for up to $1 million in FDIC insured deposits. Why there isn't a fintech company that networks together 100 banks to offer FDIC insurance of $25 million per client, I don't know.
@@tylerpeterson4726 Thank you - that makes a lot more sense than how I thought it worked. That also sounds like an idea for a good business plan :)
My girlfriend’s brother in law was a part of the tech layoffs at Cap One’s West Creek Campus recently. It’s wild seeing the tech world in a downward spiral.
This is the second go around for a lot of us watching this happen to tech.
Yup, not the first time, it'll bounce bank in time. Just part of life.
You nailed it Bagel - I work at SVB and my #1 focus now is to help my clients land on their feet. I can say that my own loan book was of utmost quality
The risk for Silicon Valley Bank is the potential “fake-it-till-you-make-it” accounting used by many tech startups. I don’t know how aggressively the bank’s auditors reviewed the books of the startups before approving the loans.
The issue with SVB wasn't VC loans, it was VC depositors, who proceeded to bank run them.
Also, they invested large amount is very long-durariom debt, which got his hard by high interest rates.
It's wonderful that no youtubers, no fundamental anyalyts were able to predict the bank run. Says something that how much all these people are aware of it. It's so so easy to start making videos and do explanations after the fact.
Now comes the housing and automobile crash, wait for it, it has been happening slowly for the past year or so. At that point, we're screwed.
One of the ways from here for SVB is to have some large bank to step in, acquire SVB at peanuts and provide customers the full confidence. Big Bank could halt customer withdrawals by imposing daily limits for certain time periods and meanwhile slowly offloading bonds. Loss made in bonds would be the cost of acquisition for the parent bank.
Don’t give them any ideas !
I expect that's exactly what we'll see. The same way Bear Stearns and Merrill Lynch were taken over by the much stronger JP Morgan and BofA
I wouldn’t be surprised that BlackRock, PIMCO, State Street or Vanguard figure out a way to get a safe takeover of SVB.
Yeah, until its your money at stake then you'll want government bailouts. GTFH
@@rutherfordbhayes423 This happened many times since the dawn of American financial history. This isn't exactly a new idea.
Wait, a crypto bank failed????? NO WAY!!!!!!
Fractional reserve banking...an "old" problem. Nah, just an old system. It would be an old problem if it was ever fixed, but it hasnt been.
Thanks for the info Richard. Although one thing that could have been mentioned that could make this video more useful is about exposures that financial institutions hold on U.S gov bond. It's an asset that most financial institutions hold certain amount for 'risk free' return. There may be more financial institutions with unrealized loss on gov bond that can be later revealed, which may lead to another bankruns.
I took a two-week break from the news and this happened.
Don’t take anymore breaks. The economy will thank you.
Make that three. As of 03.12.2023, Signature Bank has been shut down/
Good, level-headed observations. I started watching a couple of the fringe videos saying "the economy is going to collapse, go get your money out of the bank right now" videos, which will only incite panic. I think people should go watch the movie "It's a Wonderful Life" before attempting to extract their money from a bank to understand how bad a bank run is. Banks can generally handle a load of maybe 5% extraction at the most before serious problems kick in. So if some people take their money out, it's something that can be absorbed. If more than roughly 5% take their money out, that can't be absorbed as easily and runs the risk of collapsing the bank and that would cause far more problems, including triggering rampant global inflation, which would devalue the USD to nothing. The result would be a total disaster. If you want to point fingers, Peter Thiel is primarily to blame for SVB failing as he incited the panic. The FDIC should extract every last penny from him to help cover the losses.
But what if everyone else at my
Bank pulls their money out before I can???
that was a savings and loan bank in the movie, they were gobbled up by the big commercial banks., which is why no decent interest on savings accounts.
Me, who thought SVB was just another name for Silvergate: 0.0
That's an optimistic and short sighted view. The businesses that have lost their working capital won't be able to operate. This will kill the tech stocks, ie silicon valley, and the employees. This trickles through to commercial real estate and the overinflated west coast housing market which affects SVB's "assets" in addition to other banks assets. This doesn't even include direct investment from banks in SVB nor pay any attention to the perceptual potential for bank failure, as was the cause in this case.
