This weekend, we were at a family party to celebrate my nephew’s first birthday. Among the various topic discussed, questions surrounding the second biggest bank failure in U.S. history, notably, the failure of the parent company of Silicon Valley Bank, or SVB Financial Group (NASDAQ:SIVB), were directed in my direction. Here is how I tried to explained it.
SIVB was a bank that catered to venture capitals, start-ups, and emerging technology companies, as well as mid-sized and publicly traded technology companies. The business and its deposits grew rapidly, amidst all of the money printing associated with Covid stimulus programs and the Federal Reserve’s big policy errors (keeping rates way too low, for way too long). The vast majority of its funding was in the form of “demand deposits” to businesses. These types of deposits aren’t sticky, like the tens of thousands (or hundreds of thousands) of retail deposits, which enjoy $250K FDIC protection. Again, some of these businesses were well-funded publicly traded technology companies and others were smaller and privately held businesses.
READ FULL ARTICLE HERE!