$1 Million per Second - wow! SVB Bank Run - this could get way out of control

Marjory Wildcraft
Marjory Wildcraft Posts: 1,615 admin
edited March 2023 in Emergency News

So if you haven't been paying attention - Silicon Valley Bank went into receivership on Friday.

And what instigated it was a massive breathtaking "run on the bank" flash crash, modern electronic banking style.

Silicon Valley Bank's customers withdrew $42 billion from their accounts on Thursday. That's $4.2 billion an hour, or more than $1 million per second for ten hours straight. To put that in context, the previous largest bank run in modern U.S. history took place at Washington Mutual bank in 2008, and totaled $16.7 billion over the course of 10 days. (Axios)

What I'm wondering is why couuldn't a miscellaneous million have gotten into my account with all that frenzy??? LOL

Janet Yellen has publiclly stated the Fed will NOT be stepping in to save the bank. Maybe because the American people would be looking for blood if she did? We had enough of that bail out stuff back in 2008 and we ain't taking any more of it.

So tomorrow morning is going to be very, very interesting...

This could get ugly.

From another newsletter I subscribe to here is some of the larger consequences from SVB going under:

There are thousands of US startups that banked at SVB, often as their *sole bank*. $250K FDIC (bank insruance maximum coverage) per account is not going to last long.

The #1 pressing issue for these startups is *payroll* - you can't have people work if you can't pay them.

This means mass furlough.

It might mean thousands of startups die before the FDIC gets through its receivership process and releases the funds.

 From what I hear, there are venture debt options coming from providers like Brex, but we're going to need *a lot* of options in order to avoid a mass shutdown of all American startups in the next few weeks.

This is an *extinction level event* for startups and will set startups and innovation back by 10 years or more.

BIG TECH will not care about this. They have cash elsewhere.

All little startups, tomorrow's Google's and Facebooks, will be extinguished if we don't find a fix.

30% of YC companies exposed through SVB can’t make payroll in the next 30 days.

Comments

  • LaurieLovesLearning
    LaurieLovesLearning Posts: 7,573 admin

    It is certainly something to watch. I wonder what might be slipped in through all of the chaos?

    My thoughts go not just to the small startups, but to the worker's families. What horrific timing for them.

    I read an opinion article that basically said not to keep all your "bread" in one basket for this exact reason. Spread it around so it is still insured. I guess your insured limit is $250000 USD. Ours in Canada is $100000 CAD. If only I had $100000!

    The other thing it mentioned is a kind of domino effect as well. Will other banks follow suit?

  • kbmbillups1
    kbmbillups1 Posts: 1,390 ✭✭✭✭✭

    Here are 2 things I just read that sound like regular accounts will be fine. Hopefully it's okay to post the links.


    https://thepostmillennial.com/breaking-us-government-backs-silicon-valley-bank-customer-deposits

  • Marjory Wildcraft
    Marjory Wildcraft Posts: 1,615 admin

    HYPER INFLATION IS NOW GAURENTEED!!!!

    OMG, Janet Yellen, flip flopped big time - went from "I won't bail out the banks" to "I'll give every bank anywhere, anything, they want".

    The Fed is totally exploding the system. Everyone is going to want to get out of the banks and out of dollars.

    Bix Wier is speculating, and I agree, the Gov't is likey to start handing out cash to the people to try and keep us calm.

    Not sure what Canada, Australia, UK, other countries are doing.

    Right now, if you haven't purchased any silver - go get some immediately! If you can't afford silver, get nickles or other coins that have nickle or copper in them. Storable food essential too. Medicines, weapons, you know, all the preps...

    When everyone starts to figure this out the panic buying will ensue. Seriously. It is really happening. A few weeks? Two months at the most? The speed of these things can happen so rapidly.

    It's going to get very very crazy.

  • LaurieLovesLearning
    LaurieLovesLearning Posts: 7,573 admin

    The biggest thing is to keep a level head and not make decisions based on fear of the unknown & panic. The worst decisions are made because of fear & panic.