This is just the beginning.
Good explanation. But as someone who worked in financial regulation I think there should be questions to the regulators on the stress testing and LCR submissions for SVB.
Or why fed reserve didn’t step in and buy the government bonds for cash ? There should be standard procedures for dealing with ban runs, esp when there are high quality assets.
My spouse mentioned that SBV fell just below the threshold for stricter stress testing, due to the weakening of Frank-Dodd in 2018. Yet another thing to blame on the 2016 elections.
Page 87 of their most recent 10-K.
"As a banking organization, our liquidity is subject to supervision by our banking regulators. Because we are a Category IV organization with less than $250 billion in average total consolidated assets, less than $50 billion in average weighted short-term wholesale funding and less than $75 billion in cross-jurisdictional activity, we currently are not subject to the Federal Reserve’s LCR or NSFR requirements, either on a full or reduced basis."
@@katarh The reduction was Republican policy that a couple of Republican senators (probably Manchin and Sinema, though I'm not sure) also supported. I wouldn't be surprised if some rich people bought those votes because I don't have much belief that R senators are smart enough or would have any incentive to go for those changes to the law on their own.
I like your presentation and knowledge, subbed. However, I think you underestimate the fallout. The problem here is that many well known companies funds are being held up which is impacting their own clients funds being held up. Not sure of the exact list but let's say Airbnb needs to pay property owners, that can be held up. Things like that tend to create a much larger panic and it's not going to be just a single company that this happens to. Crypto banks collapsing probably gets more smiles than frowns but when normal banks fail and their client list has loads of household level name recognition, you might have a problem, Houston.
Thank you for your level headed take. Tiktok had me thinking the sky was falling...
I always appreciate the calm tone and level-headedness of Richard's video. Not trying to spook investors, but just provide clarity on the news.
Make that a third bank being closed now, Signature bank in New York.
Well. Maybe it's a problem that there was so little that the bank had on hand?
Fractional reserves aren't new or generally a problem. It is worth noting that SVB petitioned to get laws changed so that they didn't have to increase their reserve percentage as their size increased.
They got the change in 2017, if memory serves.
@@TheNaldiin Exactly.
There's a lot of tech companies that might go under because of SVB since a lot of tech companies parked their money there. Some of them couldn't even make payroll because of this.
Can I still play my ''call of duty or Fortnite'' vids?
These firms invested in wokeness. Especially the SVB. The ceo was too busy with pride campaigns to run the bank
Thanks for that straight forward, no frills explanation. As soon as I saw you had posted this video I thought "uh huh! now this will explain what's happening with none of the crap." Please keep up your high quality videos. 5 stars!
Confidence in the US government. Riiiiight. I haven't seen anything in several years that would have me trust the US government to do anything other than make endless mistakes.
Then you should only take any salary or accept any payment in gold only. If you can't get that you should refuse all payments.
So true!!!
People are finally realising that if it's "not your keys, it's not your coins".
Brother, I just sent a huge invoice payment to a company that uses them. I’m sitting at home watching this video right now and fortunately because of you I was able to get in contact with my bank and cancel it before it got cleared on Monday. Thank you.
Check SEC filings of companies you hold stock in to see if they have loans with SVB...
Funny how you call it the banks assets but its just them buying stuff with your money. My question is what happens if i am paying a mortgage and the bank closes?
Wow, Bank Regulation is good? What a concept.
Great video. It’s so refreshing to hear economic news in a concise, straightforward way without the drama. Plus, I always learn something new with each video. Thank you!
One might ask, "Why don't these companies have tons of different bank accounts at different banks so as to get more protection from the FDIC and avoid a concentration of credit risk?" The main reason behind this I suspect is the slow time to clear payments between banks and the hassle of trying to give different vendors different banking information in order to be sure that you have enough money in the account that you give them so the bill gets paid. Because they can't instantaneously transfer the money or demand that customers pay them RIGHT NOW, they have to have a bunch of slack in the system because they can't predict which banks are going to have enough money to cover the bills they're trying to pay. This means they have to somewhat centralize operations, which means a lot of cash in a single bank.
