WEBVTT - Ep 350: Should I Freak Out About the SVB Bank Collapse? 0:00:06.080 --> 0:00:09.760 Hey, Hey, ba fam Brown ambition is back. I am 0:00:09.800 --> 0:00:14.320 writing solo today and I cannot even tell y'all. I 0:00:14.360 --> 0:00:16.279 know I shouldn't have a big fat smile on my 0:00:16.360 --> 0:00:19.759 face because a bank did just collapse and another one 0:00:19.880 --> 0:00:24.080 is right behind it, And understandably, a lot of y'all 0:00:24.079 --> 0:00:27.120 are freaked the f out about what has been happening. Now, 0:00:27.120 --> 0:00:30.080 if you've been living under a rock or you are 0:00:30.120 --> 0:00:32.080 not a part of the family group chat that has 0:00:32.120 --> 0:00:35.920 been popping off, and everyone who's like I keep my 0:00:36.000 --> 0:00:38.800 money rolled up in my socks or in my mattress, 0:00:39.120 --> 0:00:42.400 and they're not gloating to you right now, let me 0:00:42.560 --> 0:00:44.879 get you up to speed on what's been going on. 0:00:45.120 --> 0:00:46.880 Why do I have a big smile on my face? 0:00:47.560 --> 0:00:50.080 I just love this stuff. I just y'all know. My 0:00:50.120 --> 0:00:54.400 background is as a business reporter. I spent years covering 0:00:54.440 --> 0:00:58.240 finance and business for sites like Yahoo Finance and Business Insider, 0:00:58.280 --> 0:01:00.960 and then I ran a hole damn content team for 0:01:01.080 --> 0:01:04.280 five years for a fintech company, and our whole job 0:01:04.920 --> 0:01:09.840 was to break down really like confusing complex personal finance 0:01:09.880 --> 0:01:12.679 topics and help y'all understand what's going on so that 0:01:12.760 --> 0:01:17.479 you can live in this calm, you know, serene sort 0:01:17.520 --> 0:01:20.319 of state of mind that I live in because I 0:01:20.440 --> 0:01:23.240 know when to worry, and I would say, now is 0:01:23.280 --> 0:01:25.640 not the time for people like you and I to 0:01:25.720 --> 0:01:28.600 be freaking out, all right, So I do want to 0:01:28.640 --> 0:01:31.399 walk through what the heck has happened with the Silicon 0:01:31.480 --> 0:01:35.920 Valley bank collapse, which I'm recording this a few days 0:01:35.959 --> 0:01:39.520 after that collapse has happened, and I'm actually one of 0:01:39.560 --> 0:01:41.800 the reasons we've waited to even talk about it, or 0:01:41.840 --> 0:01:44.520 I've waited, is because you need to let the dust settle, 0:01:44.680 --> 0:01:46.959 you know, you need to figure like, let the smart people, 0:01:47.080 --> 0:01:50.600 the regulators, the president of the freaking United States, have 0:01:50.640 --> 0:01:52.560 a press conference about it, and let them start to 0:01:52.640 --> 0:01:56.880 unpack what's happening. What does this mean for people who 0:01:56.920 --> 0:02:00.200 were using that bank, which is probably none of the 0:02:00.200 --> 0:02:03.200 people who listen to Brown Ambition and definitely not myself, 0:02:03.640 --> 0:02:05.520 And what does that and like, what can we learn 0:02:05.560 --> 0:02:08.760 from it, and how can we actually move forward without 0:02:08.800 --> 0:02:14.880 freaking out? Okay? And if you, like me, are still worried, 0:02:14.960 --> 0:02:17.240 because you're like, damn, I've spent a decade trying to 0:02:17.280 --> 0:02:20.240 convince my dad to stop rolling up his damn money 0:02:20.240 --> 0:02:23.960 in his sucks and deciding that he does not trust banks. 0:02:24.000 --> 0:02:26.520 And I have finally got this man. He's got a 0:02:26.639 --> 0:02:29.480 Vanguard investment account. He say, he's got a four to 0:02:29.520 --> 0:02:32.959 one k now he's got money in savings. This man's 0:02:33.000 --> 0:02:36.600 even got I even bought him some eyebonds. So and 0:02:36.919 --> 0:02:40.640 I'm worried that, like dang, with all this swirling talk 0:02:40.800 --> 0:02:44.600 about what this means for us, are people going to 0:02:44.600 --> 0:02:48.080 start making hasty, uneducated decisions about what to do with 0:02:48.120 --> 0:02:50.760 their money. And what I'm here to do is just 0:02:50.760 --> 0:02:52.680 to be a voice of reason. And I am just 0:02:52.720 --> 0:02:56.079 one of many voices out there, y'all. I of course, 0:02:56.160 --> 0:02:59.960 am not your financial advisor. I am not an investment advisor. 