This weekend I spent in Agua Prieta for the Rancho Feliz open house. No I did not flee the country because I had 100% portfolio company exposure to SVB. This is me and my man Reyes cheesin hard.
It was a weekend where many people were on pins and needles. Tech’s marquee bank was put into receivership, and the fate of everyone’s deposit was unknown. You can read about the reason why that happened here. Early Sunday morning Yellen signaled that there would be no “bailout” for SVB, but they were doing everything they could to protect the depositors. Remember that a bailout protects management and equity holders while a backstop protects the bank’s customers.
Last night before the Asian trading markets opened, a joint statement by the FDIC, Treasury, and Federal Reserve stated that they would create a mechanism to backstop to protect the depositors. Phew! Oh, and yes, they are also going to be closing Signature Bank as well!
Signature Bank had too much crypto exposure, and they most likely had a rebalancing plan that they had not yet told the market. The government wanted to shut this down and give a resolution to its depositors before another run-on-the-bank scenario happened. Who said the government is inefficient? They also work on weekends! You can learn about Signature Bank here.
Nothing like a potential worldwide contagion to start the week. I am very grateful that there was swift action and that Silicon Valley and Signature Banks depositors are safe.