    Things happen. Big or small, these events of build & collapse of financial institutions, businesses, & full countries have happened throughout history. It is important to stay grounded and take inventory of where you are in the scheme of things.

    Our members are pretty level-headed, knowledgeable, resourceful and resilient. I suspect most do not make impromptu decisions without considering all their options.

    Purpose to still grow your own food & medicine alternatives, store it efficiently, and know how to forage. Keep building your skills. Be wise with what you have been given & be prepared & willing to support others who truly need help. It might be physical pitching in & it might be advice. It might just be as simple as having the wisdom to not join those who go into panic mode so that you, your skills & knowledge are available when most needed.

  • Marjory Wildcraft
    Marjory Wildcraft Posts: 1,615 admin

    OK, I really like Simon Black, and am a subscriber to his newsletter. I've posted his analysis down below.

    Simon puts this sitaution into perspective. The shocking thing to me is the Fed's own balance sheet - which is $330 billion against just $42 billion in capital… making this bank completely and totally insolvent. I've been watching it go more and more negative wondering why on Earth nobody else saw a problem...

    For years I've been seeing totally impossible things just get swept under the carpet and we all keep chugging along. For example, whatever happened to FTX and Sam Bankman Freed?

    So is this yet another crisis that won't last a news cycle?

    The reason I am posting this is not to stir up panic, but I think we really are at an ending of the financial system.

    Simon's take is the guys in charge are idiots. I disagree: all of our markets are so tightly controlled and manipulated and have been for decades (if not centuries) what he is looking at are the machinations of the control system. I think we are nearing the end of that massive game. I tend to like Bix Wier's perspective that it is intentional, and (surprisinly, for a twist you wouldn't expect!) the Fed are the good guys who are intentionallly doing it. Hyperinflating the US Dollar is the only way to destroy the banking cartel. Not ot mention topple our Governments which are absolutely corrupt and do not serve thier people. With this humanity has a chance for real freedom. So although this will liley get messy, I am very hopeful.

    Will they come up with a way to wiggle out of this? It is so gynormous I doubt it.

    We will absolutely need to be more self-reliant if we want to be strong enough to re-build in a good way. That is the main reason I have worked so hard on this organization for so many years. I am so honored that you are here and have helped so much all these years.

    MONDAY, MAR 13, 2023 - 07:20 PM

    Authored by Simon Black via SovereignMan.com,

    If SVB is insolvent, so is everyone else

    On Sunday afternoon, September 14, 2008, hundreds of employees of the financial giant Lehman Brothers walked into the bank’s headquarters at 745 Seventh Avenue in New York City to clear out their offices and desks.

    Lehman was hours away from declaring bankruptcy. And its collapse the next day triggered the worst economic and financial devastation since the Great Depression.

    The S&P 500 fell by roughly 50%. Unemployment soared. And more than 100 other banks failed over the subsequent 12 months. It was a total disaster.

    These bank, it turned out, had been using their depositors’ money to buy up special mortgage bonds. But these bonds were so risky that they eventually became known as “toxic securities” or “toxic assets”.

    These toxic assets were bundles of risky, no-money-down mortgages given to sub-prime “NINJAs”, i.e. borrowers with No Income, No Job, no Assets who had a history of NOT paying their bills.

    When the economy was doing well in 2006 and 2007, banks earned record profits from their toxic assets.

    But when economic conditions started to worsen in 2008, those toxic assets plunged in value… and dozens of banks got wiped out.

    Now here we go again.

    Fifteen years later… we have just witnessed two large banks collapse in the United States of America– Signature Bank, and Silicon Valley Bank (SVB).

    Now, banks do fail from time to time. But this time the reality is much worse.

    1) US government bonds are the new “toxic security”

    Silicon Valley Bank was no Lehman Brothers. Whereas Lehman bet almost ALL of its balance sheet on those risky mortgage bonds, SVB actually had a surprisingly conservative balance sheet.

