Banking Update: Yesterday, the Silicon Valley Bank in Northern California failed and was shuttered by the FDIC. It's the 2nd. largest bank failure in U.S. history. What, if any, are the implications?
You may be saying, "So what? I have no interest in banks in California." Wake-up! SVB's failure may be a bellwether (canary in the mine) for other coming issues. How safe is YOUR bank or credit union?
The recent collapse of both the Silvergate Bank and Silicon Valley Bank was caused by a combination of factors, including the impact of the COVID-19 pandemic, changes in the regulatory environment, the FED raising interest rates quickly, and the mismanagement of resources.
One of the critical factors that led to the collapse of these banks was the COVID-19 pandemic. The pandemic has had a severe impact on our economy, leading to a significant increase in loan defaults, particularly in the commercial real estate and hospitality sectors. These defaults put a considerable strain on banks' balance sheets, which ultimately contributed to their collapse.
Another factor that contributed to these bank failures was changes in the regulatory environment. In recent years, regulators have been tightening their oversight of banks, particularly in the wake of the 2008 financial crisis. These changes have included higher capital requirements, stricter lending standards, and increased scrutiny of risk management practices. For some banks, particularly those already struggling, these changes were too much to handle, leading to their failure.
Lastly, the mismanagement of resources played a role in the collapse of these banks. Both Silvergate Bank and Silicon Valley Bank were known for their aggressive lending practices, particularly in the technology sector. This aggressive lending led to a high level of risk exposure, particularly as the pandemic began to take hold. When these risks materialized, the banks were unable to manage them effectively, which ultimately led to serious issues.
The collapse of these banks is certainly concerning; what is unclear is whether their collapse may trigger a financial contagion to other regional banks.
In theory, the banking system is much more resilient today than it was during the 2008 financial crisis (I’m not so sure, see attached list of derivatives exposure), and regulators have taken steps to prevent the spread of contagion.
It remains to be seen if the collapse of these banks is likely to have a significant impact on the broader economy.
Let’s start with a headline news article and then I’ll share a situational video update regarding SVB from the prestigious Cooley global law firm.
I’m also including a rating research link where you can check the safety of your current bank or credit union… you might be surprised by what you see.
In general, credit unions are safer places today to hold your accounts than banks. And, credit unions have a different insurance backup; they are NOT insured by the FDIC which itself may have liquidity problems if more regional banks fail.
Record Bank Run Drained A Quarter, Or $42BN, Of SVB's Deposits In Hours, Leaving It With Negative $1BN In Cash
Game Over: FDIC Shutters Silicon Valley Bank, Appoints Receiver
"Expect Mass Layoffs..." - The Real-World Impact Of SVB's Failure
For most people in America, the news that a 'bank in Silicon Valley' has failed will be forgotten quicker than a story about soaring shoplifting in their local supermarket.
It shouldn't.
The reality is that the contagion of the shuttering of the 18th largest bank in the U.S. is widespread.
Please click this graphic for a link to the article…
What caused Silicon Valley Bank to collapse and will customers get their money back? Second largest bank failure in US history rattles markets and raises fears of wider risks…
Silicon Valley Bank's Manhattan branch calls COPS on investors trying to pull their cash out as Boston tech CEO with $10M in bank describes 'worst 18 hours of my life': Lender is SEIZED by regulators in largest US bank failure since Great Recession
Please click on this freeze-frame image for a link to a time-sensitive overview. A big thank you to reader Paul for sharing the link to this instructive webinar…. (23:04)
NOTE: This webinar link will only be active and available for viewing throughout the weekend until Monday, March 13 at 6:00 am PST // 9:00 am EST // 2:00 pm GMT.
Two US Banks Collapse in 48 Hours. Which One's Next?
BREAKING: Big Bank FORCED to Close: What It Means for YOU with Glenn Beck
Note: Bank Failure segment starts at 29:00 into the above streaming video link.
What Comes After the Great Liquidation?
Banks Ranked by Derivatives Exposure
Editor’s Note: I expressly warned about the dangers of derivatives collapsing the markets back in the early and late spring of 2008.
Here’s a newspaper article documenting my then warning now almost fifteen (15) years ago.
The sad thing is there are even WAY MORE derivatives (financial bets) now than then. They are a time bomb. Will the collapse of SVB set them off? It remains to be seen…
Please click on this image for a link to the website…
Here’s another great resource to check out the relative financial “health” of your bank or credit union:
Weiss Ratings: We provide 100% unbiased ratings and research, empowering investors to achieve the best profits and safety.
Imagine u$ gov has all fdic banks covered, with a vault secure, with monies needed, when and as needed. Print