The phone call that broke world banking

if you're not into Tech last weekend was nothing special Brendan phaser I love you Griffey but for Tech Founders and Executives last weekend was the stuff of nightmare the FDIC just reported the California regulator shut down silicon the biggest bank collapsed since the 2008 financial customers right now no access to their money 42 billion dollars were withdrawn within 24 hours Silicon Valley Bank the bank where over half of the venture-backed startups in the US keep their money failed it failed and and I'm really not exaggerating it failed in about 40 hours from this press release at 404 pm on Wednesday to Friday at noon a 200 billion dollar Bank managed to fail trading halted offices closed government took over immediately after Panic started building up and continued over the weekend these companies these startups really lost access to their money even if only for a few weeks there are thousands of jobs on the line not only from their own payrolls but from their providers there were desperate call-outs from everyone in the sector for the government to enter intervene and save not only them but but the entire economy and the government did and of course this can feel hypocritical from a sector that usually likes less government regulation we're going to talk about whether or not that was the right thing to do but let me tell you if it hadn't happened believe me this week that we're in would have been way way worse I thankfully did not have any money in Silicon Valley Bank nor did we at slight beam but watching my fellow entrepreneurs reading the chat groups that I'm part of it felt very surreal because as a Founder you might delay payment to a provider you might delay it to next month or you might pay yourself late if you need to but one thing you absolutely don't do is miss your company's payroll missing payroll for whatever reason sends all the wrong sick it means people's School tuition it means people's mortgages and people's bills but when your bank fails if all of your money all the money that you've raised from investors heck all of your revenue is in one bank and that bank dies you are in some serious learn my lesson then I'm not gonna put the money all in one place for many startups even Silicon Valley Bank had actually pushed them to sign an exclusivity deal meaning that they would have to keep all of their accounts in that bank now here's our challenge to tell you this story we needed to finish this video in less than 40 hours all right guys so here's the challenge we need to finish this video in 40 hours it took 40 hours for Silicon Valley Bank to die so this is going to be our fastest documentary and and it's been it's been pretty crazy we uh we also opened up questions on YouTube on on our Twitter accounts and we got hundreds of questions throughout the week which we made sure that we cover in the story and we're going to highlight your questions as we answer them in the video this was not easy to grasp we had to learn a lot of terminology that we had no idea about I mean our job is running companies not understanding Banks Our intention with this video is making sure that everybody can understand what happened that you don't have to go through the hours of research that we went to in order to get a grip on the events or to be able to have an opinion on something that could have changed your life very drastically truly so so we have about four four hours to finish wrap up edit and publish this video it's already not the first one but I promise you this this is gonna be the best explainer you're gonna find this is company forensics Silicon Valley Bank all right you guys ready okay let's get started on Sunday at 606 PM the government issued a statement saying that everyone's money on Silicon Valley Bank would be available the next day rest assured they'll be protected and they'll have access to their money as of today this effectively ended a nightmare week not just for the executives of the bank who are already sued but for the clients and yes this is the government coming to the rescue and according to the statements without using taxpayer money this is an important point no losses will be borne by the taxpayers still not a clear how we're gonna explain it when we finally understand it Silicon Valley Bank died because of a bank run it's not a new term but this is the first bank run in the US in many years A Bank Run is simply when everyone tries to get their money out of the bank at the same time this is a key concept that you have to understand because regardless of the country regardless of the law a bank run can kill any Private Bank in the world so we arrive at the first explainer how Banks actually work at the very simplest level what the bank does take some money from the clients the processors and find ways to make more money with it and give you some of that money in the form of interest and in the form of services really somebody has to pay for for the office and and for the nice teller lady so the bank takes your money the customer's money and invests it to generate more they might lend that out to other people for example as as a mortgage they might lend it out to other companies or even to to the government via a treasury bond and then all of these things pay an interest rate so they take that interest they pay you some of it as your own savings account interest and then they keep the rest for their operation essentially the spread