With all the eyes of the world looking at SVB's collapse, a lot of FUD is spreading, and people are worried about another 2009 contagion.
The risk was not that they were fiscally irresponsible. I'm not going to go into detail about what they did with the money. You can look it up easily. People are talking about it. What really went wrong was that a FUD situation was created, and badabing badaboom, bankrun.
One topic that keeps popping up is FDIC coverage of depositors' balance. The issue was that more than 85% of the deposits were not insured. SVB's primary clients are clients that have too much concentrated risk.
The way I see it, with everyone talking about FDIC insurance and people becoming ever more aware of the risks, people are going to seek precaution by moving liquidity around. There's going to be a huge volume of capital moving around this coming week. A lot will be people looking to move some balance off their accounts and spreading it out across different banks. In effect, bolstering bank balance sheets.
Imo, there couldn't have been a better martyr than SVB that may result in a more distributed banking system with fewer risks.
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