A bank goes bankrupt and the US becomes Argentina

The United States seemed Argentina last night in its worst moments. In the afternoon, the Central Bank and the United States government met to define what to do to stop a banking crisis that nobody knows where it will stop. Goodbye independence from the Central Bank, the FED. And at 8:00 p.m. they issued a statement announcing that the Federal Reserve was going to take over the deposits of two banks that had lost the confidence of their depositors.

What happened? There is a bank, the Silicon Valley Bank, which, as its name indicates, arose in Silicon Valley and specializes in technology companies. This bank, like all others, took money from depositors and lent it, especially to startups, companies that mostly lose money until eventually some of them hit the bump, such as Uber, Facebook or Apple.

Rumors began to spread that the SVB was facing a run on depositors. With just the rumor, depositors began to withdraw their money. The bank was not well prepared. It has few very large depositors. The bank had a lot of its money deposited long-term at low rates (because the world came with low rates) but now the Fed is raising rates to curb inflation, which led to forecasting heavy losses and therefore more doubts. And on top of that, it is focused on startups, a sector that is going to weaken now that central banks begin to raise rates and sweet silver is becoming scarce.

The question is that today there is a quagmire. The bank has subsidiaries in many countries, including China. The UK subsidiary of the SVB was just sold for £1 a while ago. And US banks similar to the SVB are currently losing up to 65% of the value of their shares.

And of course an old debate is resumed: do the central banks have to go out and save the banks when they go bankrupt with everyone’s money? It’s a confusing discussion. They don’t really save the bankers. In fact, the owners of the SVB had until Friday and today they no longer have it. He disappeared. Those who are saved are the owners and managers while the sweet money lasts and large salaries are paid and enormous profits are liquidated, and the depositors, who do not distrust the saint when the alms are great, know that, in the end, the governments will save to prevent much greater damage to the entire financial system.