that's their problem and there's no foul play in this this is really how most banks in the world work now in the US banks are allowed to use about 90 of their money that they have from their depositors to invest and then the other percent they have to keep in their reserve and it must be kept in this main wallet meaning the money needs to be readily available to give it out to their customers if they need it immediately now when a bank run happens people desperately withdraw all their money but if enough people do so then the bank can run out of money in that wallet and become a liquid liquidity doesn't mean that the money is completely lost it doesn't mean that someone stole it it just means that it's stuck there it's stuck in loans or mortgages or or government bonds if if the bank lends a company a million dollars over over 10 years it can't just go and take the million dollars back right away so so the bank's total assets might still be greater than what they owe like the deposits that the customers money they just can't pay them back right away which is of course a problem but it's very different from a bank or from a company becoming insolvent insolvency is what absolutely happened to FTX a few weeks ago as an exchange it operates a bit like a bank too and then when FTX died and then when Regulators dug in they found that there was money missing that there was not enough money to pay for all the deposits Silicon Valley bank was closed by the FDIC because it was eLiquid and maybe because it was also insolvent but we'll get there in a second but for most customers for the companies both of these things are equally bad the point is they can't access their money they can't pay their employees they can't pay their power bill that's why Bank runs are so dangerous really the word here is dangerous but let's get back to the other timeline I'm going to show you why now before the government made this announcement there was absolute panic in the air that this contagion would spread that it would spread to other Banks out of money because if this Panic actually spreads it would trigger Bank runs on other Banks as it happened with Signature Bank in New York who also went out of business over the weekend the irony here is that it's the Panic it's the Snowball Effect it's the tweets the interviews the media that while our informing people of what's happening are truly making things worse this is so much bigger than a bank biggest failure since something frantically waiting and longer this billion dollars financial sector collect and this of course triggers memories from 2008 where among other things a lot of Bank runs happened at the same time triggering what the government called a systemic failure when just everything just Falls like a house of cards this painting had been building up all the way through the weekend with interview after interview tweet after tweet podcast offered podcast speaking of the possibility of the systemic failure happening again if the government didn't intervene which is mostly true there was a big chance that the Panic could spread and that other Banks would see the same fate if nothing was done about it now most of the panic came from this statement by the FDIC so the Federal Deposit Insurance Corporation was created after the Great Depression in 1933 the regular Banks to act when one goes out of business and mostly to protect the customers it works very much like an insurance agent the banks need to pay just like an insurance company premiums on the money that they have stored they have to pay those premiums to the FDIC that's how it gets funded and in exchange this government insurance company ensures the customer's money and it's meant to pay it back to customers if the bank collapses now here's the catch they insure up to 250 000 per customer this is an agency meant to protect customers the average American and the average American doesn't have 250 000 in savings the statement by the FDC essentially said that they would do their job that they'd make all of the insured money available by Monday this is what they do very efficient on their part but most of the money in Silicon Valley Bank was not insured that's because Silicon Valley Bank dealt primarily with companies and many startups had Millions even billions of dollars stored in Silicon Valley Bank around 150 billion dollars of the customers money in Silicon Valley Bank was on accounts above that 250k threshold and take a look at how that compares with other Banks now the logic behind this these limits on the FDIC is sound if all of the money the bank has is insured by the government then the Insurance Fund would have to be much larger but more importantly if all the money is insured then Banks can be completely Reckless and still know that the government will pay for their mistakes isn't that what what's happening yeah yes we'll get we'll get there hot anyway the point is that the money stored in Silicon Valley Bank was mostly uninsured it was money from a very specific type of customer startups companies tend to have millions of dollars in the bank from their investors so that they can expand and grow rapidly they need to have this cash when they raise money that's what we do at slightly anyway Silicon Valley Bank had also signed these exclusivity deals with some of their clients that forced them to keep all of their money all their accounts with them the FDIC statement was the end of Silicon Valley Bank it meant