Speaker 1: Hey, Hey, ba fam Brown ambition is back. I am
Speaker 1: writing solo today and I cannot even tell y'all. I
Speaker 1: know I shouldn't have a big fat smile on my
Speaker 1: face because a bank did just collapse and another one
Speaker 1: is right behind it, And understandably, a lot of y'all
Speaker 1: are freaked the f out about what has been happening. Now,
Speaker 1: if you've been living under a rock or you are
Speaker 1: not a part of the family group chat that has
Speaker 1: been popping off, and everyone who's like I keep my
Speaker 1: money rolled up in my socks or in my mattress,
Speaker 1: and they're not gloating to you right now, let me
Speaker 1: get you up to speed on what's been going on.
Speaker 1: Why do I have a big smile on my face?
Speaker 1: I just love this stuff. I just y'all know. My
Speaker 1: background is as a business reporter. I spent years covering
Speaker 1: finance and business for sites like Yahoo Finance and Business Insider,
Speaker 1: and then I ran a hole damn content team for
Speaker 1: five years for a fintech company, and our whole job
Speaker 1: was to break down really like confusing complex personal finance
Speaker 1: topics and help y'all understand what's going on so that
Speaker 1: you can live in this calm, you know, serene sort
Speaker 1: of state of mind that I live in because I
Speaker 1: know when to worry, and I would say, now is
Speaker 1: not the time for people like you and I to
Speaker 1: be freaking out, all right, So I do want to
Speaker 1: walk through what the heck has happened with the Silicon
Speaker 1: Valley bank collapse, which I'm recording this a few days
Speaker 1: after that collapse has happened, and I'm actually one of
Speaker 1: the reasons we've waited to even talk about it, or
Speaker 1: I've waited, is because you need to let the dust settle,
Speaker 1: you know, you need to figure like, let the smart people,
Speaker 1: the regulators, the president of the freaking United States, have
Speaker 1: a press conference about it, and let them start to
Speaker 1: unpack what's happening. What does this mean for people who
Speaker 1: were using that bank, which is probably none of the
Speaker 1: people who listen to Brown Ambition and definitely not myself,
Speaker 1: And what does that and like, what can we learn
Speaker 1: from it, and how can we actually move forward without
Speaker 1: freaking out? Okay? And if you, like me, are still worried,
Speaker 1: because you're like, damn, I've spent a decade trying to
Speaker 1: convince my dad to stop rolling up his damn money
Speaker 1: in his sucks and deciding that he does not trust banks.
Speaker 1: And I have finally got this man. He's got a
Speaker 1: Vanguard investment account. He say, he's got a four to
Speaker 1: one k now he's got money in savings. This man's
Speaker 1: even got I even bought him some eyebonds. So and
Speaker 1: I'm worried that, like dang, with all this swirling talk
Speaker 1: about what this means for us, are people going to
Speaker 1: start making hasty, uneducated decisions about what to do with
Speaker 1: their money. And what I'm here to do is just
Speaker 1: to be a voice of reason. And I am just
Speaker 1: one of many voices out there, y'all. I of course,
Speaker 1: am not your financial advisor. I am not an investment advisor.
Speaker 1: I don't work for a big bank, although I have
Speaker 1: in the past. I'm just, like Tiffany says, we are
Speaker 1: your smart financial besties, the little voices in your head.
Speaker 1: And so I want you all to pull up a seat,
Speaker 1: pour yourself a little glass of wine. I wish I
Speaker 1: could join you there, but you know, doctor's orders. And
Speaker 1: let's break this down. Okay, So the first question you
Speaker 1: guys probably have is like, what the heck even is
Speaker 1: SVB and why are people freaking out this is not
Speaker 1: one of the big banks that you see when you
Speaker 1: go downtown and you see the big blue banks. You
Speaker 1: got your Chases, and you got your BAA's and your
Speaker 1: Wells Fargo's or your big online banks. Even so, the
Speaker 1: reason you've never heard about SVB until now is because
Speaker 1: the bank's customers are largely startup founders and like tech bros.
