Reply to I don’t know how banks work

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[quote=Anonymous][quote=Anonymous]Banks do a lot more than hold money for individuals, but let’s limit it to that for simplicity’s sake:

You deposit your money in a bank account. The bank charges you a small amount of money for that service. The bank also lends your money out. This is how banks make money.

FDIC exists so that you can be assured that you will have access to your money—up to $250K—if you need it.

There’s nothing evil about a bank lending money out. It’s how they make money.

In the case of SVB, a lot of their depositors’ funds were invested in bonds that had low interest rates attached to them. That was well and good until the Fed increased rates. Then those bonds became less profitable investments. Couple that with Peter Thiel saying people should withdraw their money from SVB and you get a bank run. No bank can survive a big enough run, so SVB failed.

SVB’s problem is they overinvested in these bonds and didn’t tell their customers about the extent of risk involved in purchasing them, given fed interest rate hikes. Hence why the CEO and CFO of SVB are being sued for misleading investors.[/quote]

SVB's problem was that silicon valley vc funded tech is actually a very small community and when Thiel advised companies he funded to pull their money word got out and there was a bank run. [/quote]

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