Busted Banks
Here’s a fun game… After one bank collapses, who else will fail or sell out?
It’s Monday morning. Start your watches.
This is the most common, knee-jerk phrase about the Silicon Valley Bank collapse on Friday, March 10, 2023…
“It’s just one bank.”
This phrase must be stated quickly and with authority.
I’ve heard it publicly and in private conversations.
The phrase is so dismissive and so common that I have to assume it’s dead wrong.
SVB – R.I.P.
For context, we’re talking about the sixteenth largest bank in the US.
Silicon Valley Bank closed out 2022 with $209 billion in total assets.
So, this is the second largest bank failure in U.S. history. Lehman Brothers was the biggest in 2008.
Treasury Secretary Janet Yellen is pretty sure that SVB was crushed by a barrage of interest rate hikes. (I think she phrased it differently.)
Reports suggest that 97% of the bank’s deposits (by value) were uninsured. That’s a problem.
It seems SVB mostly served Tech companies. Apparently, some 37,000 of them kept their operating cash there.
When that cash vanishes, the companies —quite suddenly— can’t pay 400,000 employees.
Signature Signs Off
The Treasury Department, Federal Reserve, and FDIC issued a joint statement Sunday night, March 12.
They said they’re totally on top of things. Don’t you worry your little head about it.
Magic money will flow to uninsured depositors.
Oops…
The statement also said that they’ll offer similar protection to depositors of Signature Bank of New York, which state regulators closed on Sunday.
That’s bust number 2.
Silvergate Swings Shut
I’m writing this early Monday morning, March 13. Doubtless, we’re in for day of high drama.
Keep in mind that banks move like a herd of cattle. They do everything at the same time, in pretty much the same way.
Oh, look what I found. This statement was released on March 08…
Silvergate Capital Corporation (“Silvergate” or “Company”) (NYSE:SI), the holding company for Silvergate Bank (“Bank”), today announced its intent to wind down operations and voluntarily liquidate the Bank in an orderly manner and in accordance with applicable regulatory processes.
Silvergate served the crypto community, up until Wednesday.
Bust #3.
Bad Luck For Joe G.
We might as well close with our version of a man-on-the-street story.
Here’s a little gem dug up by Sarah Rumpf (FOXBusiness) over the weekend…
The Chief Administrative Officer at Silicon Valley Bank was Joseph Gentile.
Before that, Gentile worked as Chief Financial Officer at Lehman Brothers’ Global Investment Bank. Gentile left Lehman in 2007, just one year before it went bankrupt in 2008.
-TD