Silicon Valley Bank
I am a sick man.... I am a spiteful man. I am an unattractive man. I found myself nostalgic for 2008 this morning. Remember a lot of the big fails on a Friday were followed by weekend meetings and the bestowing of innumerous largesse before markets opened Monday morning. So watching the Silicon Valley Bank (SVB) get shuttered this morning, the 16th largest US bank and the WSJ says, “The biggest bank to fail since the near collapse of the financial system in 2008, second only to the crisis-era shutdown of Washington Mutual Inc,” I was engulfed in a dirty nostalgia.
Honestly, as someone who has followed for years both banking and the Valley, though much less in recent years, SVB, never heard of it. Seems they had mucho bucks from venture capitalists and carried the accounts of numerous once cash-rich startups. According to WSJ, the last end of year report, $151 billion of the bank’s $192 billion in deposits exceed FDIC insurance levels. That’s big-time, high flying money.
The bank’s official narrative has fingers pointed at the Fed for raising interest rates, and much better, a run by its high flying or once high flying clientele — a bank-run, an old fashion panic by the Masters of the Silicon Universe? Come on, panics are so 19th and 20th century.
Naked Capitalism has a piece pointing at the “extinction event” of many of the Valley's latest species of overfunded, no profit startups, and also a suggestion of a possible tie in with Private Equity (PE). Certainly an unanswered question today is the banks’ exposures to Private Equity and PE’s fantastical valuations — banks here being the handful of former and, I’d wager, still “too big to fail” lot.
Doesn’t seem the bank analysts I’ve checked are too concerned, but then a couple hours ago, the Treasury’s Janet Yellen released a statement saying “the banking system remains resilient.” Now there’s a statement by a person that makes you sit up and ask the eternal question, “How do I get the Fed to give me money?”