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Silicon Valley Bank collapse, SVB, Silicon Valley Bank, the Fed, interest rate hikes, bank run, what happened with Silicon Valley Bank, silicon valley bank collapse explained, bailout, SVB bailout, contagion, Fed, rate hikes, signature bank.
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#stockmarket #svb #siliconvalleybank…(read more)
LEARN MORE ABOUT: Bank Failures
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In the midst of the COVID-19 pandemic, businesses are struggling to stay afloat. Silicon Valley Bank, once considered a golden child of the tech industry, is no exception. It has been forced to request a bailout from the Federal Reserve’s Main Street Lending Program in order to pay off loans.
So, how did this happen? And why does it keep happening?
First, a little background: Silicon Valley Bank, a subsidiary of SVB Financial Group, provides loans and other services to startups and venture capitalists. It has become one of the most important banks in the tech industry, helping to fund some of the biggest names in Silicon Valley, including Apple, Facebook, and Google. Its success has made it a symbol of the tech industry’s power and influence.
However, the bank’s success came at a cost. Its loan portfolio grew more than tenfold in the last decade, but much of that growth came from high-risk loans to startups that may never turn a profit. In addition, the pandemic has had a devastating impact on many of the bank’s clients, causing delinquencies and defaults on loans.
Despite its risk-taking, Silicon Valley Bank was not prepared for such a severe economic downturn. Its financial performance began to suffer in late 2019, and it reported a net loss of $194 million in the second quarter of 2020.
So why does this keep happening in the tech industry? Many tech startups are fueled by venture capital funding, which often involves investors taking a heavy risk for the promise of great rewards. However, this high-risk model can lead to an unsustainable growth trajectory that requires continual funding and leaves little room for failure. When the economy takes a hit, companies that rely on such funding models are vulnerable to collapse.
Furthermore, the tech industry’s tendency towards exuberance and the belief that it can change the world can blind companies to the risks they are taking. Silicon Valley Bank, like many other technology companies, was convinced that it could continue to take risks and come out ahead. It did not anticipate the devastating impact of the COVID-19 pandemic on its clients.
In conclusion, Silicon Valley Bank’s bailout is just one example of the high-stakes, high-risk game played by many tech companies. The industry’s tendency towards exuberance and a belief that it can change the world have blinded companies to the risks they are taking. However, in the current economic climate, these risks have come home to roost, leaving many tech companies and their investors scrambling for support from the government. It remains to be seen how many other tech companies may follow Silicon Valley Bank’s path.
Bank socialism
Who's Vivek?
Thx man…liked
One word, Biden
That’s capitalism!
Bailout. Interest free loan. Hoping someone buys the banks loans. The Fed give them the $ to take them. 2% on a 4.5% loan. Not enough margin. Someone was getting $ to loan to themselves
This will SUPER⚡CHARGE Inflation.
Whatever it takes to save the 1% Right?
TTT > Meet Kevin
going long on TLT as a possible FED pause/lowering of interest rates over the next year
This is absolutely a bailout lol if tax payers are footing the bill for a mismanaged bank that is absolutely a bailout, regardless of what entity you draw the funds from lol
Yes this is magic money coming from thin air lol
It all sounds great until it doesn't… what if all the SVB assets sell only covers 50% of depositors money? Where will they find the other 50% of the money, if not the tax payers?
They cant be promising something until they complete the sell and see where thay stand…
Bro never disappoints
It's a bailout. There's no guarantee the assets cover the deposits. The banks losses came precisely because the long duration bonds were devalued in a high inflation environment and they couldn't liquidate.
All the state does is baling out the depositors by guaranteeing the liquidity of the assets. It's an improvement over other bailouts but it shows how sick the entire system is.
You're correct and it's the best decision to make
You explain fundamentals better than any other person out there sir
Thank you for this explanation. I share your opinion and I appreciate your effort to get this message out. FDIC money coming from other banks is coming from these banks clients so eventually we pay for this rescue proces. However I think this is the best solution on this situation. At the end of the day our financial system has to be restructured.
There is the bad and the worst.
Better to count the blessings.
Otherwise you will become a bankrupt state or a bankrupt world
enough rest in between sets 😀
The FDIC gets its funding from Banks, where do Banks get their money from??? Wake up people!!!
❤❤❤ No bailout
It might not technically be a bail out however, to say it won’t hurt taxpayers. Inflation is the main issue and now no one‘s going to be taken care f it