that they had taken over it meant that the bank run had been happening over the last few hours was over because there was no more liquid money to get out of the bank since the morning of that Friday the bank was no longer sending transfers offices had closed it was true chaos but how did this Bank Run start and why was it so violent let's go back a day now this background was peculiar because of the type of customer that svb dealt with people like me Venture backed started Founders I'm part of a few founder chat groups with other people who I truly respect fellow founders companies founder CEOs of companies that are much larger than we are I respect their opinion I consider them smart people if the word on the telegram group is that svb is dying that you have to get your money out I am bound to trust that word more than a random Twitter person these are founders who have heard this rumor about the bank going under from other Founders or from their own investors we know that several firms reached out to their companies to their Founders to tell them to get their money out of Silicon Valley Bank heck many of these firms have their own money themselves in Silicon Valley bank and then and the idea the Inception that triggered this seems to have been this dude Peter Thiel a prominent investor part of the PayPal Mafia go watch a video about them the first investor on Facebook and his fund Founders fund was one of the first to get their money out probably a few hundreds of millions of dollars Thursday morning last week right before the Panic was beginning to set in and then we get a frantic message from a Founder friend and he says that he has just gotten guidance from one of his investors that that there is a bank run that's beginning what are you doing to address this with your Silicon Valley Bank client's linear portfolio I was absolutely confused we transferred close to 25 percent of the cash result from our main bank into SV in the last few weeks and all of a sudden on Friday the messaging from Bank of England saying all the UK accounts are frozen and they're looking at an insolvency by Sunday and I started preparing myself for the worst case scenario like my friends they have 100 of their money in svb and they really don't know what to do I can't even digest now this this student Threat by Alexander tornegra perfectly summarizes what a background looks like when you have your money there he had both personal money and his startups money at Silicon Valley Bank and this is his day Thursday 9 A.M questions about SVP starts to show up 10 a.m some suggest getting the money out of SVP for safety 1050 I read the messages in a bathroom break immediately cancel meetings ask my wife to wire all our personal money out to other Banks call my teams ask them to do the same 11 10 we can't get the money out of any of the accounts for our personal savings we don't have other accounts to transfer to 1238 wires to Ameritrade clear the first company is safe 410 we jump on a plane back to San Francisco 1150 we have land we learned that the second wire for the second company hasn't cleared where's the wire to get our personal savings out of SBB is still in queue Friday 7 A.M we wake up nothing svb stock has crashed 60 overnight 7 30 cancel all morning meetings to focus on the problem at around 8 am I learned that SVP is now controlled by the government 9 am hosts a town hall with my team explain what's happening answer questions 4 pm figure that the money for the company with the pending wire is safe it will be available as of Monday unfortunately for our personal savings only a portion is safe we may recover most of the money the percentage however remains unclear and it might take years 5 PM play with the kids man I spend my weekend playing Hogwarts Legacy I mean I wouldn't wish a weekend like this in my to my worst enemy I'm kidding of course now even if this background was being spread over calls and private messages the media had cut up they not only started reporting on what was happening but on another very visible metric about the bank the stock price stock prices were tanking all through Thursday the bank CEO Greg Becker had called a meeting Thursday morning to tell everyone not to panic which of course did the exact opposite everyone's kind of holding their breath because the CEO of Silicon Valley Bank holds an emergency Zoom town hall and this Zoom link actually goes viral among VCS to see what he's about to say and it was actually a huge failure of communication and then it ends with this paraphrase statement which is there's nothing for you to worry about unless everyone panics and takes out their money then you should be worried but essentially the way that he ended that call and the trigger for all of this craziness the trigger for all of this Panic came the day before we've made it to that press release I talked about or I will talk about it truly the beginning of the end at 404 pm on Wednesday Silicon Valley Bank issued this press release this is a blunt 500 word press release with banking language that only a handful of people could really read but the translation to English said essentially this we are selling Bank stock to raise around 2.25 billion dollars and we've sold 21 billion dollars in our investments from from that investment bucket at a loss of 1.8 billion dollars that's it but now that you understand banking thanks to our cool stop motion you know what the message here is you know what the