Speaker 1: In Silicon Valley. It's called Silicon Valley Bank and they
Speaker 1: mean that ish Okay. They've only been around for about
Speaker 1: forty years, and over the years it has become the
Speaker 1: go to spot for startups and their executives to keep
Speaker 1: their cash there. One of the reasons is because the
Speaker 1: size of Silicon Valley Bank. Now, I'll get into a
Speaker 1: little bit of like trust me, y'all. We won't talk
Speaker 1: about Trump and how he had something to do with
Speaker 1: this bad this bad business. But basically, the bank allowed
Speaker 1: its customers to deposit more money than was actually insured.
Speaker 1: So for those of y'all who know a thing or
Speaker 1: two about a little friend of mine called FDIC insurance,
Speaker 1: let's back up a little bit and talk about that.
Speaker 1: FDIC insurance is bay, Okay. It's the reason why we
Speaker 1: put our money into banks. And we go to bed
Speaker 1: each night and we do not stress. Because as long
Speaker 1: as you were banking with an FDIC inshored institution, your
Speaker 1: funds are covered up to two hundred and fifty thousand
Speaker 1: dollars per account, per bank, per account holder. So if
Speaker 1: you and a partner are you know, part of the
Speaker 1: same bank, you each get two hundred and fifty thousand
Speaker 1: dollars worth of protection. That means if thing were to happen,
Speaker 1: if the bank were to collapse, the federal government says,
Speaker 1: we got you. This money is insured. The best part
Speaker 1: about FDIC, well, honestly, the best part is that it
Speaker 1: protects your money up to two hundred and fifty g's.
Speaker 1: But one of the other best parts is that that
Speaker 1: insurance is paid into buy the banks themselves. So the
Speaker 1: same way you and I like pay a little bit
Speaker 1: of money into an insurance pool, that then, like you know,
Speaker 1: let's say a lot of people get sick from COVID
Speaker 1: and they're all, you know, filing insurance claims. Part of
Speaker 1: the reason we pay premiums is so that the insurance
Speaker 1: company has money to give to the sick, even if
Speaker 1: we ourselves are not sick. Right, So all these banks
Speaker 1: they pay their FDIC premiums, their little dues. That money
Speaker 1: goes into a central pot, and when one of them
Speaker 1: falls on hard times, then the FDIC can be like, oh,
Speaker 1: we have all this money in reserve. We got your customers,
Speaker 1: We're good now. The issue with SVB is that several
Speaker 1: or a lot of its customers were holding way more
Speaker 1: than that two hundred and fifty thousand dollars limit. Over
Speaker 1: ninety percent by one account, of the bank's customers had
Speaker 1: more than that limit in the bank. Okay, these are risky,
Speaker 1: risky you know types of investors, types of They're not
Speaker 1: like you and I. Okay, these are people who are
Speaker 1: holding their cash there because they want to invest in
Speaker 1: the next hot startup, you know. And these people, this
Speaker 1: is what's hilarious about this. These are supposed to be
Speaker 1: the smart ones, you know, the big like venture capitalist firms,
Speaker 1: the tech executives like Peter Teel, you know, like these
Speaker 1: big wigs who are supposed to really understand how this
Speaker 1: whole investing game works. And they're supposed to understand that
Speaker 1: when you have a lot of money tied up in
Speaker 1: a bank that does not that's way over the insurance limit,
Speaker 1: that that is risky, right, But basically what happened is
Speaker 1: these big tech guys, these tech bros. Hey, I'm not
Speaker 1: trying to be gender like you know, I'm sure there's
Speaker 1: some some ladies in there too, right, But essentially, the
Speaker 1: bank customers started to get really nervous the past few days.
Speaker 1: They started to wonder, Okay, what if something happens, will
Speaker 1: the bank actually have enough cash on hand to give
Speaker 1: me my money back? And because they understand that they
Speaker 1: are over that insurance limit, they really start to sweat.
Speaker 1: And so what happens We end up with a bank
Speaker 1: run on SVB. So what is a bank run? A
Speaker 1: bank run is when just like I said, customers of
Speaker 1: a bank start to get worried about their money not
Speaker 1: being available to them, so they run, run, run to
Speaker 1: the ATM, they run online, and they start to transfer
Speaker 1: their money out. And in fact, one of the biggest
Speaker 1: like you know, I mentioned Peter Teal, he was one
Speaker 1: of the guys who actually advised his clients to withdraw
Speaker 1: millions of dollars from SVB the day before it collapsed.