0:03:00.080 --> 0:03:01.760 I don't work for a big bank, although I have 0:03:01.880 --> 0:03:04.760 in the past. I'm just, like Tiffany says, we are 0:03:04.800 --> 0:03:07.880 your smart financial besties, the little voices in your head. 0:03:08.280 --> 0:03:10.200 And so I want you all to pull up a seat, 0:03:10.520 --> 0:03:12.840 pour yourself a little glass of wine. I wish I 0:03:12.880 --> 0:03:16.960 could join you there, but you know, doctor's orders. And 0:03:17.120 --> 0:03:20.560 let's break this down. Okay, So the first question you 0:03:20.560 --> 0:03:22.960 guys probably have is like, what the heck even is 0:03:23.120 --> 0:03:25.680 SVB and why are people freaking out this is not 0:03:25.800 --> 0:03:28.120 one of the big banks that you see when you 0:03:28.160 --> 0:03:30.960 go downtown and you see the big blue banks. You 0:03:31.040 --> 0:03:34.280 got your Chases, and you got your BAA's and your 0:03:34.280 --> 0:03:37.760 Wells Fargo's or your big online banks. Even so, the 0:03:37.840 --> 0:03:41.400 reason you've never heard about SVB until now is because 0:03:41.760 --> 0:03:46.400 the bank's customers are largely startup founders and like tech bros. 0:03:46.600 --> 0:03:49.760 In Silicon Valley. It's called Silicon Valley Bank and they 0:03:49.800 --> 0:03:52.680 mean that ish Okay. They've only been around for about 0:03:52.720 --> 0:03:55.720 forty years, and over the years it has become the 0:03:55.760 --> 0:04:00.320 go to spot for startups and their executives to keep 0:04:00.360 --> 0:04:04.600 their cash there. One of the reasons is because the 0:04:04.640 --> 0:04:07.720 size of Silicon Valley Bank. Now, I'll get into a 0:04:07.720 --> 0:04:10.360 little bit of like trust me, y'all. We won't talk 0:04:10.400 --> 0:04:12.280 about Trump and how he had something to do with 0:04:12.280 --> 0:04:17.200 this bad this bad business. But basically, the bank allowed 0:04:17.200 --> 0:04:21.960 its customers to deposit more money than was actually insured. 0:04:22.240 --> 0:04:24.520 So for those of y'all who know a thing or 0:04:24.560 --> 0:04:28.200 two about a little friend of mine called FDIC insurance, 0:04:28.640 --> 0:04:30.560 let's back up a little bit and talk about that. 0:04:30.960 --> 0:04:35.120 FDIC insurance is bay, Okay. It's the reason why we 0:04:35.160 --> 0:04:37.120 put our money into banks. And we go to bed 0:04:37.120 --> 0:04:40.400 each night and we do not stress. Because as long 0:04:40.480 --> 0:04:44.560 as you were banking with an FDIC inshored institution, your 0:04:44.720 --> 0:04:47.760 funds are covered up to two hundred and fifty thousand 0:04:47.800 --> 0:04:52.680 dollars per account, per bank, per account holder. So if 0:04:52.720 --> 0:04:54.880 you and a partner are you know, part of the 0:04:54.880 --> 0:04:57.160 same bank, you each get two hundred and fifty thousand 0:04:57.160 --> 0:05:00.839 dollars worth of protection. That means if thing were to happen, 0:05:00.920 --> 0:05:04.080 if the bank were to collapse, the federal government says, 0:05:04.240 --> 0:05:07.400 we got you. This money is insured. The best part 0:05:07.440 --> 0:05:10.080 about FDIC, well, honestly, the best part is that it 0:05:10.120 --> 0:05:12.440 protects your money up to two hundred and fifty g's. 0:05:12.960 --> 0:05:15.400 But one of the other best parts is that that 0:05:15.560 --> 0:05:19.479 insurance is paid into buy the banks themselves. So the 0:05:19.480 --> 0:05:21.880 same way you and I like pay a little bit 0:05:21.920 --> 0:05:25.440 of money into an insurance pool, that then, like you know, 0:05:25.800 --> 0:05:28.080 let's say a lot of people get sick from COVID 0:05:28.440 --> 0:05:31.960 and they're all, you know, filing insurance claims. Part of 0:05:32.000 --> 0:05:34.800 the reason we pay premiums is so that the insurance 0:05:34.800 --> 0:05:37.200 company has money to give to the sick, even if 0:05:37.240 --> 0:05:40.320 