message that that's hiding behind this text this press release really said hey we're running out of money in our liquidity wallet and we've been forced to get more we need that money so desperately that we're willing to dilute our shares and to sell those Investments at a 1.8 billion dollar loss to get a better sense of the technicalities I've been chatting with Rich Faulk Wallace from our Canon analytics hi I'm Rick Wallace I'm the founder of Arcana analytics a data analytics business before that I spent my career as an investor at several hedge funds Citadel like what they did is they announced publicly to the market on March 8th that they had crystallized 20 billion of the 200 billion of assets that sat on their balance sheet at a nine percent loss to make matters worse a crypto-focused bank called silvergate had just gone bust a few hours earlier that same day and it was inevitable for people to at least assume that their two were kind of connected now why would anyone take such a desperate action release such a bad press release well the pressure came from Moody's Moody's is a decently respected rating agency that essentially rates the financial standings of Banks and institutions and even countries if we don't give them the ratings they'll go to Moody's right down the block hours earlier Moody's had announced that it was downgrading the status of svb to negative and the first reason that they mentioned was the deterioration in SVP Financial groups funding liquidity and profitability the Moody's press release came just hours before svb's own press release but they had been given a warning the decision to sell stock and to sell assets at a loss was actually made over the weekend now at some point the week before Moody's had caught all the executives at Silicon Valley Bank to tell them about this upcoming downgrade in their rating now this was enough of a big deal to trigger the CEO and other Executives to fly to our side of the country to meet in person and to begin coming up with a response plan a response an action to to respond to this drop in rating we know that it didn't work out but why was the bank struggling in the first place why did Moody determined that it had this negative outcome well someone who actually had a negative outcome prediction for the business was the CEO who a few weeks earlier had sold around four million dollars worth of his own shares in the bank cashing out as one might say funny enough that same week Forbes named Silicon Valley Bank one of the best banks in the country which of course doesn't do well for Forbes credibility anymore okay so why was Silicon Valley Bank in a hurdle well first of all it has to do with the type of customer that they deal with most banks have this mixed portfolio of customers but svb had mostly Venture funds and startups there was not only a problem because of the uninsured money but because they're all inherently tied together all through the pandemic 2020 and 2021 a lot of money was injected into startups we know this firsthand literally what we do for a living is make pitch decks for these companies around 300 million dollars were raised with the pitch sticks that we made in 2021 it was easy to raise money in 2021. this meant that money flowed into Silicon Valley Banks's accounts remember half of venture-backed startups in the US use them as their bank now from 2019 to 2021 assets under management for svb almost doubled the pandemic was this time of Bonanza for startup for tech companies that were raising money until the well dried out by mid-2022 investors had stopped writing checks starters had to slow down their scale but they were still spending out of their savings out of their Savings in Silicon Valley bank now that burst of capital of investors putting a lot of money into these companies in 2020 2021 was unexpected it wasn't normal but their monthly and was the bank seriously miscalculated how much money they were going to need in hand how much liquid money they were gonna need in that wallet to be able to keep funding the withdrawals of these companies through 2023. after this 2021 Bonanza ended they put more money than they should have in these long-term Investments right so take a look at these These are the banks financials actual financials that rich actually helped me understand these are assets the bank has that add up to about 205 billion dollars now the thing with how Banks account for these assets is that on paper they're accounting for the value of a mortgage at maturity so you know the bottom mortgage today it cost them this but on their books it's counted as what it's going to be worth at when that mortgage expires now this is of course not the bank's money this is the depositors money so if you look at those two bars there's this little there's this little range over here at the very end and that's called the bank's Equity that's essentially how much the bank is worth it's their assets minus their liabilities meaning how much the Investments of the bank are worth minus what they would have to pay if everybody got their money out but here's the thing when they made that press release on March 8th what essentially they said is well our assets are worth less than what we thought they were so essentially that Equity disappears and they might have that deficit so if all of these assets are worth less because the Investments they made were devalued they have less assets than liabilities which means that they're insolvent