(AP Photo/Susan Walsh)
Part of what happened is explained in this series of tweets. SVB, thanks to the COVID emergency rules adopted by Jerome Powell – who is still in charge of the Federal Reserve – was no longer required to hold any cash on hand to meet its “reserve requirement.”
Why that detail matters is because this bank’s problems started with an announcement Wednesday that it was in the middle of a cash crunch and looking at a possible sale as a way of raising funds.
The bank had taken a bath on their bond holdings, due to the rapid interest rate hikes.
Their customers, mostly tech types, had their own problems in the industry (as we’ve posted on here), not to mention that the availability of federal COVID start-up/emergency funds was drying up. So SVB’s depositors were having to withdraw money to keep their own businesses afloat.
This is the branch in Massachusetts.
Shades of 1930’s. This is my bank in Wellesley this morning. Boston Private Bank, recently acquired by Silicon Valley Bank. Ruh, roh.
Better have a George Bailey inside.
Now the regulators also have to worry about “contagion” banks and businesses – does it spread?
What is connected to SVB that is in plain sight as well as hidden, that is going to be thrown into chaos or collapse because of this failure.