How Silicon Valley Bank Collapsed in 60 hours
Start writing a post
Featured

How Silicon Valley Bank Collapsed in 60 hours

One of the top-20 banks in the US collapsed this weekend, producing a catastrophic effects on startups and technology companies.

1056
How Silicon Valley Bank Collapsed in 60 hours

This is a developing story. Updates might be posted as news flows in.

Banks in US invest the money that customers put in there. How much can they invest? If you give them $10, they could invest $9 of it. This is called Fractional Reserve Banking. This system is not a problem if the investment is sound, but if the investment is not sound AND a bunch of customers try to cash out at the same time, then the bank has no money to give back. When the bank has no money to give back, it's a liquidity crisis.

Silicon Valley Bank (SVB), which is the goto bank for most startups and venture capital, invested a huge proportion with the belief that interest rates would come down. When the Feds didn't do that, they were stuck holding a lot of bad bets. All the money was tied up in these bad bets.

Concern among founders and VCs investors was palpable last week after Silicon Valley Bank surprised the market by announcing Wednesday it needed to raise $2.25 billion in stock. On Thursday, Peter Thiel asked many of his portfolio companies to withdraw their money out of the bank, and the shares were down another 62% in premarket trading Friday before they were halted. Regulators then shut down the bank and said the FDIC would protect insured deposits. But these insured deposits are unto 250K, so what happens to companies that have millions of fundraised dollars stuck in it? Some experts seem to think the Feds caused this problem but not sticking to the "transitory inflation" case.

Others believe the SVB made really bad bets and taxpayers should not bail them out.

The venture capital community basically created a run on SVB, says Unlimited CEO Bob Elliott www.youtube.com

Come Monday, we will find out if there are other suitors that are able to buyout SVB.


Report this Content
Featured

22 Songs To Use For Your Next GoPro Video

Play one of these songs in the background for the perfect vacation vibes.

304608
Pexels

We've all seen a Jay Alvarez travel video and wondered two things: How can I live that lifestyle and how does he choose which song to use for his videos?

Keep Reading... Show less
Featured

13 Roleplay Plots You Haven't Thought Of Yet

Stuck on ideas for a roleplay? Here you go!

409507
13 Roleplay Plots You Haven't Thought Of Yet
Pixabay

One thing that many creators know is that fun to have characters and different universes to work with but what's the point if you have nothing to do with them? Many people turn to roleplay as a fun way to use characters, whether they're original or from a fandom. It'd a fun escape for many people but what happens when you run out of ideas to do? It's a terrible spot to be in. So here are a few different role play plot ideas.

Keep Reading... Show less
Featured

Deep in the Heart of Texas

A Texan's responsibilities when introducing an out-of-stater to Texas culture.

1822

While in college, you are bound to be friends with at least one person who is not from Texas. Now Texas is a culture of its own, and it is up to you to help introduce them to some good ole Texas traditions during their time here. Show your friends that famous Southern hospitality!

Keep Reading... Show less
Featured

Marching Through March

Some appreciation for the month of March.

2637
Pexels

I love the entire year. Well, for the most part. I'm not a big fan of Winter, but even then, every month has something that's pretty great. November? Thanksgiving. December? Winter Holidays. January? New Year's. February? Valentine's and Single Awareness Day. May? Existential dread during finals. But for me, March has always been my favorite month of the year, and for good reason.

Keep Reading... Show less
Content Inspiration

Top 3 Response Articles of This Week

See what's trending in our creator community!

3166
Top 3 Response Articles of This Week
gouletballet.files.wordpress.com

Welcome to post-spring break week on Odyssey! Our creators have a fresh batch of articles to inspire you as you hit the books again. Here are the top three response articles of last week:

Keep Reading... Show less

Subscribe to Our Newsletter

Facebook Comments