and what that resulted in was everybody else in the market saying hey there isn't this Equity cushion and so what immediately happened thereafter was in particular VCS on Twitter said to their follower groups hey it looks a little shaky I think it would be prudent to pull your money now if you haven't noticed our timeline is color coded in blue we have highlighted government decisions that have anything to do with this in yellow we have highlighted Bank Executives decisions really the reason why we wanted to do this was to answer this question of well what if the government hadn't intervened what if we removed the government from the equation and we'll get there now the point here is this was very much a bad Bank decision to miscalculate how much to invest and to invest in the wrong things could the bank have done anything different to avoid this it probably could have it could have had a loan book that was less Long what's called duration and so SBB they didn't do a very good job of matching their liabilities and their assets and that can be very tempting because the longer the duration difference the higher your intrinsic spread is going to be and so you make more money you're taking risk this kind of a risk that hey the interest rates go up and therefore you're asking side goes down while your liability side stays more flat but that's a choice no don't get me wrong I'm not a banker I don't know if at that time those Investments were moronic or smart but let's dig deeper now it sucks to have to go back and remember 2021 but we need to this is full-blown pandemic uncertainty and panic two government actions during the pandemic are very well connected to this timeline first the stimulus checks the US government injected about two trillion dollars into the economy in the form of checks and other Capital to companies now most Americans received thousands of dollars in free money and most people didn't complain but that of course was gonna have consequences at the same time to keep the economy stimulated the fed the U.S Central Bank slashed the interest rates to zero percent for the FED to slash interest rates means that Banks can now borrow money from the FED to then loan to their customers at this very low interest rate since their interest rate is so low they can also charge very low interest to the customers this means that borrowing money at this time became incredible really cheap but also means that the money that you had parked in your bank account wasn't going to generate a lot of interest because interests are low now if yours svb in 2021 you have a hundred billion dollars of fresh new money that your startup customers deposited in your accounts what the hell do you do with it so that it's not just parked there the bank did mainly and I'm overly simplifying here two things they invested in mortgage-backed Securities which are essentially mortgages and then they lent money to the government through treasury funds since a lot of money from Silicon Valley Bank was invested in mortgage-backed Securities I'm really going to focus on those for a while now when you when you get a loan to to buy a house you might have a lender that's that's maybe your small bank or even a mortgage company and these companies what they do is they group a lot of loans into this single big package you could have maybe a thousand loans with a similar amount of interest rate all packed up together and that's called a mortgage backed security it's the same as the 2008 ones but they're much better regulated these days now the big advantage of this is that if one person doesn't pay their mortgage it really doesn't affect the value of the package that much because it's really just one of 1000 or maybe even more mortgages all packed together now for the lender really the main goal is selling that package getting rid of it as fast as possible so that they can get cash back and then lend it again and create another mortgage-backed security and then when someone buys this when somebody buys an MBS they get the benefit of the loan they're essentially become the lender in a way all these 1000 customers pay their mortgage every month and then the buyer often gets those monthly payments as interest and then the mortgage-backed Securities are sold and traded among different investors they can even buy parts of them like shares in a company let's look at this example from 2021 interest rates where about three percent per year for a 30-year mortgage so 100 million dollars worth of loans packed in a mortgage-back security 30 years later would give investors about 130 million dollars I'm super oversimplifying a bunch of variables here but that's in essence what it's worth Silicon Valley Bank had many of those even though they didn't pay that much money they didn't really have other choices on places to put their money in 2021 in the middle of the pandemic but no one could have guessed what would happen next inflation is near historical guys now 50 more a month just for the basics are Sky High gas rents consumer prices are climbing at coming at fastest rate at more than 40 years or maybe yes or maybe some people might have guessed it or should have guessed it or actually did predict it pace of inflation will also depend on the pandemic government spending and the FED raises interest rates government decisions during covet played a big part of this whole thing but there were other unpredictable factors too like for example the war in