Speaker 1: So you have this like situation where everyone's talking to
Speaker 1: each other in Silicon Valley and tech and you got
Speaker 1: money in SVB. Yo I heard Peter Teal is being
Speaker 1: like run yo, run, like this bank's going to go down,
Speaker 1: and so everyone panics and you have that herd mentality.
Speaker 1: So I hope that that explains like how we got
Speaker 1: to a place where SVB basically seemingly overnight lost a
Speaker 1: lot of its deposits because people were coming right now.
Speaker 1: There was a concern that, oh, shoot, we're actually SVB
Speaker 1: is not going to have enough money if everyone not
Speaker 1: enough money to pay everyone, if they come with their
Speaker 1: checks and want us to cash them, right. So that's
Speaker 1: when the FDICEE the federal government immediately steps in and
Speaker 1: is like whoa wo wo wo who press pause everyone,
Speaker 1: hoda hoda hoda. So immediately they take over right and
Speaker 1: effectively SVB does collapse. But what's crucial to understand here
Speaker 1: is that people are not actually going to be losing
Speaker 1: their money. So even if investors or bankers, depositors or
Speaker 1: rather customers of this bank put in over that two
Speaker 1: hundred and fifty thousand dollars limit, the federal government, the
Speaker 1: Biden administration has said basically, we're gonna make you guys whole.
Speaker 1: You're not gonna lose any money. All right, we're gonna
Speaker 1: let you go over the FDIC limit in this particular case.
Speaker 1: I think it's understandable why they bended bent the rules
Speaker 1: in this case because of like one social media, you know,
Speaker 1: the same types of conversations that were happening behind closed
Speaker 1: doors that made all of svb's customers freak out, make
Speaker 1: withdrawals and then ended up collapsing. The bank, The White House,
Speaker 1: the government. They're worried that the rest of us, now
Speaker 1: that we're hearing this news and it's trickling down, that
Speaker 1: we're going to start doing the same and that there
Speaker 1: could potentially be like a really bad impact on other banks.
Speaker 1: Here's where I want to be a voice of reason, though.
Speaker 1: I think the Biden administration, and this is just my opinion,
Speaker 1: and after reading up a lot on this, they're really
Speaker 1: just trying to assuage fears and like do the right thing. Okay,
Speaker 1: sure they're gonna make these investors money. Hole, They're doing
Speaker 1: them a solid. These people knew what they were doing.
Speaker 1: They knew they were investing, they were putting money, not
Speaker 1: investing rather, but they were depositing money into a bank account,
Speaker 1: and they were depositing way above the limit where they
Speaker 1: would have been protected. They should have known better, and
Speaker 1: they did know better, but they did it anyway. And
Speaker 1: Biden and the White House and the government, they're basically like,
Speaker 1: y'all know you did wrong, but we are almost going
Speaker 1: to put aside the fact that we should be, you know,
Speaker 1: letting you get what you deserve, because we're just worried
Speaker 1: about the rest of America freaking out if y'all lose
Speaker 1: your money. So we're gonna make y'all good. We're gonna
Speaker 1: give you all your money back. Blah blah blah blah blah. Okay,
Speaker 1: and they're doing that to sort of stop people from
Speaker 1: freaking out. But the reality is, what does this mean
Speaker 1: for regular you know, bank customers like you and I.
Speaker 1: I bank with some pretty big bank, some an online bank,
Speaker 1: a fricking mortar bank. I use an online only bank
Speaker 1: for my business account personally, So a lot of us
Speaker 1: are at these institutions that are really really large, like
Speaker 1: they are much bigger than a SVB, And this is
Speaker 1: where it can get a little wonky. Okay, So like
Speaker 1: stick with me, maybe we'll like take a deep breath
Speaker 1: and a pause, because Mama gets excited about this stuff.
Speaker 1: But I do want to explain that one of the
Speaker 1: things about SVB is that they weren't the biggest bank
Speaker 1: in the US. They're actually the sixteenth largest bank in
Speaker 1: the US, and regulations hit different when you were in
Speaker 1: that top ten, you know, top ten largest banks in
Speaker 1: the US, which I'm going to hazard a guess the
Speaker 1: majority of y'all listening would recognize those banks and be like, Yeah,
Speaker 1: that's my bank, boo, that's who I bank with, right.
