SVB and Signature Bank Crisis Is What Happens When Easy Money Runs Out

Phew. Hey there. Senior reporter Phil Rosen here. Before we jump into the newsletter, the Silicon Valley Bank saga is continuing to unfold, so let’s quickly break down the latest.

The big story this morning: HSBC has bought the UK arm of collapsed SVB in a last-minute deal for 1 British pound, or $1.21. The UK government and the Bank of England facilitated the private sale, British Chancellor Jeremy Hunt said on Twitter: “Deposits will be protected, with no taxpayer support”.

Also, if you haven’t heard, Signature Bank yesterday became the third bank to fail in the past week, after Silvergate shut down its bank voluntarily.

The Treasury, Federal Reserve, and FDIC made a joint statement Sunday evening, effectively saying that all depositors for SVB and Signature Bank would be made whole, and that a new facility, the Bank Term Funding Program, would be created to provide liquidity for firms under stress. 

“No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer,” policymakers added.

Meanwhile, as the two banks fell under regulatory control, First Republic issued a message to clients aimed at calming nerves, saying it still had strong liquidity. 

In any case, some folks on Wall Street have been telling me that we can chalk up much of the turmoil to our departure from the easy-money era

More than a decade of near-zero interest rates allowed companies to borrow money freely, and as far as repercussions go, what we’ve seen so far could mark only the tip of the iceberg.

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1. The fall of SVB and Signature bank means the Fed’s aggressive interest-rate hiking regime has now taken sizable casualties. 

The tumult is a byproduct of the central bank’s 1,700% increase in rates that took place in less than a year, and it could mean more once-stable institutions could be turned inside out in the coming months

When you raise interest rates quickly, after 15 years of overstimulating the economy with near-zero rates, to not imagine that there’s not leverage in every pocket of society that will be stressed is a naive imagining,” Lundy Wright of Weiss Multi-Strategy Advisors told me. 

This new rate cycle delivers a “perfect storm,” according to Deutsche Bank analysts, who told clients last week that SVB epitomizes all the risks worth fretting over in the shifting policy era.

In a Sunday note to clients, Goldman Sachs’ research team pulled back their Fed policy forecast in response to this weekend’s bank failures. 

“In light of recent stress in the banking system,” the analysts wrote, “we no longer expect the FOMC to deliver a rate hike at its March 22 meeting with considerable uncertainty about the path beyond March.”

In any case, the risk of contagion may not be all that high, as my colleague Matthew Fox writes, given that banks have become extremely well-capitalized since the Great Financial Crisis

And according to Tut Fuller, chief executive and founder of Capra Bank, if policymakers stick to their word and protect depositors like they said they would, people will have their faith restored. 

“I’m hopeful that the government’s approach of stepping in and protecting depositors, but not bailing out failed executives and boards of directors, actually builds confidence,” Fuller told me close to midnight last night. “We need to protect the consumers and businesses who thought their money was safe and hold poor leadership accountable.”

Here’s Deutsche Bank again: 

“What do you get when you see one of the biggest hiking cycles on record, alongside one of the most inverted yield curves in history, at the same time as seeing one of the biggest tech bubbles bursting in history, coupled with runaway growth in private markets?”

The answer looks something like what transpired this weekend

What’s been the most surprising thing to you about the collapse of two banks in three days? Tweet me (@philrosenn) or email me ( to let me know. 

In other news:

wall street


2. Stocks on Wall Street battle for direction as SVB’s failure ignites fears for banks. Shares in First Republic Bank fell as much as 60% premarket after the US lender tapped the backstop for a $70 billion to shore up liquidity. Here are the latest market moves

3. Earnings on deck: Carlsberg, Getty Images Holdings, and more, all reporting

4. Morgan Stanley recommended this batch of stocks to profit on an investing strategy that produces positive returns 100% of the time. Here’s the approach the strategists laid out — including the 19 names they like now.

5. A $15 billion venture capital firm had warned its startups of Silicon Valley Bank’s red flags months ago. Greenoaks Capital Partners told clients in an email back in November that SVB, as well as other firms, could see problems in a high-interest-rate environment, Bloomberg reported. Those clients pulled over $1 billion in funds out of the bank ahead of the turmoil. 

6. Investing veteran Jeremy Grantham said the stock market bubble is still deflating. The market won’t bottom until 2024, and investors shouldn’t be fooled by any rallies that materialize, the GMO co-founder said. He blasted the Fed’s monetary policy as a 36-year-long “horror show.”

7. The bank crisis will force the Fed to slash rates by 100 basis points to prevent contagion. That’s according to market guru Larry McDonald. He said it was the Fed that effectively caused the dramatic bank run last week.

8. This real estate investor owns over 1,250 units. He was able to retire at age 36 through leveraging the cash flow from his properties. Here are the five pillars that he says drive wealth — and how investors can combine them to compound their income and reach financial freedom.

9. An investing expert who says “cash is king” doesn’t think it’s time to get into the stock market right now. Lauren Simmons recommends instead putting your money into Treasuries, CDs, and high-yield savings accounts because that’s how you can be best prepared to jump on new opportunities after a recession.

Bitcoin price

Markets Insider

10. Bitcoin and other risk-assets stumbled amid bank fears. The crypto industry is navigating fresh pain as Silvergate prepares to wind down and other financial firms face snags. Bitcoin dropped below $20,000 last week, but is now back above $22,000. Here’s what caused Friday’s drop

Curated by Phil Rosen in New York. Feedback or tips? Tweet @philrosenn or email

Edited by Max Adams (@maxradams) in New York and Hallam Bullock (@hallam_bullock) in London.

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