Ukraine now inflation essentially means that there's more money going around in the world more money in the market again you can guess why and so the price of things suddenly goes up nobody likes when inflation happens we've seen inflation spiral out of control in countries around the world and that's why the government has been raising interest every few months or so you know in an effort to try and stop inflation and so interest rates on a mortgage today are around six percent that means that a new mortgage-backed security issued this year 2023 from a new set of the same 100 million dollar worth of loans would give investors would pay investors over those 30 years about 200 million dollars instead that of the 130 mortgage-backed Securities from 2021 are not as good and they don't pay as much and nobody wants them nobody wants to trade with them nobody wants to buy them because you can just buy one of the new ones with the new exciting six percent interest rates so sometimes the market value of a mortgage-backed security in this situation can drop it can drop even below the 100 million dollars that are owed to that security which is what seems to be happening right now especially with the assets that Silicon Valley Bank held so if the bank keeps it and just Waits all that time and lets the loans be paid they could actually get all their money back but if for some reason they're forced to sell those Securities today yes they're gonna lose money now you can trace the origins of this story really years in the past all the way to that Wuhan Market or was it a lab anyway there are also bad decisions in the middle very bad decisions by the bank management a bank structurally takes deposits and lends those assets so meaning if everybody pulled it once no matter what the nature of the assets are you would have a bank run that the bank couldn't meet in one day if a bank did everything perfectly for example they lend it to just Federal Reserve rates and they maybe they could pull the money immediately at low durations in that case they wouldn't be in solvent there'd be no risk of insolvency but there'd be a risk of a bank run because a bankrupt can happen if everybody pulled it once they just won't have that asset base to return immediately and that would be a very unprofitable Bank as well but like you have to be taking some risk and some duration in order for a bank to cooperate property what you're saying is no Bank could survive a 40-hour bank run with such large accounts with digitized that kind of bank run historically would have required that people literally walk to their Banks and ask them to pull out the money but what happened here is that you have that same fear and contagion accelerated infinitely in the digital age because you can just make that transaction from an app as VCS and and the market broadly said hey this is concerning on predominantly Twitter Silicon Valley Bank the holders of deposits tried to pull out 42 billion dollars in over the course of one day each individual or each company withdrawing their money and telling their fellow Founders about it made things way worse maybe a different type of customer maybe with smaller accounts insured by the FDIC would have allowed the bank to get a grip on the narrative but with such huge withdrawals there was really nothing to do but when there's this level of panic people just strive to save themselves sometimes really not considering the consequences a person is smart people or dumb panicky dangerous animals and you know it when that announcement came out by Silicon Valley Bank the nine percent loss investors who'd been following the stock carefully for years I thought it was a little bit bad but not a huge deal what catalyzed the problem was the sort of broader perception that this was a scary thing for depositors and then the reverberation of venture capitalists announcing it to their audience what we saw is very much a series of unfortunate events that could have spiraled into something way worse if it wasn't for the government but let's talk about that which I really don't know how it works yet but future me will okay so let's talk about that bailout now it's been called b word nobody wants to speak the b word this week because of how critical bailouts were in the 2008 crisis but this time it is different and the government has been quite emphatic about it 2008 bailouts essentially meant that the government lended money to the banks so that the bank the company the executives the shareholders could be saved so the company could be saved and there's an argument that it had to be done or otherwise the economy would have imploded but I'm I'm not going to go there that's that's matter for a whole other video now with Silicon Valley Bank the not bailout is different the FDIC remember that we talked about them is stepping up to ensure all deposits not just those up to 250 000 now this is possible thanks to the fact that the bank assets seem to be in good standing and could be liquidated could be sold to someone else yes at a loss but not a large enough loss to make them completely worthless now that the FDIC has taken over liquidating these assets to pay for the Contin immune withdrawals out of the bank is the value of that portfolio lower than the deposits at current market value yes that number is lower than the deposit Base by probably about 15 lower on the asset side been on the total deposits but the federal government the FDIC stepped in