we ourselves are not sick. Right, So all these banks 0:05:40.360 --> 0:05:43.920 they pay their FDIC premiums, their little dues. That money 0:05:43.920 --> 0:05:46.240 goes into a central pot, and when one of them 0:05:46.400 --> 0:05:49.840 falls on hard times, then the FDIC can be like, oh, 0:05:49.880 --> 0:05:52.640 we have all this money in reserve. We got your customers, 0:05:52.680 --> 0:05:57.719 We're good now. The issue with SVB is that several 0:05:57.880 --> 0:06:01.279 or a lot of its customers were holding way more 0:06:01.800 --> 0:06:04.960 than that two hundred and fifty thousand dollars limit. Over 0:06:05.080 --> 0:06:09.680 ninety percent by one account, of the bank's customers had 0:06:09.760 --> 0:06:13.080 more than that limit in the bank. Okay, these are risky, 0:06:13.320 --> 0:06:16.560 risky you know types of investors, types of They're not 0:06:16.640 --> 0:06:18.600 like you and I. Okay, these are people who are 0:06:18.640 --> 0:06:20.719 holding their cash there because they want to invest in 0:06:20.720 --> 0:06:23.880 the next hot startup, you know. And these people, this 0:06:23.920 --> 0:06:26.560 is what's hilarious about this. These are supposed to be 0:06:26.640 --> 0:06:31.240 the smart ones, you know, the big like venture capitalist firms, 0:06:31.640 --> 0:06:35.200 the tech executives like Peter Teel, you know, like these 0:06:35.240 --> 0:06:39.039 big wigs who are supposed to really understand how this 0:06:39.120 --> 0:06:42.000 whole investing game works. And they're supposed to understand that 0:06:42.120 --> 0:06:44.080 when you have a lot of money tied up in 0:06:44.120 --> 0:06:47.279 a bank that does not that's way over the insurance limit, 0:06:47.360 --> 0:06:51.440 that that is risky, right, But basically what happened is 0:06:52.080 --> 0:06:54.880 these big tech guys, these tech bros. Hey, I'm not 0:06:54.880 --> 0:06:56.760 trying to be gender like you know, I'm sure there's 0:06:56.800 --> 0:06:59.680 some some ladies in there too, right, But essentially, the 0:06:59.720 --> 0:07:03.640 bank customers started to get really nervous the past few days. 0:07:03.680 --> 0:07:06.719 They started to wonder, Okay, what if something happens, will 0:07:06.760 --> 0:07:09.720 the bank actually have enough cash on hand to give 0:07:09.760 --> 0:07:12.960 me my money back? And because they understand that they 0:07:12.960 --> 0:07:16.320 are over that insurance limit, they really start to sweat. 0:07:16.520 --> 0:07:20.400 And so what happens We end up with a bank 0:07:20.560 --> 0:07:23.920 run on SVB. So what is a bank run? A 0:07:23.960 --> 0:07:27.280 bank run is when just like I said, customers of 0:07:27.320 --> 0:07:30.680 a bank start to get worried about their money not 0:07:30.760 --> 0:07:33.160 being available to them, so they run, run, run to 0:07:33.200 --> 0:07:35.800 the ATM, they run online, and they start to transfer 0:07:35.840 --> 0:07:39.360 their money out. And in fact, one of the biggest 0:07:39.400 --> 0:07:41.480 like you know, I mentioned Peter Teal, he was one 0:07:41.520 --> 0:07:44.920 of the guys who actually advised his clients to withdraw 0:07:45.400 --> 0:07:49.080 millions of dollars from SVB the day before it collapsed. 0:07:49.280 --> 0:07:52.760 So you have this like situation where everyone's talking to 0:07:52.840 --> 0:07:54.520 each other in Silicon Valley and tech and you got 0:07:54.520 --> 0:07:57.600 money in SVB. Yo I heard Peter Teal is being 0:07:57.640 --> 0:08:00.240 like run yo, run, like this bank's going to go down, 0:08:00.520 --> 0:08:03.440 and so everyone panics and you have that herd mentality. 