The Collapse of Silicon Valley Bank

Regulators Act Quickly to Shore Up Banking System

In brief, late last week, Silicon Valley Bank, the nation’s 16th largest, suffered a bank run akin to the scenes from “It’s a Wonderful Life” and was taken over bybanking regulators on Friday. This is notable as a bank of this size has not failed since 2008. A big difference from then to now is that Silicon Valley Bank is not systemically important to the economy and regulators now have the tools and experience to act quickly to shore up the banking system from the aftershocks. And regulators did just that Sunday night. 

U.S. Financial Regulators promised that ALL depositors (not just the insured depositors within FDIC limits) of Silicon Valley Bank will have there full accounts restored Monday morning and, more importantly for you and the overall economy, they announced a special backstop for any other bank that was having similar issues which avoids depositors worrying if their bank might be next and this situation getting into a downward spiral. 

Dumb Decisions

Silicon Valley Bank failed because of really dumb decisions that it’s management team made that were completely avoidable. They were greedy and the owners of the bank (the stockholders) are paying the price. The owners have been wiped out to make sure that all depositors will be paid. This is how it should work and that the U.S. taxpayer is not footing the bill.

Due to Wrought Advisors' forward looking market views, the investment portfolios we manage had no material exposure to Silicon Valley Bank stock.