and guaranteed that those deposits would be made so there's no risk to the depositors but the asset base is lower than the deposit Base by about 5 to 15 billion dollars the bank is that the executives have been fired and as of today again soon and no money is going to the executives or to the shareholders of the bank now one complication that must be clarified is that we're talking about Silicon Valley Bank which is one of the companies operating under svb Financial Group the bank is that the government took over but the other businesses still exist they were definitely struggling they're having the worst press of their lives and they weren't absorbed by the government and then so the point of this non-bailout is that svb Financial Group isn't getting anything out of the bank it's gone so the FDIC doesn't need to liquidate all the long-term assets yet unless people withdraw them so they're essentially guaranteeing that if they have to they'll pay for the 10 15 billion dollar dip on the on the value of those assets if that has to happen like if the bank front continues until all the money is withdrawn from the bank if that happens so who funds the FDIC 10 to 15 billion dollars is it the insurance premiums or the other Banks pay so in a sense the FDIC oversimplifying a little bit but gets to capture that profitability that SBB was making on the spread between the deposit base effectively and the loan base but if they had to it's likely that they would be able to basically accrue that that value but so it realistically it's not likely that taxpayers will pay anymore my last question which is government intervention was key here to stop the crisis and to stop the spreading to other Banks what if that hadn't happened yeah it's a great question and in some sense you'll never know for sure what would have happened and some of these things aren't fully off the table today at the Catalyst of that moment what would have happened is that you probably would have seen sequential runs on other institutions that had a somewhat similar setups even though you have at least an implicit backstop of larger amounts by the FDIC across other Banks there still is this open question of what is is the incentive to keep your money in anything but what's called one of the largest a money center bank at all I think a lot of people are having that raising that question because this kind of non-booked losses fact is true across the industry now remember I mentioned that the FDIC is funded by the premiums that all the banks pay on their insured capital and those premiums might go up which inevitably would be translated into cost for people maybe in the form of higher interest rates on the bank loans or smaller interest rates on Bank deposits but it's not directly tax money and now almost 40 almost 40 yeah almost 40 hours later we can see the patterns that these events trigger these stocks of other Regional small-ish banks are down but so far no others have gone out of business it looks like the FED might stop increasing interest rates because of the pressure that this created on the banks it's not my business really these decisions are beyond my understanding of Economics but what we can do is this explain what happened because you can bet that the demise of Silicon Valley Bank will be talked about for decades you can bet that people are going to use the complexity of this whole mess the lack of understanding in the average person to just push their own agendas or to make their own arguments to reinforce their points just this week for example this guy a post went viral because they found this guy Joseph Gentile who he used to work at Lehman Brothers which is one of the 2008 crisis Banks and he worked at svb too but not at SBB Bank on one of the other companies and you know whole viral thing started from it my point is that the ground is ripe to politicize this and arguments can be made on both sides whether it's to blame the government for causing this in the first place or to blame the government for coming to the rescue there is blame yes but blame falls on a combination of factors some of these expected some completely unpredictable the blame Falls in bad decisions yes but decisions that were made without the information that we have today there's even blame on how quickly conclusions were drawn here or how quickly Panic was spread thanks to social media or how this mostly knit startup Community helped make the problem worse but let me say this one last time no Bank no Private Bank could have survived a bank run like the one we saw last week the system is much more fragile than you might think very much related by the way to our recessions video so check that out if you want to learn more about what happened in 2008 and in the other recessions how much time we have left we're done yes okay thanks a lot for watching see you next week [Music]

Channel: Slidebean

Views: 83,904

Keywords: slidebean, caya slidebean, company forensics, caya, startups, startups 101, silicon valley bank, silicon valley bank explained, silicon valley bank collapses, silicon valley bank news, silicon valley bank collapse explained, svb, svb bank, svb collapse, svb bailout, svb explained, svb bank bankruptcy, svb bank crash, svb bank run, svb ceo, silicon valley bank stock, silicon valley bank crash, what is silicon valley bank, silicon valley bank collapse, bank collapse

Id: 80TbyibmshY

Length: 35min 8sec (2108 seconds)

Published: Fri Mar 17 2023