The Silicon Valley Bank Collapse Explained

there is no headline in the world of banking bigger than the major crash of the Silicon Valley Bank That Shook citizens and politicians alike so what exactly happened here in case you didn't already know Silicon Valley Bank is well was the 16th largest Commercial Bank in the United States of America as you might expect from that name svb had a big hand in the tech sector

in the U.S and abroad in fact half of all U.S venture-backed tech companies and life science companies were doing business with svb the incredible growth in Tech over the last few years made svb be a true Powerhouse the bank had assets upwards of 220 billion as of March 2022 it had also expanded into Germany Canada China Denmark the UK Sweden Ireland and Israel companies like Circle

describe to you the scariest 48 hours in the world of modern banking take a quick breath ready yourself and hey maybe click like And subscribe down below now when I tell you that this thing went fast I mean like Vin Diesel hitting the NOS at the exact right moment fast it all started on March the 8th when svb announced that it would make a 1.25 billion

common stock sale add on to that another 500 million of depository shares on March 9th their stock plummeted 30 percent that was only the start of the plummet though svb CEO Greg Becker tried to calm down VCS in a video call in fact he had appeared on CNBC just a month earlier where he said that the company was optimistic for 2023 this was all just a

momentary setback business would be back on track soon enough this strategy didn't work at all to stop panic in fact it may have pushed some people right out of the door VCS startups and other customers initiated a huge Bank Run a bank run is pretty much exactly what it sounds like it's when a huge number of people withdraw their money from a bank all at once

like it's uh Black Friday and ps5s are on sale so this Bank Run ended up being a bank run to the tune of 42 Bubba billion this was the single largest bank run in history svb stocked and continued to drop all the way to 60 percent by March 10th it was time for the government to get involved Regulators shut the bank down and all of a

sudden svb was collapsed for good so what could possibly have paved the way for such a massive collapse on a scale that is rarely ever seen in American history the problems with svb go way back specifically most people cite the billions the bank put into U.S government bonds during the era of near zero interest rates while many considered this to be a risk free Venture it

turned out to have a high duration risk meaning that holding on to the bonds was only profitable if it didn't later lose their value okay so let me try to simplify that a bit so you know when you go to a bulk grocery store like Costco let's say there's a massive sale and you decide you want to spend all your money buying groceries in bulk you

put a whole Year's worth of groceries in the fridge thinking all that food would keep only the fridge breaks and then all that food you spent a fortune on is suddenly at risk of going bad very very quickly this is in the simplest terms I can make them essentially what happened to those bonds the Federal Reserve started hiking interest rates in order to get inflation under

control when interest rates go up bond prices fall svb then started offloading those shares we talked about earlier triggering a panic and ultimately the collapse of the entire freaking thing as you might expect this collapse only led to more Panic the more dire coming from employers who had to to pay their employees within the next week take Earth Optics CEO for example after seeing svb go

down the tubes he tried to pull 90 percent of his assets from the bank but he was too late because the government had already stepped in he was only insured upwards of two hundred and fifty thousand dollars so keeping his business afloat seemed to be almost impossible this was the exact sort of situation that was going on all over the country and the world this led

to even more panic and speculation that more companies involved with svb would collapse within the week leading to even more economic Fallout situations like this almost always lead to the kind of catastrophic thinking that usually ends with the entire world engulfed in a Mad Max style post-apocalyptic meltdown for startups and small tech companies invested with svb that post-apocalypse was already here while the initial 48 Hours

was met with whole Roar and panic it cannot be overstated how much worse the days after it were for all they knew these companies were going to be irreparably damaged by this banking collapse which could have seen them permanently lose billions of dollars within the course of a few days luckily things took a turn for the better when the federal government finally announced their plan on

Sunday Regulators came to an agreement and announced their plan to fully back depositors and financial institutions associated with svb by Monday all those affected would be able to access their funds according to President Biden himself quote small businesses across the country that had deposit Accounts at these Banks can breathe easier knowing they'll be able to pay their workers and their bills and their hard-working employees can

breathe easier as well end quote this was the second largest banking collapse in American history so how would that reverberate around the world it's impossible to truly know how big the impact has vb's collapse will have on the future there are all sorts of possibilities and not many of them are good for starters confidence in the U.S banking system is at an all-time low everywhere you

look people are trying to convince others that the United States banking system is under heavy scrutiny and that it should be trusted what they are really afraid of is another housing crisis that could lead to another recession which could lead to hundreds of businesses closing their doors forever and millions of Americans losing their jobs for good you're fired as you will likely see in the coming

months more and more plans will come out to make sure that this exact thing does not happen all of these numbers and complicated jargon really eliminate the good old-fashioned human incompetence that's always behind these kinds of things if you take svb's word for it that human failing came from one thing and one thing alone remote work the issue to report that employees who worked from home

struggled with work-life balance which caused significant disruptions to day-to-day business along with a severe drop in productivity this has been echoed by other CEOs like Elon Musk who famously hates online work and told his Twitter employees that they needed to return to the office as soon as humanly possible not everyone's convinced that working while in sweatpants is what's really going on though many companies actually saw

productivity and overall employee satisfaction improve because of work from home practices not only that but many employees who no longer had to spend money commuting back and forth basically considered this to be a raise so was the focus on remote work a fair argument or just a deflection from some of the bigger problems take it from Dan schwabble the managing partner for the HR research firm

workplace intelligence he said that all of this talk about the failings of remote work was quote a convenient excuse that ignores deeper organization issues and fails to address the root causes of the problem end quote if you would have asked anyone just a few years ago they would have told you that Gregory Becker was svb's biggest hero not essentially the captain of the Titanic steering it

right towards that Iceberg while telling the people jumping overboard not to panic in 2011 he took over president and CEO of svb and brought in what should have been its greatest era under his leadership the company made its way onto the fortunes list of top 100 companies to work for and as one of the best banks in America by Forbes as well so what happened well

with these kinds of leaders they tend to fall victim to their own hype when you succeed and succeed and succeed you tend to fall into the habit of magical thinking risky expansions are always going to work out it's clear that Becker is exactly this kind of guy he was saying in the weeks leading up to this collapse that everything was going to be just fine he

was not able to see the full extent of his company's problems until it was far too late now he seems to be living in a self-imposed Exile vacation he has a 3.1 million dollar hideout in Hawaii that he's been spotted in since the bank's demise now he's also the target of a class action lawsuit that will likely end up costing him Millions you know I'm starting

to think that Ron Swanson had the right idea when he just invested all his money in gold and then just buried it in secret holes all over town foreign