Explain the what and the why below. How is SVB exposed differently, than other popular banks. Use simple terms. No Twitter post or popular media article has sufficiently explained what has happened. No article has done a great job. Thank you. #svb #siliconvalleybank
Read Matt Levine’s Money Stuff newsletter. He explains everything brilliantly.
Hey, another Matt Levine fan ✋
Is he on Blind? 😂
😂😂😂 this person is frustrated that you can’t get answers on anything past 2021 from chatGPT
Try bing
The explanation I could understand: https://www.reddit.com/r/OutOfTheLoop/comments/11n88pd/what_is_the_deal_with_silicon_valley_bank/jbm60a7/
svg got a bunch of money from startups. they bought longterm investments. fed raised rates, those investments went underwater (fed rate > yield). VCs said hey startups take ur money out of SVB! => bank run domino effect
You understood the assignment! 👏🏽👏🏽👏🏽
In 2021 when interest rates were very low they had a ton of cash from VC money dumped into startups. They wanted a “safe” place to put it so they invested the majority of the money in bonds that yielded 1.5% per year over 10 years. Then mean daddy Powell came along grrrrr. He raised rates. Boooo. The value of bonds dropped because you could seek higher rates elsewhere. In the long term, the value of the bonds if held to expiration would recover, but the short term prices were depressed. Meanwhile all these startups hyping crypto and generative AI were losing money and taking out deposits without new investment so new money coming in declined. At some point the value of their bonds declined to less than what remained in all cash accounts and kaboom.
So alternatively, they could have bought less bonds and kept the cash, so they can lend out money now that interest rate is high, to expect high returns?
Which all tech companies affected?
https://www.cnbc.com/2023/03/10/silicon-valley-bank-collapse-how-it-happened.html If you can’t understand that, nobody can explain it to you
https://youtu.be/cl-ZawiAghE