🏦 SIVB 0.00 (silicon valley bank group) - who were they?

• "svb" was a regional bank headquartered in california (also the 16th largest bank in the us)

• simply put, it’s where all the “tech money / deposits” were on

  • specifically, it started off being a bank lending to small businesses and tech startups but later changed to giving out loans to venture capital firms

💀 dead in 48 hours

• svb announced last wednesday that the bank needed to raise $2.25b rather unexpectedly and it spooked the market

• that triggered a massive digital bank run (aka pretty much everyone wanting to withdraw their deposits all at once)

  • customers withdrew a total of $42b by the next day

• svb’s stock price declined 60% in a day

🤔 why tho?

• one big reason is that interest rates were at an all time low during the pandemic for almost two years – this was a time when svb had consistently large influx of cash as money

  • at the time of failure, ~70% of its $76bn in outstanding loans were dependent on private equity or venture capital for repayment

• with all that idle cash (more than it's ever had a hand on), svb decided to invest in longer term bonds (i.e. mortgage securities, 10-year-or-longer us treasuries)

• but the fed soon began raising rates and the fed's been raising rates fast, which caused extreme losses for the bank (bond prices fall as rates rise)

imo: it could’ve been a great opportunity (increased deposits led by low interest rate environment) used wisely, but the human aspect (of course, always the unexpected factor) of the business kinda ruined it

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as always, i’m no financial advisor! (i’m no substitute for professional financial services)