How Silicon Valley Bank Collapsed in 36 Hours | WSJ What Went Wrong

Silicon Valley Bank collapsed in less than two days when FDIC regulators seized control. In that time, the bank’s stock price fell over 60%, a $42 billion bank run was sparked and a liquidity crisis ensued.

Here’s how SVB’s collapse became the second largest U.S. bank failure ever, and what it means for customers in the future.

0:00 SVB’s collapse forced bank closures, rattled global markets and threatened startups
0:30 The events leading up to SVB’s collapse
2:50 What was the turning point that marked SVB’s downfall?
4:39 Will Silicon Valley Bank be bailed out?

What Went Wrong explores the challenging conditions and decisions that led to a company's downturn.

#SVB #Finance #WSJ

[jerrycampbell-utyf]

It was a very bad decision to remove the Glass-Steagall Act in the late 1990s, which led to the spectacular failure of huge banks during the financial crisis of 2007–2008. To prevent another disaster, Dodd-Frank and this statute both need to be reestablished right away. What happened with SVB is only the beginning of what will happen if nothing is done to address the current situation.

[shellylofgren]

The rising interest rate can surely control inflation, but won't prevent erosion of the eroding purchasing power of the US dollar. I have learnt my lesson this time. The banks can't be making money off my money, while inflation eats into it. I have set aside 650k to invest in the stock market now, since that keeps up with inflation, but I don't know how to get started.

[MargaretSchwerdtmann]

The banking situation is a reminder that Fed hikes are having an effect, even if the economy has held up so far, ” It’s precisely at times like these that investors need to be on guard against the next certainty. First SVB, then signature bank and now first republic bank, these are all the signs of yet another 2008 market crash 2.0

[cloudyblaze]

What happened to SVB is really scary, and goes to show that no corporation, however big, is immune to collapse. I have always had a deep-seated mistrust for corporations. I have plans to pull out most of my money, but don't know what to do with $350k sitting idly. I'd like to go into the stock market, maybe. Any ideas?

[Raymondjohn]

About the current bank situation, I'm really concerned. I am worried about a lot more if a bank the size of SVB may fail. I have a friend who manages a fast-growing startup and was severely impacted by the bank run. I have taken more than $840k out of my bank. Since the FDIC only provides coverage up to $250K, an implosion could have negative consequences. presently want to invest in the stock market. Does anyone have any ideas on how I might proceed?

[emilybrown]

The negative impact of SVB and SI debacles has been reflected in the regional bank ETF (KRE) which has witnessed a decline of over 20%. This event has triggered contagion effects, dragging the entire market lower. However, historically speaking, a localized and narrow contagion of this nature presents an opportune time to invest in strong, financially stable companies with substantial cash reserves on their balance sheets.

[paulkurilecz]

Some things are left out in this video, namely the role that the California banking regulator played as well as how SVB handled such a large increase in deposits over a very short period of time.

[RoobieRhoo]

The $17bn loss was unrealized because bonds held to maturity are not marked to market. The problem with SVB was on the liability side and a liquidity problem, not an asset side devaluation. Not until SVB had to sell some assets and realize a $1.8bn loss to cover. A similar stress has happened before under Fed Chairman Volker and we survived it. I believe what we are seeing is banks adjusting to a more normal interest rate environment as the Fed finally lifts off the zero bound. Due to its hold to maturity book, SVB was actually solvent until the bank run.

[peterwilliams]

With changes in the economy leading to instability in the stock market, some individuals may face a decrease in their investments in an effort to benefit from the current market conditions, I am considering liquidating my $725k portfolio consisting of bonds and stocks. Someone else in the same situation? Please tell me in the comments!..

[waynejones]

It turns out that having long periods of Fed manipulated interest rates towards zero percent caused massive systemic risk. Once rates were allowed to move back towards a normal equilibrium we suddenly saw firms that depended on negative real rates struggle to survive. It was the Fed that created this crisis by inflating to unsustainable bubbles so they could "stimulate" the economy. Unfortunately that stimulation only lasted as long as rates remained far below market equilibrium. When rates climbed treasuries tanked .. taking down SVB with them.

[well-blazeredman]

Very good explanation. You have a new subscriber.

[saturnteatree]

This is like the greatest mismanagement of funds i’ve ever seen why would SVB tie that much money in long term bonds at least with a mortgage loan u can get returns monthly

[lashlarue]

WTH. It went under because rising interest rates sparked an old-school bank run!? They didn't do anything that crazy, they had parked the excess deposits in treasuries! That's nuts!

[vlrjqdk]

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[jarrodyuki]

The three pillars of Basel III are market discipline, Supervisory review Process, minimum capital requirement.

[lambertois]

The root cause of the Silicon Valley Bank catastrophic collapse is the failure to implement the Basel Framework for Banks.
After the 2008 financial crisis, all the major western democracies have implemented the recommendation of the Basel Framework for Banks, with the notable exception of the United States. The Basel Framework for Banks was implemented only for the major American banks.

The smaller banks and regional banks were exempted (including SVB) because they lobbied hard and Congress bowed, they were excluded from the Basel Framework.

[anyonename]

The most amazing aspect of this whole event is that before it was seized, svb paid its annual bonuses! What a caring organization! And because the depositors are so politically involved, everything is guaranteed 100%

[lambertois]

The Silicon Valley Bank reserves were in long-term low interest treasuries, without any hedging.
I do not understand the reason to buy long-term treasuries when the interest rate is near zero ?
I do not understand why the management did not do any hedging for interest ?
Usually big failures are caused by big management failure !

[michelew]

"These are companies that move quickly". BS. They're not talking about the fact that a bunch of tech companies and venture capital groups all hopped on Slack and collectively decided to pull their money out at once. Investigation pending.

[Cybertruck_Dad]

What were the rules that were rolled back? How did those rules being removed directly contribute to SVB’s downfall?