0:08:03.960 --> 0:08:06.640 So I hope that that explains like how we got 0:08:06.680 --> 0:08:12.080 to a place where SVB basically seemingly overnight lost a 0:08:12.120 --> 0:08:16.200 lot of its deposits because people were coming right now. 0:08:16.240 --> 0:08:19.400 There was a concern that, oh, shoot, we're actually SVB 0:08:19.800 --> 0:08:22.240 is not going to have enough money if everyone not 0:08:22.400 --> 0:08:25.440 enough money to pay everyone, if they come with their 0:08:25.560 --> 0:08:28.600 checks and want us to cash them, right. So that's 0:08:28.640 --> 0:08:33.400 when the FDICEE the federal government immediately steps in and 0:08:33.520 --> 0:08:36.520 is like whoa wo wo wo who press pause everyone, 0:08:36.800 --> 0:08:41.800 hoda hoda hoda. So immediately they take over right and 0:08:41.960 --> 0:08:47.240 effectively SVB does collapse. But what's crucial to understand here 0:08:47.640 --> 0:08:50.120 is that people are not actually going to be losing 0:08:50.160 --> 0:08:54.760 their money. So even if investors or bankers, depositors or 0:08:54.840 --> 0:08:58.320 rather customers of this bank put in over that two 0:08:58.360 --> 0:09:01.440 hundred and fifty thousand dollars limit, the federal government, the 0:09:01.559 --> 0:09:05.760 Biden administration has said basically, we're gonna make you guys whole. 0:09:05.920 --> 0:09:08.880 You're not gonna lose any money. All right, we're gonna 0:09:09.000 --> 0:09:12.240 let you go over the FDIC limit in this particular case. 0:09:12.960 --> 0:09:17.200 I think it's understandable why they bended bent the rules 0:09:17.200 --> 0:09:22.040 in this case because of like one social media, you know, 0:09:22.280 --> 0:09:25.920 the same types of conversations that were happening behind closed 0:09:25.960 --> 0:09:29.880 doors that made all of svb's customers freak out, make 0:09:29.920 --> 0:09:33.319 withdrawals and then ended up collapsing. The bank, The White House, 0:09:33.400 --> 0:09:36.199 the government. They're worried that the rest of us, now 0:09:36.200 --> 0:09:39.080 that we're hearing this news and it's trickling down, that 0:09:39.120 --> 0:09:41.240 we're going to start doing the same and that there 0:09:41.240 --> 0:09:46.280 could potentially be like a really bad impact on other banks. 0:09:46.880 --> 0:09:49.200 Here's where I want to be a voice of reason, though. 0:09:50.080 --> 0:09:52.760 I think the Biden administration, and this is just my opinion, 0:09:53.040 --> 0:09:55.480 and after reading up a lot on this, they're really 0:09:55.520 --> 0:09:58.880 just trying to assuage fears and like do the right thing. Okay, 0:09:58.920 --> 0:10:01.920 sure they're gonna make these investors money. Hole, They're doing 0:10:01.920 --> 0:10:04.560 them a solid. These people knew what they were doing. 0:10:04.679 --> 0:10:07.040 They knew they were investing, they were putting money, not 0:10:07.080 --> 0:10:10.640 investing rather, but they were depositing money into a bank account, 0:10:10.880 --> 0:10:12.920 and they were depositing way above the limit where they 0:10:12.920 --> 0:10:15.680 would have been protected. They should have known better, and 0:10:15.720 --> 0:10:18.280 they did know better, but they did it anyway. And 0:10:18.559 --> 0:10:22.520 Biden and the White House and the government, they're basically like, 0:10:23.000 --> 0:10:26.320 y'all know you did wrong, but we are almost going 0:10:26.360 --> 0:10:28.800 to put aside the fact that we should be, you know, 0:10:28.920 --> 0:10:31.880 letting you get what you deserve, because we're just worried 0:10:31.880 --> 0:10:34.079 about the rest of America freaking out if y'all lose 0:10:34.120 --> 0:10:36.640 your money. So we're gonna make y'all good. We're gonna 0:10:36.679 --> 0:10:39.480 give you all your money back. Blah blah blah blah blah. Okay, 0:10:39.760 --> 0:10:41.640 and they're doing that to sort of stop people from 0:10:41.679 --> 0:10:44.920 freaking out. But the reality is, what does this mean 0:10:45.000 --> 0:10:48.800 for regular you know, bank customers like you and I. 0:10:48.800 --> 0:10:52.320 I bank with some pretty big bank, some an online bank, 0:10:52.400 --> 0:10:55.760 a fricking mortar bank. I use an online only bank 0:10:55.800 --> 0:10:58.439 for my business account personally, So a lot of us 0:10:58.800 --> 0:11:01.960 are at these institutions that are really really large, like 0:11:02.000 --> 0:11:04.719 they are much bigger than a SVB, And this is 0:11:04.720 --> 0:11:06.800 where it can get a little wonky. Okay, So like 0:11:06.840 --> 0:11:09.040 stick with me, maybe we'll like take a deep breath 0:11:09.040 --> 0:11:12.520 and a pause, because Mama gets excited about this stuff. 