If you want to bring in James to your Wiki joining us now he is a contributor At Fast Company Speaking of Fast Company talk about a Fast Story the way this all unfolded I Mean on Friday I saw a couple of Headlines and I was like yeah it sounds Mildly interesting and then suddenly Over the weekend everything accelerated Um so we're going to start with this Um treasury secretary Janet Yellen was On Face the Nation and she sort of Talked about this I guess encouraging Level heads let's just play some of her Sound Let me be clear that Um during the financial crisis There were Investors and owners of systemic large Banks that were billed out and we're Certainly not looking and the reforms That have been put in place means that We're not going to do that again but we Are concerned about depositors and are Focused on trying to meet their needs I think you know for many people the Last banking crisis is what they think Of and so that's where they went to and I think she was trying to sort of Reinforce the idea that this is not the Same Um can you kind of I talk a little bit About the difference between the last Banking crisis and what we're seeing
Here yeah I mean I think there are a Couple things one is just that the last Banking crisis was a massive system-wide Problem right where the biggest banks in The country in fact arguably most of the Banks in the country had made all these Bad loans uh mostly Bad Mortgages uh and As a result you had massive losses Across the system this is very different First of all the Silicon Valley Bank is A very unusual bank it's really not Similar to other banks in the United States because it was so concentrated in The tech industry and it was really Dominated by corporate accounts and as a Result only a very small percentage of The people who or businesses that had Monies money at Silicon Valley Bank were Protected by the FDIC so if you have Money in a bank and you have up to 250 000 in a bank you're safe it doesn't Matter what the bank is you are safe Because those funds are protected by the FDIC they are insured so you don't have To worry about it at uh SC CB it was a Very different situation and I think That their problems are really Distinctive to the tech industry and Then to these decisions that they made To buy these long-term bonds that kind Of got them in in a lot of trouble right Having said that I think the big concern And the reason why the fed and Treasury And the FDIC stepped in was that once
People start to panic then you can have Bank runs even when there isn't really a Good reason for Bank runs yeah and so he Stepped in to make sure that didn't Happen at other sort of you know what They call Regional Banks um and I think That this plan essentially does that Yeah because this is actually a 40 year Old bank it's pretty pretty stable it's Kind of like the largest bank that I Never heard of I think most people never Heard of it until this weekend Um but it was the Panic that really Caused the problem from the people Immediately we started to attempt to Withdraw their money Um so here we have the government Intervention now what does the Government intervention mean for those With active accounts and what does it Mean for investors So for depositors they basically are Going to be made whole so anyone who had Money in Silicon Valley Bank that is to Say as a depositor so whether you're a Business or a rich individual uh the the FDIC will essentially make you whole the Government says it's not going to Involve any taxpayer money what they'll Do instead is they'll basically assess Money on other Banks and they will use That if they have to to make the Depositors whole investors uh are going To essentially be wiped out which they
Should be so the bank stock went to zero Or will and uh essentially they're going To be wiped out and it's also likely Although this wasn't entirely clear that Anyone who had lent money to the bank Not as a depositor but you know as a Bond holder or something uh will be Wiped out as well and and that's another Big difference between today and 2008. That's what Janet Yellen was talking About in that clip you played where in 2008 uh shareholders in you know big Banks we're not wiped out in fact when The government put in money uh it Actually helped the shareholders that's Not happening here and that is a really Important difference but depositors are Basically going to be made whole so They're not going to lose any money and In theory I think they should get their Money very quickly that was a big Concern in Silicon Valley was that uh Even if they would eventually going to Get their money back back it was going To be Frozen and that's not the case Right they should be having access today Is what they say uh James thank you very Much I appreciate it thanks a lot
