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The collapse of Silicon Valley Bank: A one-off calamity, or sign of more trouble for California?

Original post made on Mar 13, 2023

Silicon Valley Bank's failure is a sign of weakness in the tech industry, and that could spell trouble for the state of California.

Read the full story here Web Link posted Monday, March 13, 2023, 11:15 AM

Comments (2)

Posted by Leslie Bain
a resident of Cuesta Park
on Mar 13, 2023 at 4:15 pm

Leslie Bain is a registered user.

Banking is very important, the failure of any bank will bring much pain and misery to a great many people. But bailing out banks whenever they fail is the WRONG ANSWER. It just encourages them to engage in risky behavior, knowing that if they win they will get rich and if they fail they will FACE NO CONSEQUENCES.

SAFEGUARDS need to be put into place (and REMAIN THERE!) to ensure that banks don't fail. Law makers need to hold strong when bankers plead with them to lower and remove such safeguards, as the president of SVB did within the past decade:

""In 2015, SVB President Greg Becker submitted a statement to a Senate panel pushing legislators to exempt more banks — including his own — from new regulations passed in the wake of the 2008 financial crisis. Despite warnings from some senators, Becker’s lobbying effort was ultimately successful."" - Web Link

I agree with Jim Cramer, I think that the Fed is raising interest rates far too quickly and this hurt SVB very badly. SVB is like a canary in the coal mine. "SVB’s failure could be the thing that keeps the Fed from wrecking the economy, Cramer says" Web Link

"Silicon Valley Bank’s collapse was due to poor communication that it was getting killed on its bond portfolio because the Fed raised interest rates so rapidly, CNBC’s Jim Cramer said Friday.

It’s a “Cool Hand Luke” problem, Cramer said, a classic case of a failure to communicate. SVB’s bond portfolio lost tremendous value because the Fed raised interest rates so rapidly, but the bank failed to communicate that to investors. At the same time, SVB’s failure to signal how many startup-equity backed loans it had distressed investors.

”...there’s no appetite for IPOs when the Fed’s tightening aggressively,” Cramer said."

The FDIC just put a band-aid on a much bigger problem.

Posted by Steven Goldstein
a resident of Old Mountain View
on Mar 13, 2023 at 5:09 pm

Steven Goldstein is a registered user.

Just an Observation,

I recently read there is $670 Billion in UNREALIZED LOSSES in the financial sector.

What that means is that in the banking system alone we have nearly $1Trillion of unreported losses. And that doesn't touch all the other businesses that exist. I can picture that this could account for as much as $15 Trillion.

This is going to get REALLLY ugly fast. Remember depositors are insured but LOANS, MORTGAGES, COMMERCIAL MORTGAGE BACKED SECURITIES and RESIDENTIAL MORTGAGE BACKED SECURITIES as a lost cause.

It is time to clean the books, time for investors to lose whatever it takes to get rid of this shell game.

As a person with 2 business degrees and studied accounting and economics, this is the BIGGEST SCAM IN WORLD ECONOMIC HISTORY

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