0:11:12.559 --> 0:11:15.400 But I do want to explain that one of the 0:11:15.440 --> 0:11:18.400 things about SVB is that they weren't the biggest bank 0:11:18.400 --> 0:11:20.960 in the US. They're actually the sixteenth largest bank in 0:11:21.000 --> 0:11:24.720 the US, and regulations hit different when you were in 0:11:24.760 --> 0:11:27.640 that top ten, you know, top ten largest banks in 0:11:27.640 --> 0:11:29.840 the US, which I'm going to hazard a guess the 0:11:29.880 --> 0:11:33.520 majority of y'all listening would recognize those banks and be like, Yeah, 0:11:33.559 --> 0:11:35.920 that's my bank, boo, that's who I bank with, right. 0:11:36.440 --> 0:11:39.360 The good news is that those big banks they're not 0:11:39.559 --> 0:11:43.119 like SVB. They're not investing in hot Silicon Valley startups 0:11:43.480 --> 0:11:47.000 or cryptocurrencies like Signature Bank, which is another one that 0:11:47.360 --> 0:11:50.880 people are freaking out about potentially collapsing. They're very different. 0:11:51.160 --> 0:11:54.959 They're held to tighter regulatory standards, and that's one issue 0:11:54.960 --> 0:11:57.840 we're going to get into again, going back to how 0:11:57.840 --> 0:12:02.240 Trump himself and his administration helped create an environment where 0:12:02.240 --> 0:12:04.680 it was a lot easier for a bank like SVB 0:12:04.840 --> 0:12:07.440 to go under. But just keep this in mind, the 0:12:07.480 --> 0:12:10.640 big big banks, they have tighter regulations. They are way 0:12:11.200 --> 0:12:16.319 less risky with your deposits than a bank like SVB. Okay, 0:12:16.679 --> 0:12:21.680 so also you have a FDIC insurance, all right, as 0:12:21.760 --> 0:12:24.720 long as you keep in mind that two hundred and 0:12:24.720 --> 0:12:28.440 fifty thousand dollars cash limit deposit limit for your protection, 0:12:28.840 --> 0:12:31.440 then you should be gucci. All right. I don't got 0:12:31.480 --> 0:12:34.040 more than two hundred and fifty g's in a checking account, 0:12:34.080 --> 0:12:36.640 do y'all like? I don't feel like a lot of 0:12:36.679 --> 0:12:38.760 y'all do, And if you do, we might need to 0:12:38.760 --> 0:12:43.080 have a little conversation, okay, about diversifying and putting cash 0:12:43.200 --> 0:12:46.600 in other accounts, investing some of that cash. But anyway, 0:12:46.720 --> 0:12:50.000 another topic for another day. The vast majority of us 0:12:50.360 --> 0:12:54.320 are not really don't really have anything to be concerned by. 0:12:54.720 --> 0:12:56.840 All Right, I'm gonna take a quick little breather, and 0:12:56.880 --> 0:12:58.440 I'm gonna come right back, and I'm going to talk 0:12:58.440 --> 0:13:01.560 to y'all about Okay, well, you're talking about customers of 0:13:01.559 --> 0:13:03.840 big banks, But what if I bank with a credit union? 0:13:03.880 --> 0:13:06.440 What if I bank with a regional, smaller bank? Do 0:13:06.600 --> 0:13:08.920 I have to be worried? We're gonna come bite back. 0:13:08.960 --> 0:13:11.240 Take a quick little breaky break. I'm gonna get a 0:13:11.240 --> 0:13:13.080 sip in my water, take a sip of your wine. 0:13:13.120 --> 0:13:15.719 I hope that you're feeling the relaxation vibes start to 0:13:15.800 --> 0:13:18.760 hit okay, and I'll be right back with more on 0:13:18.800 --> 0:13:25.160 Brown ambition. All right, bafam, it's Mandra back explaining what 0:13:25.240 --> 0:13:28.719 the heck happened with SVB and it's bank collapse and 0:13:28.800 --> 0:13:31.959 what does that mean for you and me? Right so again, 0:13:32.000 --> 0:13:34.640 if you haven't, if you haven't like listened so far, 0:13:34.880 --> 0:13:37.280 or maybe you're still a little stressed, like, let me 0:13:37.320 --> 0:13:40.480 just remind you my my my feelings are this. I 0:13:40.520 --> 0:13:44.079 haven't done anything to my bank deposits. I'm not concerned 0:13:44.080 --> 0:13:46.079 about it. I don't have more than two hundred and 0:13:46.160 --> 