    According to the bank’s annual financial statements from December 31 of last year, SVB had $173 billion in customer deposits, yet “only” $74 billion in loans.

    I know this sounds ridiculous, but banks typically loan out MOST of their depositors’ money. Wells Fargo, for example, recently reported $1.38 trillion in deposits. $955 billion of that is loaned out.

    That means Wells Fargo has made loans with nearly 70% of its customer’s money, while SVB had a more conservative “loan-to-deposit ratio” of roughly 42%.

    Point is, SVB did not fail because they were making a bunch of high-risk NINJA loans. Far from it.

    SVB failed because they parked the majority of their depositors’ money ($119.9 billion) in US GOVERNMENT BONDS.

    This is the really extraordinary part of this drama.

    US government bonds are supposed to be the safest, most ‘risk free’ asset in the world. But that’s totally untrue, because even government bonds can lose value. And that’s exactly what happened.

    Most of SVB’s portfolio was in long-term government bonds, like 10-year Treasury notes. And these have been extremely volatile.

    In March 2020, for example, interest rates were so low that the Treasury Department sold some 10-year Treasury notes at yields as low as 0.08%.

    But interest rates have increased so much since then; last week the 10-year Treasury yield was more than 4%. And this is an enormous difference.

    If you’re not terribly familiar with the bond market, one of the most important things to understand is that bonds lose value as interest rates rise. And this is what happened to Silicon Valley Bank.

    SVB loaded up on long-term government bonds when interest rates were much lower; the average weighted yield in their bond portfolio, in fact, was just 1.78%.

    But interest rates have been rising rapidly. The same bonds that SVB bought 2-3 years ago at 1.78% now yield between 3.5% and 5%… meaning that SVB was sitting on steep losses.

    They didn’t hide this fact.

    Their 2022 annual report, published on January 19th of this year, showed about $15 billion in ‘unrealized losses’ on their government bonds. (I’ll come back to this.)

    By comparison, SVB only had about $16 billion in total capital… so $15 billion in unrealized losses was enough to essentially wipe them out.

    Again– these losses didn’t come from some mountain of crazy NINJA loans. SVB failed because they lost billions from US government bonds… which are the new toxic securities.

    2) If SVB is insolvent, so is everyone else… including the Fed.

    This is where the real fun starts. Because if SVB failed due to losses in its portfolio of government bonds, then pretty much every other institution is at risk too.

    Our old favorite Wells Fargo, for example, recently reported $50 billion in unrealized losses on its bond portfolio. That’s a HUGE chunk of the bank’s capital, and it doesn’t include potential derivative losses either.

    Anyone who has purchased long-term government bonds– banks, brokerages, large corporations, state and local governments, foreign institutions– are all sitting on enormous losses right now.

    The FDIC (the Federal Deposit Insurance Corporation, i.e. the primary banking regulator in the United States) estimates unrealized losses among US banks at roughly $650 billion.

    $650 billion in unrealized losses is similar in size to the total subprime losses in the United States back in 2008; and if interest rates keep rising, the losses will continue to increase.

    What’s really ironic (and a bit comical) about this is that the FDIC is supposed to guarantee bank deposits.

    In fact they manage a special fund called Deposit Insurance Fund, or DIF, to insure customer deposits at banks across the US– including the deposits at the now defunct Silicon Valley Bank.

    But the DIF’s balance right now is only around $128 billion… versus $650 billion (and growing) unrealized losses in the banking system.

    Here’s what really crazy, though: where does the DIF invest that $128 billion? In US government bonds! So even the FDIC is suffering unrealized losses in its insurance fund, which is supposed to bail out banks that fail from their unrealized losses.

    You can’t make this stuff up, it’s ridiculous!

    Now there’s one bank in particular I want to highlight that is incredibly exposed to major losses in its bond portfolio.

