Another global banking crisis? BLS and its implications

Apart from the fact that neither the regulators nor the bankrupt bank itself knows all its extensions, we can indeed draw some consequences from what is known up to now. My impression is that “the usual suspects” are going to try to dose the bad news to come.

Let’s see what happened and whether this reminds you of Long Term Capital Management or Lehman.

During the pandemic, this Silicon Valley bank increased its deposits by tripling them. The amount of the clients’ money was invested in the ten-year US treasury bond and mortgage loans backed by federal agencies. Full security, but…

When interest rates rose, depositing companies (mostly technology companies and start-ups) began to need to withdraw the funds deposited there, since cheap financing disappeared and after the pandemic, the activity of these companies increased again, many of them they burning cash in their initial stages.

Deposits fell throughout 2022.

All was well, with JPM holding the stock as an overweight and rating agency SP as investment grade.

“On Wednesday March 8, Moody’s still had an A3 rating on SVB Financial, owner of the now-defunct Silicon Valley Bank, which was already collapsing in full view. Four notches in investment grade – a very respectable rating!

To restore the balance and be able to continue giving loans at higher rates, this Wednesday it sold assets worth 21,000 million, losing 1,800 million dollars in the operation. He also proposed a capital increase for 2,250 million that sank the price and failed.”

The associations of venture capital firms advised their affiliates to withdraw the deposits and you know what’s next.

There’s about $150 billion that appears to be uninsured by the FDIC, so perfect storm. If we add to these the bankruptcy of Silvergate and the public debt portfolio of certain banks that, if carried out, would entail considerable losses, well, what happens.

It seems that bank CEOs, regulators, rating agencies, etc. do not understand that trying to match assets with liabilities, which is 1º of EGB, unless the bankruptcy is premeditated and the Reserve Federal has had to resort to it to curb inflation and meet the objective of central banks: CAUSE BANKING CRISES for the gains of a few and the detriment of all the rest.

Given the banking interconnections, it is difficult to quantify the extent and duration of this event, but do not trust too much the authorities that provide us with information, when they do not falsify it for their interests.

While CEO Greg Becker member of the board of directors of the Federal Reserve from San Francisco talked about the economic recovery and sent videos to his employees about the progress of the company selling 3.6 million shares.

Not only is it a large bank in its size given the volume and its subsidiaries around the world, but it is lose confidence again regulators, rating agencies, brokers, etc… More bad news to come and if you don’t see how the rates in the USA dropped

It will continue and we will try to keep you informed.