Silicon Valley Bank was the 16th largest bank in the country, and two weeks ago on March 17th,

they filed for bankruptcy. It was the second biggest bank failure in U.S. history behind Washington

Mutual. Signature Bank, headquartered in New York, collapsed shortly after, and became the

third largest bank failure on record. So what exactly happened here? Why did these banks fail?

Whose fault is it? What can retirement savers learn from this debacle and what should they do in response?

Welcome to the Stay Wealthy podcast. I'm your host Taylor Schulte and today I'm tackling these questions

in addition to answering five important questions about our banking system.

For the links and resources mentioned, just head over to you staywealthy.com forward slash 184.

To understand what happened with Silicon Valley Bank and the current state of the banking system,

we have to rewind a few years. In early 2020, the growing instability surrounding COVID-19 caused the global markets to collapse. As we all remember, in just four short

weeks, the U.S. stock market dropped 34%. By April, the unemployment rate was skyrocketing and hit a high

of 14.7%. And by the end of June, real GDP, i.e. the output of the

U.S. economy, was cut by a third. In response, and to prevent things from getting worse,

the government stepped in and Congress-approved stimulus bills unleashed the largest flood of federal

money into the U.S. economy in history. When it was all said and done, approximately

$5 trillion went to American households, small businesses, restaurants, airlines, hospitals,

local government, schools, and other institutions around the country. According to Louise

Shiner and economist with the Brookings Institution, the stimulus, quote, made sure that when we reopened, people

had money to spend, their credit rating wasn't ruined, they weren't evicted, and kids weren't

going hungry. In addition to flooding the economy with money, the Federal Reserve cut interest

rates twice, taking already historically low interest rates even lower. The Fed also began quantitative

easing again and established new lending programs, including forgivable loans to businesses.

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