The prices of bonds have an inverse relationship to interest rates. The recent rapid rise in interest rates has caused bond prices to fall. SVB failed because a large portion of its bond portfolio was "marked to market" and they were forced to recognize losses. The question that is unanswered is, are there other banks with bond portfolio losses that will soon have to be recognized? Was SVB a one-off or do we have a real problem in the banking sector?
The Fed was expected to raise interest rates another 50 basis points next week to fight inflation. Will they still raise rates as expected? Or will they allow inflation to remain high in order to save the bond portfolios of banks nationwide? The Fed is facing a real dilemma!
There's a chart floating around of the net unrealized losses on the books of the big 4 banks. Its..... extremely concerning to say the least
The recognition of losses is irrelevant, proceeds from the liquidation of those assets were insufficient to cover liabilities
Big banks are fine. It’s the smaller banks that can quickly go under and it will cause people to panic and multiple bank runs which can lead to major crisis.
@@HotDogLaws None of them go far in excess of market cap like SIVB and bond losses are not likely to be realized being held to maturity whilst it may be a drag on their ROTCE. None of them did stupid shit like dumping the majority of deposits into long term MBS with 0 interest rate risk hedges. All banks are always subject to a risk of a bank run and that is why we always subject the biggest ones to stringent stress tests unlike SVB. The major difference is that they do not have a concentrated client base like SVB.
They need to do what it takes to stop inflation. You don’t want rampant inflation.
If the government could get their shit together and ban stock buybacks, tax long term capital gains 25% on a million up to 50% on a billion, reduce defense spending, and lift the income cap on social security we could see progress with inflation declining but government just wants to spend….
And implement a 5% vacancy tax to punish the greedy corporations holding houses for no reason but to keep prices high.
Now it’s three banks: SVB, Silvergate, and Signature.
When "money" is vaporware it can just go poof.
After the last financial crisis you would've thought that they'd have more safeguards in place. Just be careful where you invest your money because many banks have applied for a licence but not been granted it which means that they cannot provide cover for its depositors. What worries me is that Chase Bank is offering better interest rates than other banks - how is that possible?
Should we be concerned about banks that have recently been offering above-market sweetheart rate CDs (e.g. Capital One's 5% 11-month CD)? They do that when they need a short-term infusion of new depositors and their cash so I wondered if they're on shaky ground similar to SVB.
Hopefully not. I just put 50k into a CD account
@@fred89pj USA CDs are FDIC insured for up to $250k.
@@dylanmanka8795 good
Thank you so much for this information. Very easy to understand, and appreciate the straightforward approach. It really means a lot to a layperson like myself to get this type of quality analysis in a manner I can understand. :)
I want thank you for your calm, straightforward, and thoughtful analysis. I passed by many videos in my search [including big media networks and other clickbait] looking for you because I wanted an honest, analytical take on the situation. Thank you!
Great explanation. My coworkers and I (in tech) were trying to break this down and we came to same conclusion that is not 2007 2.0. But don’t tell that to main stream media. It’s the end of times there.
Yep. MSM is fear porn.
They're waiting for 2024 election drama to kick off and buy them a few more years. Gotta burn what fuel is on hand until then.
When there was an organized attack on Adani by US short sellers, his company's total valuation dropped by approx $100 billion. Although his FPO was fully subscribed, yet he returned the money to his investor, pre-paid his loans, had no impact on his assets, No Pink Slips, and No Job losses. Now when US Startup Bubble busted with the SVB Collapse, the total valuation dropped by approx $200 billion, Out of which total of $175 billion was public money that to UNINSURED. i.e. 90% of SVB bank account holders probably won't get their money back. People queuing outside the banks, and management calling the police. Tons of small to midsize companies don't have money to pay salaries, hundreds of startups fall, thousands of jobs are gone, and chaos in US markets. Just last month the same people were wondering why the Indian Economy was NOT doomed after the attack on Adani.