Are the Americans and their foolhardy outlier of a banking system in for another Oscar-winning crash?

Certainly seems there’s another blockbuster banking crisis afoot, if you can really believe it.

So. We’re on.

To be honest, I’d’ve thought this kind of thing was – if not less likely – then surely the kind of thing which now comes with an early warning system.

It’s called a heads up America, and after the last time – although the Ryan Gosling movie was terrific and some slight compensation – you shoulda been figuring out how to give us one.

No. Not the case. And unless the Biden government can orchestrate a deal to rescue Silicon Valley Bank (SVB) depositors before the branches open later tonight US time, then…

And, BTFW, Forbes didn’t help much either, as my colleague Reuben Adams so kindly pointed out to me. “Heads up,” Reuben said on some kind of messaging app. “I’m sending you something funny.”

It’s. Just. Courtesy, America!

Idiots. Good read tho.

This kind of  ‘it’ll-make-a-great-Tweet-meme-listicle-event-cash’ storytelling takes me kicking and screaming (in my mind, this is all in my mind) back to the whole WMDs in Iraq thing.

There’s making a BIG Deal about something you  know little about, then there’s not fact checking, and then there’s invading a country.

 

What’s about to happen, again…

What’s happening in California, it’s not rocket science. And how it all goes down is the same every time, if the curtains have changed a little.

Your bank doesn’t actually have your money in a big, ‘possibly vulnerable to someone like Clive Owen’ vault. What they usually do is lend it out to people more hard up, or more imaginative or entrepreneurial than you or me.

They’re doing this all the time. ‘Here’s some cash for that Bondi cupboard’ or ‘here’s some for starting that Bondi cupboard repair business’.

In the case of a bank called Silicon Valley, chances are the money’s heading out to people strung out in the tech startup game. (Spoiler alert).

If you wake up in the valley one day and read how your bank’s in deep shit, then you run to it and get out your money. You run fast. And that’s what happens, whether it’s houses or mouses.

Bank runs destroy banks.

Once the running starts, the rest doesn’t matter at all.

 

What comes next after the largest bank failure since 2008?

Meanwhile SVB’s customers might not need to lace up their Nikes at all.

A largely idle US bank regulator  (US Federal Deposit Insurance Corporation or FDIC) quickly made a new bank on Friday – (seems a little too easy to make a bank these days… America!) called the Deposit Insurance National Bank of Santa Clara which somehow has control of all SVB’s deposits.

Their aim is for SVB to open doors on Monday morning, and then insured depositors (with up to US$250,000 in their accounts) can pull their money and hug it tight. Take it home. Rock it to sleep.

But, wait on America. Who TF insures their money? That’s not what money’s for. Money’s for cars and bigger cars. You won’t even insure your own bodies.

Oops. And shock-a-doodle-do, turns out the majority of deposits at SVB aren’t insured anyway, and it is unclear when those customers will be able to access their money — or whether they will get all of it back.

SVB’s hardly got a dollar from old school retail banking. It’s all startup securities and such nonsense.

And even worse, its role as the start-up bank means VC backed companies and new plays that got big (like Roblox which – full disclosure – I haven’t invested in, because it’s silly), are going to want a few bucks to meet payroll this week, and what happens then?

 

The tough choices come now

Government intervention, or tough love?

One could destroy you politically, the other could destroy you and everyone else economically.

On Friday in New York, bank stocks like First Republic Bank lost 15%, PacWest Bancorp lost 38%, and Signature Bank just 23%, until this happened.

So. As you can see. These things spread like they escaped from some lab in Wuhan.

Most places – and here I’m pleased to include Australia – have a handful of major banks. We call ours the Four Pillars. Or the Big Four. Or the Four Banks of the Austrapocalypse.

But in this case, their strength is in consolidated roots whic run deep. They’re also watched like a hawk, by the hawks at the central bank. They have buffers now. Buffers are great.

Not in the states. In the states there’s about a thousand banks and they’re all as strong as a newly minted NRL team.

So tonight should be fun. Like watching a horror comedy.

 

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