The wait for the next “Lehman Brothers moment” is over. On Friday, we witnessed the second biggest bank failure in U.S. history. The stunning collapse of Silicon Valley Bank is shaking the financial world to the core. As of the end of last year, the bank had 175 billion dollars in deposits, and approximately 151 billion dollars of those deposits were uninsured. In other words, a lot of wealthy individuals and large companies are in danger of being wiped out. In particular, this is being described as an “extinction level event” for tech startups, because thousands of them did their banking with SVB. I cannot even begin to describe how cataclysmic this is going to be for the tech industry as a whole.
The closure marks the biggest bank failure since the 2008 financial crisis and the second-largest in U.S. history after Washington Mutual collapsed during that industry-wide meltdown, according to FDIC data.
Worries over a run at SVB led Wall Street investors to dump other bank stocks as well. Shares of some prominent West Coast lenders took sharp nosedives Friday, including First Republic Bank, PacWest Bancorp and Western Alliance Bancorporation.
Once the dominoes start falling, it will be difficult to stop the process.
In fact, the situation is already so dire that Peter Schiff is proclaiming that we are “on the verge of a much bigger collapse than 2008”…
“Banks own long-term paper at extremely low interest rates. They can’t compete with short-term Treasuries. Mass withdrawals from depositors seeking higher yields will result in a wave of bank failures.”
Of course a lot of the “experts” in the mainstream media never saw this coming.
Unfortunately, SVB’s situation is not unique.
Thanks to rapidly rising interest rates, many other banks are also sitting on mountains of Treasury bills that have lost a lot of value…
As I have been telling my viewers, our system simply cannot handle higher rates at this point.
But the “experts” at the Fed assured all of us that they knew exactly what they were doing.
Now they have caused one of the biggest bank failures in U.S. history, and much worse is on the way if they do not reverse course.
But I don’t expect the “experts” at the Fed to listen to any of us.
They are just going to keep doing what they are doing, and we are all going to have to live with the consequences.
h/t gebahie