0:13:49.800 fifty thousand dollars in cash in my bank accounts. Unfortunately, 0:13:49.880 --> 0:13:53.960 but fortunately, so if my bank, out of some you know, 0:13:54.200 --> 0:13:58.800 crazy crazy circumstance were to collapse, I feel confident that 0:13:58.920 --> 0:14:01.400 I would get those funds back because the federal government 0:14:01.440 --> 0:14:05.320 has these protections in place. And as a reminder, the 0:14:05.360 --> 0:14:09.240 FDIC is paid into buy banks themselves. They're the ones 0:14:09.280 --> 0:14:13.560 putting money in this fund to cover consumers if something 0:14:13.600 --> 0:14:16.680 were to happen. Okay, so it's not even like taxpayer funded. 0:14:16.800 --> 0:14:19.440 It's coming from the banks themselves, which I think makes 0:14:19.480 --> 0:14:21.600 a hell of a lot of sense. Y'all are the 0:14:21.600 --> 0:14:23.920 ones who can be greedy, right, So why don't you 0:14:23.960 --> 0:14:25.960 put your money where your mouth is and put some 0:14:26.000 --> 0:14:30.280 protections in place for us? All right? So I just 0:14:30.320 --> 0:14:33.200 want to calm everyone down. I don't think stuffing your 0:14:33.200 --> 0:14:35.600 mattress with cash or running to the bank and taking 0:14:35.600 --> 0:14:39.000 cash out right now, like unless you really need the cash, 0:14:39.200 --> 0:14:41.720 makes a ton of sense. Okay. So the banks that 0:14:41.760 --> 0:14:43.960 we have today, like the ones that you invest in, 0:14:44.000 --> 0:14:48.000 they're probably going to have way more strict regulatory policies 0:14:48.040 --> 0:14:51.440 to follow. And that is all a part of what 0:14:51.600 --> 0:14:55.840 happened after the last big financial crisis. Y'all remember two 0:14:55.840 --> 0:14:58.680 thousand and eight. It was not cute back then. Now. 0:14:58.720 --> 0:15:01.440 I'm not gonna lie I didn't even have money to 0:15:01.480 --> 0:15:03.600 worry about in two thousand and eight, but if you did, 0:15:04.080 --> 0:15:07.000 it was pretty scary. We did see the largest bank 0:15:07.040 --> 0:15:11.160 collapse in US history, Washington Mutual in two thousand and eight, 0:15:11.280 --> 0:15:15.200 and as a result, Congress got their butts in gear 0:15:15.440 --> 0:15:19.480 the Biden or sorry, the Obama Biden administration. They passed 0:15:19.960 --> 0:15:24.800 the sweeping financial regulatory package that basically said, if you 0:15:24.880 --> 0:15:27.320 are a big bank and you have or not even 0:15:27.360 --> 0:15:30.400 a big bank, if you've got more than fifty billion 0:15:30.440 --> 0:15:35.040 dollars in deposits. So then we will here's the new 0:15:35.080 --> 0:15:38.000 regulations you have to abide by. Federal government can come 0:15:38.040 --> 0:15:40.840 in and give you these stress tests, which is basically 0:15:40.960 --> 0:15:43.440 is like getting a tune up on your car. You know, 0:15:43.480 --> 0:15:46.760 however often you're supposed to do that. So the regulators 0:15:46.800 --> 0:15:49.160 can come in and say, okay, well we're going to 0:15:49.200 --> 0:15:52.040 run a bunch of models and tests and basically decide 0:15:52.480 --> 0:15:55.440 if you are at risk, if you're too risky with 0:15:55.520 --> 0:15:57.840 how you are handling your deposits, and if we got 0:15:57.840 --> 0:16:00.600 to worry about you. So these stress tests are really important. 0:16:01.360 --> 0:16:04.320 But see what happened was then we had a change 0:16:04.320 --> 0:16:07.960 in administration, right, remember twenty sixteen. I try to forget, 0:16:08.000 --> 0:16:11.200 and yet what's happening with SVB. We can't deny the 0:16:11.240 --> 0:16:14.840 fact that this is a direct result of the Trump 0:16:14.840 --> 0:16:18.640 administration rolling back some of those policies, some of those 0:16:18.680 --> 0:16:22.680 regulations that the Obama administration put in place for precisely 0:16:22.720 --> 0:16:25.840 this reason. Why do we have to learn the hard way? 0:16:25.920 --> 0:16:29.120 Why can't we just protect ourselves and not have to 0:16:29.200 --> 0:16:31.600 learn the hard way? I don't know, but this is 0:16:31.640 --> 0:16:36.160 what has happened. And in fact, what's ironic is that SVB, 0:16:36.280 --> 0:16:39.800 Silicon Valley Bank itself and its executives, they were the 0:16:39.840 --> 0:16:43.560 ones on Capitol Hill being like, yo, we almost have 0:16:43.680 --> 0:16:46.400 fifty billion dollars in funds. We're about to get hit 0:16:46.440 --> 0:16:49.640 with these regulations. We don't want that. Come on, man, 0:16:50.200 --> 0:16:53.040 let's increase this this threshold so that you have to 0:16:53.120 --> 0:16:57.040 have two hundred billion in assets before in deposits, before 0:16:57.080 --> 0:17:01.080 you have to deal with all these annoying regulations. And 0:17:01.400 --> 0:17:05.040 unfortunately for them and for a lot of other definitely 0:17:05.040 --> 0:17:10.880 for their customers, the Trump administration pasted the rolling back 0:17:11.480 --> 0:17:14.879 of those same policies. So all of a sudden, SVB 0:17:15.359 --> 0:17:18.040 has one hundred and fifty billion dollars more that they 0:17:18.080 --> 0:17:21.080 can take on from their customers before they have to 0:17:21.080 --> 0:17:25.160 deal with these pesky regulations. Right, So that's how we've 0:17:25.240 --> 0:17:27.879 ended up where we are today. Now, for those of 0:17:27.960 --> 0:17:32.400 y'all who are banking with smaller regional banks, you may 0:17:32.440 --> 0:17:36.760 be concerned because, like SVB, they don't have the same 0:17:37.119 --> 0:17:40.520 regulations as these big, big, big banks that'll you know, 0:17:40.560 --> 0:17:43.240 the majority of Americans bank with have to deal with. 0:17:43.680 --> 0:17:46.800 So what might happen to your bank? So there is 0:17:46.840 --> 0:17:51.919 some concern that regional bank customers, even credit union customers, 0:17:52.240 --> 0:17:54.159 that y'all may start to freak out so much and 0:17:54.160 --> 0:17:56.639 that it'll might trigger another bank run. Now, this is 0:17:56.720 --> 0:18:00.800 all like psy psychology at play, right, As long as 0:18:00.800 --> 0:18:04.520 people remain calm, things should be okay. I think it's 0:18:04.600 --> 0:18:07.280 worth going to your bank. And if your bank has 0:18:07.320 --> 0:18:10.000 not sent you an email correspondence, I got some from 0:18:10.000 --> 0:18:13.080 my bank, my business bank account that I was actually 0:18:13.160 --> 0:18:15.040 very I was like, great, send me a little note. 0:18:15.119 --> 0:18:19.920 Let me know. Everything's juicy, everything's gucci, right, juicy. Check 0:18:19.960 --> 0:18:23.840 your bank's policies. Check in with your bank and just ask, hey, 0:18:24.359 --> 0:18:27.960 let me just reassure me. Tell me what policies you 0:18:27.960 --> 0:18:30.840 guys have in place to protect my funds as long 0:18:30.840 --> 0:18:33.600 as they're FDIC insured. You already know that you're covered 0:18:33.680 --> 0:18:37.080 up to two hundred and fifty k per account per institution, 0:18:37.440 --> 0:18:40.399 per account holder, right, but you may want to know 0:18:40.520 --> 0:18:43.879 from them that they have so much money in cash 0:18:43.960 --> 0:18:46.800 reserves that they would be more than fine to cover 0:18:46.880 --> 0:18:49.800 everyone's deposits if they came and wrote their checks, you know, 0:18:49.840 --> 0:18:52.040 and wanted to take their money out today. So you 0:18:52.080 --> 0:18:54.800 are well within your rights to ask those questions. Check 0:18:54.840 --> 0:18:58.920 the bank's websites, look for reassurance notes from bank executives, 0:18:59.000 --> 0:19:02.200 bank leaders, and you know, look at that closely, because 0:19:02.320 --> 0:19:05.240 one of the reasons SVB ended up in this predicament 0:19:05.720 --> 0:19:08.160 is because they were going to be in a situation 0:19:08.200 --> 0:19:10.399 where they didn't have enough cash on hand to cover 0:19:10.920 --> 0:19:15.239 everyone's deposits. All right, So largely, I would say the 0:19:15.280 --> 0:19:17.919 best thing to do is nothing. The best thing to 0:19:17.920 --> 0:19:20.960 do is uses as an opportunity to just educate yourself again, 0:19:21.640 --> 0:19:25.040 which I hope that I've helped y'all do. Remind yourselves 0:19:25.119 --> 0:19:29.000 what FDIC insurance is and how it works, and how 0:19:29.040 --> 0:19:31.360 the banks that you and I use are much different 0:19:31.640 --> 0:19:36.040 than SVB and even Signature Bank, which is another regional 0:19:36.040 --> 0:19:39.600 bank that has been taken over by the government in 0:19:39.640 --> 0:19:43.399 the last few days now. Signature Bank has invested and 0:19:43.480 --> 0:19:46.720 let people put money in from cryptocurrency into their accounts. 