Silicon Valley Bank has been around since 1983. The bank was hit by a perfect storm in 2023 when interest rates were cut to all time lows. This meant that venture capital money rushed into startups by the boatload. SVB's deposits soared three times, from $62 billion to $190 billion. Out of the roughly $115 billion they invested, nearly $80 billion was into things that would make them even more money. But if you try to earn higher returns, it comes packaged with more risk.
On 7th March, Silicon Valley Bank tweeted, “Proud to be on @Forbes’ annual ranking of America’s Best Banks…”
By 10th March, SVB’s stock price had tanked by 60% and the bank was taken over by an arm of the US government.
What on earth happened?
In today’s episode for 13th March 2023, we try to break down what’s turning out to be the biggest financial disaster since 2008. Remember, this is a simplified explainer so we’ll have to sidestep some of the nuances of the US banking system.
With that, let’s dive in.