Speaker 1: The good news is that those big banks they're not
Speaker 1: like SVB. They're not investing in hot Silicon Valley startups
Speaker 1: or cryptocurrencies like Signature Bank, which is another one that
Speaker 1: people are freaking out about potentially collapsing. They're very different.
Speaker 1: They're held to tighter regulatory standards, and that's one issue
Speaker 1: we're going to get into again, going back to how
Speaker 1: Trump himself and his administration helped create an environment where
Speaker 1: it was a lot easier for a bank like SVB
Speaker 1: to go under. But just keep this in mind, the
Speaker 1: big big banks, they have tighter regulations. They are way
Speaker 1: less risky with your deposits than a bank like SVB. Okay,
Speaker 1: so also you have a FDIC insurance, all right, as
Speaker 1: long as you keep in mind that two hundred and
Speaker 1: fifty thousand dollars cash limit deposit limit for your protection,
Speaker 1: then you should be gucci. All right. I don't got
Speaker 1: more than two hundred and fifty g's in a checking account,
Speaker 1: do y'all like? I don't feel like a lot of
Speaker 1: y'all do, And if you do, we might need to
Speaker 1: have a little conversation, okay, about diversifying and putting cash
Speaker 1: in other accounts, investing some of that cash. But anyway,
Speaker 1: another topic for another day. The vast majority of us
Speaker 1: are not really don't really have anything to be concerned by.
Speaker 1: All Right, I'm gonna take a quick little breather, and
Speaker 1: I'm gonna come right back, and I'm going to talk
Speaker 1: to y'all about Okay, well, you're talking about customers of
Speaker 1: big banks, But what if I bank with a credit union?
Speaker 1: What if I bank with a regional, smaller bank? Do
Speaker 1: I have to be worried? We're gonna come bite back.
Speaker 1: Take a quick little breaky break. I'm gonna get a
Speaker 1: sip in my water, take a sip of your wine.
Speaker 1: I hope that you're feeling the relaxation vibes start to
Speaker 1: hit okay, and I'll be right back with more on
Speaker 1: Brown ambition. All right, bafam, it's Mandra back explaining what
Speaker 1: the heck happened with SVB and it's bank collapse and
Speaker 1: what does that mean for you and me? Right so again,
Speaker 1: if you haven't, if you haven't like listened so far,
Speaker 1: or maybe you're still a little stressed, like, let me
Speaker 1: just remind you my my my feelings are this. I
Speaker 1: haven't done anything to my bank deposits. I'm not concerned
Speaker 1: about it. I don't have more than two hundred and
Speaker 1: fifty thousand dollars in cash in my bank accounts. Unfortunately,
Speaker 1: but fortunately, so if my bank, out of some you know,
Speaker 1: crazy crazy circumstance were to collapse, I feel confident that
Speaker 1: I would get those funds back because the federal government
Speaker 1: has these protections in place. And as a reminder, the
Speaker 1: FDIC is paid into buy banks themselves. They're the ones
Speaker 1: putting money in this fund to cover consumers if something
Speaker 1: were to happen. Okay, so it's not even like taxpayer funded.
Speaker 1: It's coming from the banks themselves, which I think makes
Speaker 1: a hell of a lot of sense. Y'all are the
Speaker 1: ones who can be greedy, right, So why don't you
Speaker 1: put your money where your mouth is and put some
Speaker 1: protections in place for us? All right? So I just
Speaker 1: want to calm everyone down. I don't think stuffing your
Speaker 1: mattress with cash or running to the bank and taking
Speaker 1: cash out right now, like unless you really need the cash,
Speaker 1: makes a ton of sense. Okay. So the banks that
Speaker 1: we have today, like the ones that you invest in,
Speaker 1: they're probably going to have way more strict regulatory policies
Speaker 1: to follow. And that is all a part of what
Speaker 1: happened after the last big financial crisis. Y'all remember two
Speaker 1: thousand and eight. It was not cute back then. Now.
