@HighGround Can you briefly explain how the US banking system is doing using your professional economics knowledge?
Too little information has emerged to say anything, but...
The Silicon Valley Bank imploding is not really a Lehman Brothers/Bear Sterns style event. At a glance, their "exposure" was relatively unique to them. Though this is exactly what we thought right before the 2008 financial crisis. The collapse of Lehman/Bear were thought to be unique, and not reflective of any particular vulnerability in the system. The Federal Reserve isn't particularly concerned about the banking sector, and the metrics they
aren't telling a particularly dangerous story.
The rather panicked reaction of the markets and pundits to the story is less reflective of the "merits" on the collapse and what it says about the U.S. financial sector, and really more of the scrutiny and distrust the American public has towards Banks since 2008. Nobody really trusts them anymore. Banks failing is pretty rare, but it does
. That said, is the panic unwarranted? Not necessarily. The immediate concern and apprehension is quite refreshing actually.
SVB's collapse and details are pretty well documented at this point. SVB wasn't really close to an imminent collapse. It was not making risky loans, quite the opposite, a lot of their money was parked in long-term safe securities that had low yields. The rise of interest rates put pressure on banks, SVB had to sell some of its investments at a loss in order to generate the cash for operations. This triggered a panic which led to a bank run, that SVB could no survive. More details will emerge I'm sure, but I don't think anything will emerge that will change the nature of the basics in the story.
I am personally not expecting any serious ramifications, but I'm not going to say that there's nothing to worry about. A bank collapse is like a natural disaster, it's not just that the bank collapses. It has network effects on the entire community it serviced, and bank networks are all intertwined and related. A collapse of one, will always affect others even if the effect is negligible. The damage looks pretty contained and minor
right now, and I can't really identify any major systemic risks that would affect the rest of the banking sector. It looks like a pretty classic case of a bank that was playing it pretty safe, but couldn't handle the rising rates and worsening yields of the last 12-18 months. Insert some bad press, panic, and a classic bank run that they did not have the resources to survive.
I will advise people not to listen to either people like
, the co-founder of Home Depot, who simply like the sound of their own voice, or people like
, who always like to pretend that nothing is ever wrong. Let's just monitor the situation. It's probably nothing, but we have to take note and just listen for any cracks in the system.
