Are More Bank Runs Coming? The Collapse of Silicon Valley Bank

Money For the Rest of Us

J. David Stein

Investing, Investing Podcast, Business, Economics, Economy

4.5 • 1.4K Ratings

🗓️ 15 March 2023

⏱️ 33 minutes

🔗️ Recording | iTunes | RSS

🧾️ Download transcript

Summary

What caused Silicon Valley Bank to collapse in only 44 hours, and how likely will the contagion spread, leading to other bank failures?

Topics covered include:

How losses on bonds blew up SVB's balance sheet
How is Silicon Valley Bank similar and different than other regional banks
What the FDIC and Federal Reserve are trying do to restore confidence and stop bank runs
How a weakening of the Frank-Dodd bank regulation act set the stage for SVB's failure
Why bailing out uninsured depositors is controversial
Three scenarios of what might happen next
Actions we can take to protect ourselves when private money fails

For more information on this episode click here.

Sponsors

Masterworks – invest in contemporary art

Money for the Rest of Us Plus membership

Show Notes

Silicon Valley Bank launches $2.25bn share sale to shore up capital base by Joshua Franklin and Antoine Gara—The Financial Times

US Bank Capital Regulation: History and Changes Since the Financial Crisis by John Walter—Economic Quarterly

SVB's 44-Hour Collapse Was Rooted in Treasury Bets During the Pandemic by Brian Chappatta—Bloomberg

Remarks by FDIC Chairman Martin Gruenberg at the Institute of International Bankers—FDIC

How Silicon Valley Turned on Silicon Valley Bank by Ben Foldy, Rachel Louise Ensign, and Justin Baer—The Wall Street Journal

SEC Filings Details—Silicon Valley Bank

FDIC Creates a Deposit Insurance National Bank of Santa Clara to Protect Insured Depositors of Silicon Valley Bank, Santa Clara, California—FDIC

Uninsured Silicon Valley Bank depositors seek fire sale of assets by Joshua Franklin, Sujeet Indap, Colby Smith, and George Hammond—The Financial Times

Join Statement by Treasury, Federal Reserve, and FDIC—Federal Reserve

FDIC Acts to Protect All Depositors of the former Silicon Bank, Santa Clara, California—FDIC

US regulators are setting a dangerous precedent on SVB by Sheila Bair—The Financial Times

Back-to-Back Bank Collapses Came After Deregulatory Push by David Enrich—The New York Times

Will another bank fall? by Robert Armstrong—The Financial Times

Shares in US regional banks close sharply lower over fears of deposit flight by Jennifer Hughes, James Fontanella-Khan, Ortenca Aliaj, and Brooke Masters—The Financial Times

Charles Schwab shares drop 12% even as the firm defends financial position by Yun Li—CNBC

Related Episodes

405: When Volatility Spikes, Financial Things Break

392: What Is Money and How to Use It

305: Are Banks Safe?

See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Transcript

Click on a timestamp to play from that location

0:00.0	Welcome to Money for the Rest of Us. This is a personal financial on money, how it works,
0:06.4	how to invest it, and how to live without worrying about it.
0:09.9	I'm your host David Stein, today's episode 424. It's titled, Are More Bank Rents Coming?
0:16.0	The Collapse of Silicon Valley Bank
0:19.5	Last Wednesday, March 8, I saw a financial times piece that SVB Financial, the holding company
0:26.6	for Silicon Valley Bank planned to raise $2.2 billion through new stock issuance.
0:34.5	The purpose was to replenish capital that it had lost after selling $2 billion of US
0:42.2	treasuries and mortgage-backed securities. These were bonds the bank was forced to sell
0:48.0	to meet deposit withdrawals from its customers, but also because Moody's Investors Service
0:54.6	was threatening to downgrade SVB's debt rating due to the large amount of unrealized losses
1:01.3	on its bond portfolio. Silicon Valley Bank offers a variety of banking
1:06.9	financial products. Greg Becker, who is the CEO or was the CEO of SVB Financial, just
1:14.4	a week earlier, at a conference in Los Angeles said, we pride ourselves on being the best
1:20.6	financial partner in the most challenging times. Silicon Valley Bank has always had
1:26.4	a very close relationship with venture capitalists and startups. For example, I'm invested
1:33.2	in some private capital fund of funds through my old firm. I've invested in six funds
1:40.9	over the last decade or so, and those funds, in turn, have invested in 150 other funds
1:49.8	that were sponsored by venture capitalists, leverage buyout managers and real estate.
1:54.3	One-third of those underlying funds use Silicon Valley Bank for wire transfers to handle
2:00.5	the capital calls and distributions, and their underlying portfolio companies use Silicon
2:07.2	Valley Bank. If you pull up the year-end financial statements, the annual report or 10K for SVB
2:15.1	financial, what you'll see is it had $211 billion in assets, and 120 billion of those assets
	...

Please login to see the full transcript.

Previous episode | Next episode

Disclaimer: The podcast and artwork embedded on this page are from J. David Stein, and are the property of its owner and not affiliated with or endorsed by Tapesearch.

Generated transcripts are the property of J. David Stein and are distributed freely under the Fair Use doctrine. Transcripts generated by Tapesearch are not guaranteed to be accurate.