Containing SVB Fallout - Earnings: WN, LIF, PKI, BRE

This is only a sample of the article, please login to view the entire article

Raising interest rates will eventually control inflation, although it comes with no guarantee of avoiding collateral damage. With shades of the Lehman Bros. collapse that triggered the Global Financial Crisis in 2008, there is now plenty of incentive to fix the Silicon Valley Bank collapse.

Monetary policy is called a blunt instrument for good reason, there can be unwanted outcomes. Silicon Valley Bank is about one-third the size of Lehman Bros. with substantial loan exposure to the high-tech sector. SVB has been a lender to Roku(ROKU-NASD), Esty(ETSY-NASD), also to BlockFi before being caught up in the Sam Bankman-Fried fiasco. Branches are concentrated in southern California and Massachusetts with offices in Europe, Canada, Asia, India, Israel, and Sweden.

In less than 48 hours, billions of dollars of investors' wealth either individuals or companies were stranded. Last Thursday, major depositors tried to remove about 35% of cash on deposit. This led to a storm of many companies frantically trying to withdraw money from SVB. Federal Deposit Insurance Corporation (FDIC) has seized the assets and will reopen the bank Monday morning. The reopening and the market reaction will depend on how effectively the US government and regulators can restore confidence in the banking system. Comments this week consider why it is necessary to move quickly and what the initial impact has been on bond yields, and preferred share prices.

You must be a member to view the entire article, please subscribe or login