    In fact last year this bank reported ‘unrealized losses’ of more than $330 billion against just $42 billion in capital… making this bank completely and totally insolvent.

    I’m talking, of course, about the Federal Reserve… THE most important central bank in the world. It’s hopelessly insolvent, and FAR more broke than Silicon Valley Bank.

    What could possibly go wrong?

    3) The ‘experts’ should have seen this coming

    Since the 2008 financial crisis, legislators and bank regulators have rolled out an endless parade of new rules to prevent another banking crisis.

    One of the most hilarious was the new rule that banks had to pass “stress tests”, i.e. war game scenarios to see whether or not banks would be able to survive certain fluctuations in macroeconomic conditions.

    SVB passed its stress tests with flying colors. It also passed its FDIC examinations, its financial audits, and its state regulatory audits. SVB was also followed by dozens of Wall Street analysts, many of whom had previously issued emphatic BUY ratings on the stock after analyzing its financial statements.

    But the greatest testament to this absurdity was the SVB stock price in late January.

    SVB published its 2022 annual financial report after the market closed on January 19, 2023. This is the same financial report where they posted $15 billion in unrealized losses which effectively wiped out the bank’s capital.

    The day before the earnings announcement, SVB stock closed at $250.04. The day after the earnings call, the stock closed at $291.44.

    In other words, despite SVB management disclosing that their entire bank capital was effectively wiped out, ‘expert’ Wall Street investors excitedly bought the stock and bid the price up by 16%. The stock continued to soar, reaching a high of $333.50 a few days later on February 1st.

    In short, all the warning signs were there. But the experts failed again. The FDIC saw Silicon Valley Bank’s dismal condition and did nothing. The Federal Reserve did nothing. Investors cheered and bid the stock up.

    And this leads me to my next point:

    4) The unraveling can happen in an instant.

    A week ago, everything was still fine. Then, within a matter of days, SVB’s stock price plunged, depositors pulled their money, and the bank failed. Poof.

    The same thing happened with Lehman Brothers in 2008. In fact over the past few years we’ve been subjected to example after example of our entire world changing in an instant.

    We all remember that March 2020 was still fairly normal, at least in North America. Within a matter of days people were locked in their homes and life as we knew it had fundamentally changed.

    5) This is going to keep happening.

    Long-time readers won’t be surprised about this; I’ve been writing about these topics for years– bank failures, looming instability in the financial system, etc.

    Late last year I recorded a podcast explaining how the Fed was engineering a financial meltdown by raising interest rates so quickly, and they would have to choose between a rock and a hard place, i.e. higher inflation versus financial catastrophe.

    This is the financial catastrophe, but it’s just getting started. Like Lehman Brothers in 2008, SVB is just the tip of the iceberg. There will be other casualties– not just in banks, but money market funds, insurance companies, and even businesses.

    Foreign banks and institutions are also suffering losses on their US government bonds… and that has negative implications on the US dollar’s reserve status.

    Think about it: it’s bad enough that the US national debt is outrageously high, that the federal government appears to be a bunch of fools incapable of solving any problem, and that inflation is terrible.

    Now on top of everything else, foreigners who bought US government bonds are suffering tough losses as well.

    Why would anyone want to continue with this insanity? Foreigners have already lost so much confidence in the US and the dollar… and financial losses from their bond holdings could accelerate that trend.

    This issue is particularly of mind now that China is flexing its international muscle, most recently in the Middle East making peace between Iran and Saudi Arabia. And the Chinese are starting to actively market their currency as an alternative to the dollar.

    But no one in charge seems to understand any of this.

    The guy who shakes hands with thin air insisted this morning that the banking system is safe. Nothing to see here, people.

    The Federal Reserve– which is the ringleader of this sad circus– doesn’t seem to understand anything either.

    In fact Fed leadership spent all of last week insisting that they were going to keep raising interest rates.

    Even after last week’s banking crisis, the Fed probably still hasn’t figured it out. They appear totally out of touch with what’s really happening in the economy. And when they meet again next week, it’s possible they’ll raise rates even higher (and trigger even more unrealized losses).

