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South central kansas |
SVB , was unlike many banks, MA is clearly misrepresenting the facts to spin his own agenda.
https://mba.ncsu.edu/2023/03/21/what-caused-the-silicon-valley-bank-failure-and-should-we-be-concerned/
By Richard Warr
On March 10, the nation’s top bank regulator, the FDIC took over control of the failing Silicon Valley Bank, resulting in the second largest (by assets) bank failure in US history.
Silicon Valley Bank was unusual in that it specialized in lending money to tech and biopharma start up companies. Like typical banks, it funded these loans by taking deposits, however unlike typical banks, many of these deposits were very large and came from cash rich tech firms. In order to generate a decent return for these deposits, the bank chose to invest its depositor’s money in secure long term Treasury bonds. These securities, issued by the Federal Government, are very low risk and paid a slightly higher interest rate than comparable short term investments.
All was well, until recently when the Federal Reserve started raising interest rates significantly. This increase in interest rates put pressure on the bank to provide better rates of return to its depositors, but unfortunately, it was locked into the long-term low-interest Treasury Bonds. Depositors started withdrawing funds, in search of higher interest rates, which forced the bank to sell some of its Treasury bonds at a loss (bonds fall in value when interest rates increase).
Pretty quickly, the bank started to face a liquidity crisis, which occurs when depositors withdraw their money and the bank can’t cover the withdrawals. The bank recognized that it needed to raise more money, so it filed with the Securities Exchange Commission (SEC) to raise funds to pay its depositors. Unfortunately, the depositors viewed the fundraising action as further evidence that the bank was insolvent and they rushed to withdraw their money. What resulted was a “run on the bank”, the same situation that occurred in the classic movie “It’s a
Edited by zenfarm 3/9/2024 16:03
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There will be bank failures caused by commercial real estate losses
