How the Silicon Valley Bank Collapse Occurred So Fast

The Silicon Valley Bank (SVB) collapse was quick… much faster than most people would have thought.

We are talking about days, not weeks.

A large reason for such speed is the combination of social media and online banking, all escalating withdrawals.

Even though the financial instability was obvious in retrospect, it was under the public’s radar. Apparently, management knew the bank was in bad shape, but they wouldn’t admit the reality…

And, more than 10,000 customers who could not get their money out of the bank… it was a nightmare.

Imagine being a customer – your money was there, but you couldn’t get it out.

Now imagine you’re a business owner…

Payrolls were frozen.

Business expenses couldn’t be paid.

Everything you dedicated your life to building was at risk.

SVB’s issues were remedied within a week by government action… but the damage had already been done.

The Silicon Valley Bank is basically a pro-socialist, radical environmental bank that invested in many high-tech, risky climate startups.

The bank’s growth of clients and assets took off explosively during the pandemic, fueled by massive taxpayer subsidies to green energy. Thanks to all the Silicon Valley tech startup companies SVB became the 16^th largest bank in America within just a few years.

As word got out about the banking trouble, customers tried to withdraw $40 billion in deposits – about a quarter of the bank’s total assets – and it ran out of cash.

How did that happen?

Part of the problem was questionable start-up loans for politically favored companies and commercial real estate problems.

But the primary trigger was that SVB invested billions of dollars in long-term U.S. Treasury bonds – and government-backed mortgaged securities at 0% interest.

However, because the Federal Reserve raised interest rates so high and so quickly, these government securities lost big money when the bank realized it needed to sell them. They should have known in advance, especially as interest rates kept rising, but that did nothing to correct it.

To pay off debt, SVB had to sell a large chunk of these securities for $21 billion at a loss, losing $1.8 billion after taxes.

The San Francisco Fed should have seen the problem but “mysteriously” was asleep at the wheel… and was comfortable with SVB’s president being on the San Francisco Fed board—a definite conflict of interest.

This is the largest bank failure since 2008. SVB worked with over 1,500 technology firms creating solar lithium battery storage projects and other green projects that would not have gotten money from other banks because they were very risky and speculative.

In the history of the United States, this was the third largest bank to fail.

The Federal Deposit Insurance Corporation (FDIC) also took control of Signature bank in New York, which had over $110 billion in assets and over $88 billion in deposits.

Everything is a bank bailout, and you will pay either through higher taxes or because the government will create money out of thin air… causing a spike in inflation, and making your money worth less.

Or the ones paying will be smaller banks passing onto the customer additional fees and higher interest… but not too high to make them uncompetitive with the big banks. They will be squeezed and at a competitive disadvantage against the big banks.

You’ll probably experience the hurt as a combination of all three.

It’s a Bailout No Matter How Much They Try to Spin It

The shutting down of Silicon Valley Bank and the government takeover of Signature Bank, as well as other failing institutions, is a bailout.

It’s a bailout for rich people, the politically well-connected, and venture capitalists.

It’s a bailout for the Democrat donors and donor groups.

It’s a bailout for the radical green agenda.

And as crazy as it sounds, a bailout for the Communist Chinese investing in American companies.

The absurdity of Janet Yellen and Joe Biden to say that you and I and the average American will not have to pay for the bailouts is false.

The FDIC’s total amount of money is $128 Billion (about 1.27% of the total insured deposits). The total amount needed to bail out just two of the banks is over $262 billion.

And it’s over $13 trillion in the 15 largest banks).

Reality and truth are, while the government may back these banks either through the FDIC, Treasury Department, or Fed, the shortfall of these banks— with more troubled banks needing a bailout likely to come—simply means that if it’s not paid through your taxes, it will be paid by the Fed creating more money.

That means the printing presses will run, produce more money, the value of the dollar will go down even more and inflation will go up even higher. And everyone will be paying for it through higher prices.

This time it’s a different bailout than the one in 2008.

Then it was about banks being too big to fail. This bailout is about the Democrat supporters, because they don’t want to see their donor money disappear. It’s a bailout for the Democrats top donors in Silicon Valley.

It’s a bailout for the risky climate change tech companies that regular banks would never have financed.

In the free market, those who are irresponsible pay the consequences. But now we have basically a nationalization of the banking industry, where government intervention allows bad actors to get away with no consequences.

Everyone gets a trophy. The innocent must pay for the guilty.

All this is going to fuel is more bad actors, who see that there is an incentive to act bad.

And we might even see the Biden double standard here where the Democrat-friendly donor banks are bailed out, and the smaller, more regional conservative or Republican-donating banks are ignored if they see that many people are withdrawing money from their institutions.

Who are the winners of this bailout?

The green energy companies that should have never gotten loans.

The Democrat donors and supporters, who put their money into a bank that reflects their ideology.

The radical green-energy, high-tech companies and venture capitalists will continue their “mission” even if not economically justifiable.

Let me know what you think at craig@craighuey.com.

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