What happened to Silicon Valley Bank is known as a liquidity crisis.
They had plenty of assets. But the assets were in instruments whose value had fallen, that weren’t worth as much as the bank claimed. When Peter Thiel and his bros learned this, they all pulled out their money at once and the bank collapsed.
The main lesson is that everything is now liquid.
Financial assets are liquid. Political assets are liquid. Your reputation and marriage are liquid.
Before the Web was spun this wasn’t the case. It would take time for depositors to pull their money out of a bank, time the bank could use to sell assets in an orderly way. There were still runs but these could be managed through regulation.
This time the fall was sudden, and the punishment had to be severe. The executives all lost their jobs. They deserve to face criminal charges, for cashing out while the walls were falling around them. Everyone who invested in SVB or its debt lost all their money. That’s a hit of nearly $100 billion, mainly to very rich people. Hopefully it teaches other banks to manage their assets better, to sell out money-losing securities quickly so they’re not caught out, in other words to be more transparent.
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