    So this drama is far from over.

  • heirlooms777
    heirlooms777 Posts: 208 ✭✭✭

    Please keep us updated, this is very informative, @Marjory Wildcraft

  • dipat2005
    dipat2005 Posts: 1,289 ✭✭✭✭✭

    Our credit union (locally) sent out a memo saying that everything is fine. " What about credit unions? Is it the same thing? @Marjory Wildcraft

  • judsoncarroll4
    judsoncarroll4 Posts: 5,490 admin

    What too few seem to realize is that SVB was essentially an investment bank. With the government bailout, that means that from now one people won't look for Shark Tank investors. Banks will lend funds for ridiculous ideas. If they pan out, they make money, If they fail, we pay!

  • SuperC
    SuperC Posts: 952 ✭✭✭✭

    @Marjory Wildcraft thank you for posting. I have a friend that sms me about bank runs. I googled it, and to read an article stating what is going on now clarifies the activity and investment that had occurred at SVB.

    So we ought to buy silver, nickel and copper.

  • Marjory Wildcraft
    Marjory Wildcraft Posts: 1,615 admin


    Hi @dipat2005

    Yes, I've been getting all kinds of feel good emails from banks... Just like the same ones I got from De-Fi before they went into bancruptsy. LOL. I didn't have anything with them, I just had a bunch of random accounts I had opened back when I was first trying to figure out the crypto scene.

    My understanding is that almost all banks in the US are financially insolvent. They can still function, but they are actaully under water. Many of them hold Treasury bonds which have become worth less and less as interest rates go up. It is like when you buy a stock for say $100 dollars and the price on the market geos down to $70. On your balance sheet you have a loss, but it isn't actualized until you actually sell the stock for $70.

    The Fed just promised every bank that they will buy thier US Treasury bonds at the origional price paid for it. Not the true (lower) current market value. Hah! Try going to your stock broker and saying "hey, I know this stock has gone down, but could you buy it back from me at my origional price so I don't have a loss?" But in these bizarre times we live in, that is exactly what is being offered to the banks.

    The Fed has announced they will basically bail out every bank they need to. Of course they aren't using the words "bail out" because no one likes that term, but that is essentailly what they are doing.

    So the Fed is going to create more and more money to save the banking system.

    What that means for us is they may stave off bank runs and the banking system collapse, BUT there are consequences. Creating that much more money means inflation will be steeper until we get into hyper inflation.

    There may be some smaller banks with very sound lending and barrowing practises - there were a lot of small well managed banks that made it trhough the great depression. But it doesn't matter if those banks are 'good' or not. Because the currency itself is becoming more and more worthless due to inflation.

    So rather than trying to find a better bank, you need to get out of US Dollars completely.

    You know your basics: food, water, medicines, weapons, etc. Tangible, useful, things.

    Precious metals will hold value. Silver is especailly rare and those pre-1964 dimes and quarters (if you are in the US) are excellent. I do have a small portfolio of cryptos.

  • Marjory Wildcraft
    Marjory Wildcraft Posts: 1,615 admin

    OK, here is another Fed flip flop in this thread. Initially Janet Yellen said they would cover the deposits of every bank everywhere... Now she is saying it is only for the banks that the Fed deems needs it.

    In a stunning admission, when asked point blank by Rep. James Lankford (R-OK) whether a community bank in his home state of Oklahoma would have uninsured depositors made whole the same way the Silicon Valley Unicorns did, Yellen had to come clean:

    “A bank only gets that treatment if a super-majority of the Fed board, and I, in consultation with the President conclude that failure to protect uninsured depositors would create systemic risk to the banking system”

    In short “not necessarily”.

    So people are moving funds out of community banks to big banks (too big to fail banks) because they want to ensure they are in one of the "protected" banks.

    This is a really stunning admission by Janet.

