🎧 Listen: In today’s episode of The Journal podcast, charlesforelle explains what led to the failure of two banks within days and how the U.S. government is scrambling to contain the crisis
This transcript was prepared by a transcription service. This version may not be in its final form and may be updated.Kate Linebaugh: And it's Sunday night and we are not watching the Oscars. We're watching a banking crisis unfold.
Kate Linebaugh: Silicon Valley Bank collapsed on Friday. Then on Sunday, the government took over another bank, Signature Bank and announced sweeping measures designed to steady the financial system. Kate Linebaugh: Silicon Valley Bank did business with well known tech companies like Roku and Roblox, as well as thousands of lesser known startups. And until recently, business was pretty good, especially during the pandemic.
Charles Farrell: Not good in that scenario means that you would have to accept a lower price. So if you paid 100 for it, somebody might only be willing to pay you 75 or 80 for it. Charles Farrell: Coming down. So the industry, all these startups are spending money. They are in the lingo, I'm told this is what they say in California, they are burning cash.Charles Farrell: So on Wednesday, March 8th after the market closed, Silicon Valley Bank said, we've had to sell $21 billion worth of all of these long-term bonds and we lost $2 billion on that sale. That's not very good.
Charles Farrell: Oh, it's not a good mood at all. I mean, there's not a lot you can get done without a bank. If you lose access to your bank, you can't make your payroll, you can't pay your vendors, you can't pay your Cloud software subscription, the like Tuesday, all office poke bowl thing that you have, you can't pay for that. So the bank is vital and central to business and to operations and to suddenly lose access to your money is really, really, really disturbing.
Charles Farrell: So this is acutely concerning for the government and for regulators. This is the thing that you really don't want to have happen in the banking system. You don't want to have this loss of trust.
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