0:19:47.119 --> 0:19:50.639 Most banks don't do that. Okay, these are unique, you know, 0:19:50.760 --> 0:19:53.919 different kinds of banks and unique situations that were inherently 0:19:53.960 --> 0:19:57.440 more risky. Okay, they attracted riskier clients, they had riskier 0:19:57.760 --> 0:20:00.840 types of deposits, all right. So again, just I want 0:20:00.840 --> 0:20:03.000 you to understand, it's like apples and oranges if you're 0:20:03.000 --> 0:20:07.720 trying to compare your bank to these. All right, okayba fam, 0:20:07.920 --> 0:20:10.280 thank you for letting me scratch my brain and just 0:20:10.320 --> 0:20:13.879 get this, get this out of my system, because I 0:20:13.920 --> 0:20:15.919 really miss being a part of stories like this and 0:20:15.960 --> 0:20:18.240 getting to work in a newsroom with other really smart, 0:20:18.240 --> 0:20:21.720 brilliant business and financial journalists and some of my best 0:20:21.760 --> 0:20:23.719 some of my favorite sources at a time like this, 0:20:23.760 --> 0:20:25.679 If y'all are looking for up to the date news 0:20:25.960 --> 0:20:28.560 on what's happening in the banking sector, the New York 0:20:28.600 --> 0:20:31.240 Times Business desk, like one of my best friends is 0:20:31.240 --> 0:20:34.000 an editor there. Shout out to Vivian. She didn't want 0:20:34.000 --> 0:20:36.000 to be on the podcast. She's shy, y'all, but I tried. 0:20:37.119 --> 0:20:40.120 They are doing an excellent job breaking this down. Read 0:20:40.320 --> 0:20:44.119 Ron and sorry Ron, what's his last name? Tara Siegel 0:20:44.160 --> 0:20:48.040 Bernard and Ron Lieberman Liebman, something like that at the 0:20:48.040 --> 0:20:51.159 New York Times. They cover consumer finance for the Times. 0:20:51.160 --> 0:20:55.600 They are wonderful. You can check out market Watch, check 0:20:55.640 --> 0:21:00.480 out CNBC. They've got great writers, great reporters who are 0:21:00.480 --> 0:21:02.440 gonna be breaking this down. This is not the end 0:21:02.440 --> 0:21:05.080 of the story, but I hope that you guys will 0:21:05.119 --> 0:21:07.840 just use this episode. Hopefully you feel a little bit 0:21:07.840 --> 0:21:10.360 better about you know, where you're banking and what's going 0:21:10.359 --> 0:21:12.119 on with your money right now. Hopefully you feel a 0:21:12.119 --> 0:21:15.240 little edgemicated, all right, Hopefully you have something to say 0:21:15.280 --> 0:21:18.320 in the family group chat when auntie or uncle or 0:21:18.480 --> 0:21:20.800 in my case, my father is like, damn, I'm gonna 0:21:20.840 --> 0:21:23.240 put that money back in my rolled up socks. You 0:21:23.320 --> 0:21:25.720 don't want to do that right now? Okay. Interest rates 0:21:25.720 --> 0:21:29.000 for us are popping. I didn't even mention that. Like, 0:21:29.119 --> 0:21:32.840 my interest rate is like three plus percent right now 0:21:32.880 --> 0:21:36.080 on my high yield savings accounts. So take advantage of that, 0:21:36.200 --> 0:21:38.680 Like we should be keeping our I think we should be, 0:21:39.080 --> 0:21:41.920 you know, focused on keeping debt low right now and 0:21:42.200 --> 0:21:44.440 squirreling away money in our savings in a high old 0:21:44.440 --> 0:21:47.280 savings account. And it's still safe to do that as 0:21:47.280 --> 0:21:50.119 far as I'm concerned. Okay, take that for what it's worth. Again, 0:21:50.560 --> 0:21:53.440 I am not your financial advisor. I am not Janet Yellen. 0:21:53.720 --> 0:21:56.440 I am not a part of the Fed or the Treasury. 0:21:56.480 --> 0:21:59.080