Was reading the Silicon Valley Bank fallout, trying to understand the circumstances that led to it and summarized it as below.
Fed raises interest to fight inflation.
High rates made fundraising by companies more expensive, leading to more bank withdrawals by clients to meet crunch.
SVB forced to sell bond portfolio at losses to fund withdrawals.
SVB attempts to sell equity and stock to fund capital reserve, fails. Bank run starts.
Within 48 hours, clients (mostly VC) withdraws fund, resulting in a negative cash balance by closing day - a classic bank run.
The full extent of its impact (along with the collapse of Silvergate Bank) has yet to unfold.
Volatile weeks ahead.. stay safe folks!
