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Banking Blunder

Posted March 13, 2023

Ray Blanco

By Ray Blanco

Banking Blunder

Over the past few days, you’ve likely heard about something going on with Silicon Valley Bank (SVB). 

For starters, what is SVB? 

SVB is a commercial bank that mostly serves the technology, life science, healthcare, private equity, and venture capital industries. 

The bank is known for its efforts in venture capital and private equity, and it has been involved in the financing of many successful technology companies, including Google, LinkedIn, and Facebook.

However, the bank has recently found itself in some hot water… 

During the pandemic, many of SVBs clients generated a ton of cash, resulting in a deposit surge. 

To put it into perspective, SVB ended the first quarter of 2020 with just over $60 billion in total deposits. By the end of the first quarter of 2022, the bank had over $200 billion in deposits.

With pockets full of cash, SVB bought tens of billions of dollars worth of “safe” assets, mostly US treasuries and government-backed mortgage securities. What could go wrong? 

SVB’s portfolio of securities shot up from $27 billion at the start of 2020 to around $128 billion by the end of 2021.

Again, what could go wrong? 

Well, as it turns out, those “safe” assets aren’t so safe in environments where interest rates are rising rapidly. 

Because of this, those securities suddenly became worth much less on the open market than they are valued on the bank’s books. 

SVB’s unrealized losses on its securities portfolio at the end of 2022 jumped to more than $17 billion. On top of that, SVB’s clients were rapidly burning cash and VC funding dipped significantly. 

Then, it came to light that SVB sold a large portion of its securities at a loss. At the same time, SVB’s clients attempted to withdraw about $42 billion worth of deposits and, according to a filing by California regulators, SVB ran out of cash. 

Of course, this is only the tip of the iceberg… There's much more to unpack here and luckily for you, a few of my colleagues did just that!

Below is a complimentary, emergency video briefing from Jim Rickards, Dan Amoss, and Matt Insley where Jim breaks down everything you need to know about the past of SVB, the present of the FDIC, and THREE major pitfalls to keep an eye on in the coming days. 

There’s no credit card needed for this one, we believe this situation is so important that we want as many people as possible to view this video. Click the image below to view!


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