Anyone following this? (The Silicon Valley Bank), I first caught wind of the news on Thursday, but didn't realize how big it would be until Friday when FIDC stepped in and closed the bank.
As a person who wasn't too old during the 2008 financial crisis, I have no experience with one.
Curious how people think this will play out, I know there's a lot of older members here with wisdom to share.
From what I understand, the increase in deposits caused SIVB (Silicon Valley Bank) to invest more money into hold to maturity securities at low interest rates (compared to now, as the federal reserve kept increasing interest rates, their bonds dropped in value). The unrealized losses ended up increasing to where they were unable to cover deposits. They sold off some of their bonds for a huge loss, and ended up causing a scare/bank run which led to the FIDC shutting down the bank.
I know its in the US so maybe it isn't going to affect Canada as much, but I would assume banks in Canada may be in the same situation as they may have invested in bonds when interest rates were low with leverage due to fractional reserve banking.
Is anyone moving their money around to keep under the 250K limit for insured deposits at banks? If this ends up causing contagion, what typically ends up happening? Does the federal reserve have to bail out the banks, housing market, stock market, collapse?
As a person who wasn't too old during the 2008 financial crisis, I have no experience with one.
Curious how people think this will play out, I know there's a lot of older members here with wisdom to share.
From what I understand, the increase in deposits caused SIVB (Silicon Valley Bank) to invest more money into hold to maturity securities at low interest rates (compared to now, as the federal reserve kept increasing interest rates, their bonds dropped in value). The unrealized losses ended up increasing to where they were unable to cover deposits. They sold off some of their bonds for a huge loss, and ended up causing a scare/bank run which led to the FIDC shutting down the bank.
I know its in the US so maybe it isn't going to affect Canada as much, but I would assume banks in Canada may be in the same situation as they may have invested in bonds when interest rates were low with leverage due to fractional reserve banking.
Is anyone moving their money around to keep under the 250K limit for insured deposits at banks? If this ends up causing contagion, what typically ends up happening? Does the federal reserve have to bail out the banks, housing market, stock market, collapse?
