Silicon Valley Bank
- why do all these fintech startups put all their money in a bank that is decidedly low-tech?
- why did the bank decide to lend to the government, rather than to the entrepreneurs who throng California?
- almost nothing has been telegraphed as clearly and for as long as the end of ZIRP and NIRP and the Fed having to jack up rates to head off roaring inflation. Putting all your assets in long dated US Treasury Bonds seems beyond stupid. It’s not as though yields are higher further out down the curve (now and for probably the last 18 months),
- Although $SIVB is not an especially big bank, we know that it will be bailed out. That’s why depositors, who for this bank were very sophisticated companies and individuals, didn’t care about the $250K FIDC limit. The bank was simply too connected to fail!
As always, Matt Levine has the most readable take on the story: here.
Rudy is good too:
Scott just said that this whole Silicon Valley Bank unpleasantness is “bullish” because the Fed will have to cut, or something. It’s mind-numbing, but funny.
People are gonna be working over the weekend now furiously going through the last known bank balance sheets and trying to calculate which banks are safe and which are potentially dangerous. As it turns out, in modern world bank can go tits up, zero from hero in a span of a day. Unless something happens, you will probably see other less safe banks go belly up by monday.