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Silicon Valley Bank closes after horrific capital loss.
Different article today since not much has happened so far in the Russia-Ukraine war, but still pretty big news in our economy today.
After months of stalling by the SVB on its balance sheets, it was revealed yesterday morning that Silicon valley bank would sell 2 billion dollars worth of its stock to help pay back the money it lost earlier this year after suffering catastrophic losses on its bonds (Bonds are debt instruments issued by governments and corporations when they need to raise money. By buying a bond, you are giving the issuer a loan, and they agree to pay you back the face value of the loan on a specific date with periodic interest payments along the way, usually twice a year).
Right after the news broke Thursday morning, investors sold like crazy, making the stock go from 267 dollars, to 106 by the end of the day, a drop of 61%, a horrendous amount if you do not know or have experience in the stock market, that is billions of dollars worth of stock wiped out in 7 hours.
But it did not stop there, in the after hours of the stock market (4:00+ EST) the stock dropped another 67% and then friday morning came, the stock dropped to 39 dollars from 106 the previous day but was halted minutes in to prevent the further loss of money.
But the big news that came out not even an hour ago was that California regulators finally shut down the bank and seized the remainders of its assets.
Huge development since this is the biggest bank closure since the Lehman brothers back in September of 2008, and we all know what happened to the US economy after that. It remains to be seen if the US government will be the one to bail out SVB or if they will let it fail and liquidate all of its remaining assets to customers and shareholders.
But it is not just SVB, many other banks have also suffered serious stock plunges yesterday and today. Western alliance bank down 48% (30 dollars down), Pacific Western bank down 33% (7 dollars down), First republic bank down 25% (23 dollars), and many more famous banks like Goldman Sachs, and Bank of America.
The general stock market like the Down Jones and S & P 500 are also down about 0.5%, same with European stocks. Will we have another 2008 moment? Possibly, we know the government has not done anything significant to reform the system after 2008, they just decided to kick the can down the road and deal with it later, well that can has caught up to us and it isn’t too happy.