The recent failure of three regional banks has been front and center on our news screens. It has caused some substantial volatility in the financial markets, though not as much as you expected, given the circumstances. After all, it’s pretty rare for FDIC-backed banks to fail, but here we are.
And when three banks collapsed rapidly, it acted as a force multiplier in the public consciousness. Especially when one of those banks is as big as Silicon Valley Bank (SVB) — with $212 billion in assets as recently as the fourth quarter of 2022. SVB represents the second-largest bank breakdown in our Country’s history, behind only Washington Mutual’s 2008 collapse, so it’s hard not to harbor concerns that we may be on the cusp of another 2008-style financial meltdown.
But are those concerns justified? Is this saga we’re currently experiencing really a case of financial “déjà vu”?
To find out what distinguishes the recent decline of these three regional banks — Silicon Valley Bank, Signature Bank, and Silver Gate Bank — from the financial chaos that erupted some 15 years ago, and why their deterioration doesn’t signify the onset of a financial Armageddon, be sure and tune in to the newest episode of A Place of Possibility™. Richard Del Monte and Angela Wright will provide a clear-eyed overview of the factors that caused these three banks to fall.
We’ll be talking about:
- The business model that all banks use to generate profits. Contrary to what some believe, banks are “for profit” ventures and do
- need to turn a profit to stay afloat. We’ll explain how they do this.
- Why the three banks that recently fell were particularly vulnerable to interest rate increases because of their primary clientele.
- The relationship between interest rates and bond prices, and why longer-term bond prices are so sensitive to interest rate hikes.
- Dramatic financial events ultimately led to Silicon Valley Bank’s insolvency.
- The substantial differences between the circumstances surrounding the 2007-09 recession and our current
- Some safe alternatives to brick-and-mortar banks that you should consider.
Most of us remember how the meltdown of 15 years ago seemed to start with just a few small missteps and then spiraled from there. But safeguards are in place now to prevent a repeat of that crisis and help keep the contagion of these most recent financial events to a minimum. So we’re confident that you’ll find this episode informative and reassuring and hope you’ll pass it along to your family, friends, and anyone else you think might benefit from it.
P.S. Looking to meet with Richard or Angela at our office in Alamo, CA? Want to discuss more of what you heard in this episode? Wondering where the heck you need to get started or what all of this means for your retirement plans? Schedule a free 30-minute session and find the peace of mind you deserve for the rest of your life. You can also reach us by calling 925.736.6410 or sending an email to Info@APlaceOfPossibility.com.
“I have my friends sending me these videos of these people who are acting like they've blown the lid on some massive banking conspiracy, because they're telling people, ‘Banks reinvest your money’. Oh, my goodness, what are we going to do? That IS the literal business model of a bank.”
A Glance at this Episode:
1:20 Before we get underway, are you in a declared disaster area? If so, a recent announcement by the State of California announced that eligible citizens don’t have to pay taxes until October 15th!
2:10 What is going on with the banks? Are consumers safe? This is the primary question raised by the recent banking industry news.
3:48 First, let’s talk about Silicon Valley Bank and the huge business they built catering to venture capitalists and people who make a lot of money.
4:46 A bank’s financial model is often misunderstood. In short, they reinvest your money to make their money.
6:17 The tech industry has a history of being extremely volatile which left SVB exposed when so many investors had to pull out their money after the Federal Reserve put the brakes on interest rates.
7:50 Unbeknownst to most depositors, SVB invested in long-term treasuries and mortgages that are safe but susceptible to interest rate swings.
8:34 Did you know? Interest rates and bond prices move opposite each other. Listen in as Angela discusses this relationship utilizing the teeter-totter analogy.
10:29 When people started needing more money than SVB expected, they tried to sell SVB stock to private investors to plug the hole, but when news broke, people started panicking.
12:33 Customers withdrew $43 billion from SBV in one day – it was pure mayhem!
13:31 While the FDIC protected depositors to the three failed banks — within its limits — if you owned the bank’s stock, there is no coverage. Your money is gone.
15:00 First Republic Bank also caused a brief panic that has since been calmed by $20 billion in deposits from other U.S. banks.
16:30 While banks have been subject to “stress tests” in the aftermath of the 2008 financial crisis, regulators need to pay more attention to the maturities of bonds to ensure that we never get into a situation like this again.
17:35 Want to know how to keep your savings properly protected? Then, tune in here as Richard and Angela explain FDIC coverage.
20:00 If you’re concerned that online banks aren’t as safe as their brick-and-mortar counterparts, they are as long as they have FDIC insurance.
21:45 Another low-risk, easily accessed place to put your savings is in broker money market funds.
23:12 People with particular political beliefs have an inherent distrust of the government regarding guaranteeing its citizens’ savings via Treasury Bills, but there are much greater concerns if it ever fails to do so.
25:25 Here’s a summary of our investment philosophy concerning these most recent financial events. Hint: Don’t react to short-term concerns!
27:30 While investment in securities always carries some risk, the SPIC protects investors should Schwab, Fidelity, or any investment custodian ever fail.
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Links/Resources Mentioned in this Episode:
- An online bank we use, trust, and recommend is Ally.com.
- To buy Treasury Bills directly from the Federal Government, go to https://www.treasurydirect.gov.
- To calculate your level of FDIC coverage based on your own circumstances, go to https://edie.fdic.gov.
- Ensure your family’s wealth will live on for generations to come. Order your copy of Endless Inheritance by Richard Del Monte today! https://aplaceofpossibility.com/endlessinheritance.
- If you’d like to know more about Del Monte Group’s approach to investing, we encourage you to download a copy of The Investment Answer, which we now have available as an Ebook. It’s a very easy read — you can probably get through the entire Ebook in just one evening — but it has the potential to revolutionize your relationship to investing and help you avoid many, if not all, of the mistakes you may be making without even knowing it. To get your copy, go to https://APlaceofPossibility.com/DMGInvestmentAnswerEbook.
- Del Monte Group offers a variety of free resources to help you make innovative and educated financial decisions so that you can keep, grow, and enjoy your wealth starting now. Find them by visiting https://aplaceofpossibility.com/resources.
“One-size-fits-all” won’t fit you here! The Del Monte Group team understands that everyone’s financial goals are unique. That’s why we always provide customized advice. No matter where you are in life, you can depend on our proven expertise to provide financial planning support for long-term success. Ready to get started? Schedule a meeting with Richard or Angela in our Alamo, CA based office today or we can meet via Zoom! >> You can select a date and time that works for you via our calendar, call us at 925.736.6410, or send an email to Info@APlaceOfPossibility.com. We can’t wait to help you!