Speaker 1: I'm not gonna lie I didn't even have money to
Speaker 1: worry about in two thousand and eight, but if you did,
Speaker 1: it was pretty scary. We did see the largest bank
Speaker 1: collapse in US history, Washington Mutual in two thousand and eight,
Speaker 1: and as a result, Congress got their butts in gear
Speaker 1: the Biden or sorry, the Obama Biden administration. They passed
Speaker 1: the sweeping financial regulatory package that basically said, if you
Speaker 1: are a big bank and you have or not even
Speaker 1: a big bank, if you've got more than fifty billion
Speaker 1: dollars in deposits. So then we will here's the new
Speaker 1: regulations you have to abide by. Federal government can come
Speaker 1: in and give you these stress tests, which is basically
Speaker 1: is like getting a tune up on your car. You know,
Speaker 1: however often you're supposed to do that. So the regulators
Speaker 1: can come in and say, okay, well we're going to
Speaker 1: run a bunch of models and tests and basically decide
Speaker 1: if you are at risk, if you're too risky with
Speaker 1: how you are handling your deposits, and if we got
Speaker 1: to worry about you. So these stress tests are really important.
Speaker 1: But see what happened was then we had a change
Speaker 1: in administration, right, remember twenty sixteen. I try to forget,
Speaker 1: and yet what's happening with SVB. We can't deny the
Speaker 1: fact that this is a direct result of the Trump
Speaker 1: administration rolling back some of those policies, some of those
Speaker 1: regulations that the Obama administration put in place for precisely
Speaker 1: this reason. Why do we have to learn the hard way?
Speaker 1: Why can't we just protect ourselves and not have to
Speaker 1: learn the hard way? I don't know, but this is
Speaker 1: what has happened. And in fact, what's ironic is that SVB,
Speaker 1: Silicon Valley Bank itself and its executives, they were the
Speaker 1: ones on Capitol Hill being like, yo, we almost have
Speaker 1: fifty billion dollars in funds. We're about to get hit
Speaker 1: with these regulations. We don't want that. Come on, man,
Speaker 1: let's increase this this threshold so that you have to
Speaker 1: have two hundred billion in assets before in deposits, before
Speaker 1: you have to deal with all these annoying regulations. And
Speaker 1: unfortunately for them and for a lot of other definitely
Speaker 1: for their customers, the Trump administration pasted the rolling back
Speaker 1: of those same policies. So all of a sudden, SVB
Speaker 1: has one hundred and fifty billion dollars more that they
Speaker 1: can take on from their customers before they have to
Speaker 1: deal with these pesky regulations. Right, So that's how we've
Speaker 1: ended up where we are today. Now, for those of
Speaker 1: y'all who are banking with smaller regional banks, you may
Speaker 1: be concerned because, like SVB, they don't have the same
Speaker 1: regulations as these big, big, big banks that'll you know,
Speaker 1: the majority of Americans bank with have to deal with.
Speaker 1: So what might happen to your bank? So there is
Speaker 1: some concern that regional bank customers, even credit union customers,
Speaker 1: that y'all may start to freak out so much and
Speaker 1: that it'll might trigger another bank run. Now, this is
Speaker 1: all like psy psychology at play, right, As long as
Speaker 1: people remain calm, things should be okay. I think it's
Speaker 1: worth going to your bank. And if your bank has
Speaker 1: not sent you an email correspondence, I got some from
Speaker 1: my bank, my business bank account that I was actually
Speaker 1: very I was like, great, send me a little note.
Speaker 1: Let me know. Everything's juicy, everything's gucci, right, juicy. Check
Speaker 1: your bank's policies. Check in with your bank and just ask, hey,
Speaker 1: let me just reassure me. Tell me what policies you
Speaker 1: guys have in place to protect my funds as long
Speaker 1: as they're FDIC insured. You already know that you're covered
Speaker 1: up to two hundred and fifty k per account per institution,
Speaker 1: per account holder, right, but you may want to know
Speaker 1: from them that they have so much money in cash
Speaker 1: reserves that they would be more than fine to cover
Speaker 1: everyone's deposits if they came and wrote their checks, you know,
Speaker 1: and wanted to take their money out today. So you
Speaker 1: are well within your rights to ask those questions. Check
Speaker 1: the bank's websites, look for reassurance notes from bank executives,
Speaker 1: bank leaders, and you know, look at that closely, because
Speaker 1: one of the reasons SVB ended up in this predicament
Speaker 1: is because they were going to be in a situation
Speaker 1: where they didn't have enough cash on hand to cover
Speaker 1: everyone's deposits. All right, So largely, I would say the
Speaker 1: best thing to do is nothing. The best thing to
Speaker 1: do is uses as an opportunity to just educate yourself again,
Speaker 1: which I hope that I've helped y'all do. Remind yourselves
Speaker 1: what FDIC insurance is and how it works, and how
Speaker 1: the banks that you and I use are much different
Speaker 1: than SVB and even Signature Bank, which is another regional
Speaker 1: bank that has been taken over by the government in
Speaker 1: the last few days now. Signature Bank has invested and
Speaker 1: let people put money in from cryptocurrency into their accounts.