    My suggestion is to get out of your countries fiat curremncy entirely. So get out of US Dollars, Canadian Dollars, Yen, Yuan, Francs, etc. You know the drill by now - switch out of your fiat currenty into: food, tools, medicines, silver, livestock, seeds, nickles, gold, lead, some cryptos...

    I believe after the little banks and coops fold... Ultimately the big banks will also fail.

    I would not be surprised if they actually try to push more small banks into foreclosure. Remember what they did to small businesses all over the world with the COVID experience? If Yellen rasies interest rates next week it will be a clear demonstartion they are trying to kill the little banks. Let's see what happens. In the mean time, get prepared.


  • Cornelius
    Cornelius Posts: 872 ✭✭✭✭

    Thank you @Marjory Wildcraft for updating us!

  • dipat2005
    dipat2005 Posts: 1,289 ✭✭✭✭✭

    @Marjory Wildcraft I suppose that credit unions are the same. Is that correct?

  • judsoncarroll4
    judsoncarroll4 Posts: 5,490 admin

    My biggest concern is still the petro dollar. Oil (etc) has been marked or valued in US dollars since America became the dominant economic and military power. Now, CHina is making moves to mark oil to the yuan. If this continues, we could see gas prices triple in the blink of an eye. That would lead to across the board massive inflation, which would empty bank accounts, max out credit cards, cause car repos and house forclosures - massive economic disruption and nothing the fed or any other gov agency could do to stop it. Crytpto and metals still have to be converted to US dollars to buy food, gas etc in AMerica. No investment would be safe. We have to build individual resiliency in preparation for the very real threat of empty shelves, closed banks and gas stations.... gotta learn to live without money before we have to!

  • Marjory Wildcraft
    Marjory Wildcraft Posts: 1,615 admin

    @dipat2005 The credit unions are in the same boat as the banks. It's inflation and hyper inflation that is the problem. It is a shame as there are some very well run coops and small banks.

    I just heard via Steve Quail (he is very incinderary so keep that in mind..) that the Chinese are trying to sell their US Treasury bonds at 10 cents to the dollar. So a 90% discount. I'm looking for outside confirmation of that - I'm sure that would be kept supressed by the media. That kind of steep discount is pretty much the definition of a currency and country going into bancruptsy. Or said another way, all those dollars we've created are coming back home to roost.

    Janet Yellen ordered high level emergency meetings yesterday so something big is up. I'm trying to get updates on that - I'll post as soon as I know something. I'm guessing they will come up with something to try can calm everyone down. But it won't work for long. The precious metals dealers I know are in total overwhelm with orders right now.

    I don't have much in the banking system, but come Monday I'm pulling everything out except for the bits I know I need for the next months bill payments. For TGN the company we rarely have much in the bank! Hah, and we will keep operating full-on like always. We are needed now more than ever.

    I am getting some buckets of backup foods shipped to my (clueless) children - funny, they should know better! But they are in ther early 20's and have been enjoying young adulthood in Texas which is thriving economically. I have not said much to them because what will happen will happen and they are so happy right now. I know how I raised them so I'm not that worried. ☺️

    You never know... I've been at this so long and pulled out money before and it turned out they managed to kick the can down the road. I am almost tired of being prepped LOL.

  • judsoncarroll4
    judsoncarroll4 Posts: 5,490 admin
    edited March 2023

    90% discount on a trillion or so of bonds would be economic warfare.... on the bright side, we wouldn't have to worry about bank runs. $100 wouldn't buy a burger and there would be no burgers for sale!

  • heirlooms777
    heirlooms777 Posts: 208 ✭✭✭

    @dipat2005 Now if you wanted to you can purchase some rural property to live and perhaps even grow your own food and medicine!

  • SuperC
    SuperC Posts: 952 ✭✭✭✭

    Oh my, this has been si crazy. I very much appreciate what you are posting about this topic. Keep us updated as we need these messages to be public. Our community banks state that all is okay.