Silicon Valley Bank and the Fears it Brings...

 This blog is by no means a source of information on financial markets.  There are many much more knowledgeable and enlightened bloggers out there who can provide you the info you need to make financial decisions.  I only get involved when the money intersects with tech.  This is one of those times.

The headlines of major news sites have been full of info in the last few days about Silicon Valley Bank or SVB.  So what happened and why is this news?

Basically SVB was/is a "go to" bank for companies classified as "tech startups"  Basically the bank, which was started in 1983, was well know inside Silicon Valley as a well known source of financing for these tech startups who were relying on US venture backed funding.

It's interesting to note that while practically no one outside of the Silicon Valley tech sector had ever even *heard* of SVB, the bank was one of the top US commercial banks.  It was estimated to be one of the top 20 US commercial banks with total assets around $209 billion (yes, billion with a "B").

Because of SVB's involvement with a lot of Silicon Valley startups, it was seen as *the* place to get funding as part of a startup.  However, like anything in the world of finance, it can be easy to get over extended if you are not careful.  That seems to be exactly what happened here.

As inflation seemed to loom just over the horizon for the last year or so, we have seen interest rates controlled by the Fed go up.  Of course, those increasing interest rates were an attempt to slow things down.  Rising interest rates made money harder to come by and the customers of SVB began to take money out to cover expenses and when you suddenly have more money going out than coming in... well that's not good.

Then word gets out that more money is going out than coming in and suddenly *everyone* wants their money NOW.  That creates a good old fashioned "run" on a bank.  When that started, the feds stepped in.

Where this all ends up is anyone's guess.  Someone once told me (and it's pretty much true) that money is sort of like water.  It tends to flow from one point to another and sometimes when you try to dam it up, once a crack develops in a dam, there is a huge rush downstream that can take a lot of things with it...