Recent Comments

1. 6 days ago on Gary Varvel

   Apparently, Gary Varvel doesn’t have an editor.

2. over 1 year ago on Michael Ramirez

   This was a bank that catered solely to tech companies and venture capitalists. Peter Thiel and other tech gurus started the run on the bank, which in turn caused the bank to have insufficient cash on hand to pay every depositor their full account.

   The SVB’s reliance on this single industry and not a variety of industries has been identified as one reason for its failure. It was distinctly susceptibility to a panicked reaction from depositors.

   Tech and VC transactions involve very large deposits and withdrawals. If everyone demands all of their money, there could be a shortage of cash on hand because the banks invest a portion of depositors’ money.

   That results in sudden demands for lots of money while when their depositors invest in start-ups created. They may take years to repay VC investors, resulting in tremendous peaks and valleys in deposits and demands for withdrawals.

   These tech depositors will have no problem finding another bank even though their groupthink and industry gossip among CEOs who think they are smarter than nearly everyone created the problem.

   Ordinary individuals were not affected by this failure. They weren’t depositors or even clients. In addition, individual banks pay FDIC fees based on a percentage of their deposits. That’s how FDIC has always been set up.

   Reports indicate the Fed is considering setting up a fund that depositors with slow-return investments, like bonds, from which depositors can take out short-term loans to cover cash flow and ensure there’s no break in service to depositors or insufficient funds to cover the regular withdrawals by businesses, like payroll.