Speaker 1: Most banks don't do that. Okay, these are unique, you know,
Speaker 1: different kinds of banks and unique situations that were inherently
Speaker 1: more risky. Okay, they attracted riskier clients, they had riskier
Speaker 1: types of deposits, all right. So again, just I want
Speaker 1: you to understand, it's like apples and oranges if you're
Speaker 1: trying to compare your bank to these. All right, okayba fam,
Speaker 1: thank you for letting me scratch my brain and just
Speaker 1: get this, get this out of my system, because I
Speaker 1: really miss being a part of stories like this and
Speaker 1: getting to work in a newsroom with other really smart,
Speaker 1: brilliant business and financial journalists and some of my best
Speaker 1: some of my favorite sources at a time like this,
Speaker 1: If y'all are looking for up to the date news
Speaker 1: on what's happening in the banking sector, the New York
Speaker 1: Times Business desk, like one of my best friends is
Speaker 1: an editor there. Shout out to Vivian. She didn't want
Speaker 1: to be on the podcast. She's shy, y'all, but I tried.
Speaker 1: They are doing an excellent job breaking this down. Read
Speaker 1: Ron and sorry Ron, what's his last name? Tara Siegel
Speaker 1: Bernard and Ron Lieberman Liebman, something like that at the
Speaker 1: New York Times. They cover consumer finance for the Times.
Speaker 1: They are wonderful. You can check out market Watch, check
Speaker 1: out CNBC. They've got great writers, great reporters who are
Speaker 1: gonna be breaking this down. This is not the end
Speaker 1: of the story, but I hope that you guys will
Speaker 1: just use this episode. Hopefully you feel a little bit
Speaker 1: better about you know, where you're banking and what's going
Speaker 1: on with your money right now. Hopefully you feel a
Speaker 1: little edgemicated, all right, Hopefully you have something to say
Speaker 1: in the family group chat when auntie or uncle or
Speaker 1: in my case, my father is like, damn, I'm gonna
Speaker 1: put that money back in my rolled up socks. You
Speaker 1: don't want to do that right now? Okay. Interest rates
Speaker 1: for us are popping. I didn't even mention that. Like,
Speaker 1: my interest rate is like three plus percent right now
Speaker 1: on my high yield savings accounts. So take advantage of that,
Speaker 1: Like we should be keeping our I think we should be,
Speaker 1: you know, focused on keeping debt low right now and
Speaker 1: squirreling away money in our savings in a high old
Speaker 1: savings account. And it's still safe to do that as
Speaker 1: far as I'm concerned. Okay, take that for what it's worth. Again,
Speaker 1: I am not your financial advisor. I am not Janet Yellen.
Speaker 1: I am not a part of the Fed or the Treasury.
Speaker 1: But I am a person, like I said, who has
Speaker 1: a history as a business financial reporter. And I feel
Speaker 1: perfectly fine. Okay, So keep keep listening. To Brown Ambition.
Speaker 1: If you have questions, hit us up, okay, but definitely
Speaker 1: read anything you can get as much, get as much
Speaker 1: great information as you can so that you're better educated,
Speaker 1: so that you can sort of do what I do
Speaker 1: and let these funny social media memes like roll right
Speaker 1: off your back and just keep it, keep it moving. Okay,
Speaker 1: until next time via FAM. Thank you so much for listening.
Speaker 1: I will see y'all next week. Hey ba Fam, We
Speaker 1: could not do this show without your support or the
Speaker 1: support of our team behind the scenes. The Brown Ambition
Speaker 1: podcast is produced by Cumulus Podcast Network. It's edited by
Speaker 1: the wonderful Emani Crosby and produced by Tanya Bustos. Dennistimplinsky
Speaker 1: is our in house tech guru, and I am Bandy
Speaker 1: Woodrid Santos your co host, and I will see y'all
Speaker 1: next week.