also from the Morning Brew

Contextualizing the finance news you need to know.

Is your bank running? Well, then you better go catch it. 

Ahem. We’re sorry. That joke was a trauma response. If you’ve been hiding in a cave for the last five days, allow us to fill you in: Silicon Valley Bank (SVB) collapsed on Friday, marking the second-largest bank failure in US history. The third-largest failure occurred just two days later, when regulators pulled the plug on Signature Bank. After that crazy weekend, which was messier than spring break at Señor Frog’s, regional bank stocks plunged more than 12%. And while regional banks have started to rally following Tuesday’s inflation report, it makes total sense to wonder: What should you, the everyday banking customer, do if your bank fails?

Step 1: Know your balance

The Federal Deposit Insurance Corporation (FDIC) announced that all SVB depositors will get their money back, regardless of the deposit amount. (To Signature Bank customers, the agency also promised that “all depositors of the institution will be made whole.”) That came as a surprise to some because the FDIC historically only insures $250,000 in individual bank deposits. In sum: Keep an eye on exactly how much money you have in the bank.

Step 2: Get your money

There are generally two possibilities when a bank is seized by regulators:

• The FDIC sells the failed bank to a “healthy” bank. The healthy bank then immediately takes over management of the funds. If that happens, you’ll have access to your money with no issues; if all goes well, it’ll seem like nothing happened and you can continue banking as usual, just with new bank management.
• The FDIC pays out all insured deposits. If the FDIC can’t wrangle a healthy bank, the agency will send you a check for your entire insured balance. Per the agency website, the FDIC works to send those checks “within two business days of the failure of the insured institution.” Seems like a good reminder to make sure your address is up-to-date.

Bottom line: Whatever you do, please don’t withdraw your $$$ and bury it in your backyard. Gold bars are so 1930s.—Lillian

from the Morning Brew

After Silicon Valley Bank rained volcanic hellfire upon the startup industry, some folks wanted to know: What do I do if my bank fails? Well, what if we told you there’s a way to keep an eye on your bank’s business practices that may make it easier to predict SVB-style mayhem? It all comes down to your bank’s balance sheet. But what’s a balance sheet, and why does it matter to the everyday bank customer?

Balance sheets are essentially financial statements.They cover a gaggle of capital ratios that can give shareholders an idea of a company’s financial health. For example, the asset-to-liability ratio—also known as the quick ratio—helps determine a bank’s solvency or its ability to repay your deposits.

So, where do you find these mystical troves of data? The FDIC has the info for all FDIC-insured banks (WSJ also keeps a log). For example, here’s US Bank. As you can see, in 2022, the bank’s net loans—$381,277—were less than the net deposits of $524,976. That’s a mark of good liquidity. And, in banking, liquidity is a good thing. Unless the liquid in question is, ahem, hellfire pouring from the sky. (Sorry, SVB.)—Lillian

Read: One Twitter user gave GPT-4 a budget of $100 and told it to make as much money as possible. Check out the progress. (Jackson Greathouse Fall)

from Morning Brew

Another weekend, another mad scramble to prevent a banking crisis.

Just one week after US officials raced to backstop Silicon Valley Bank depositors, Swiss authorities sprinted to engineer a takeover of spiraling Credit Suisse before the markets opened on Monday.

They got it done: Swiss banking giant UBS will buy its rival Credit Suisse for more than $3 billion in a historic tie-up of the country’s storied banks. It’s one of the most significant banking events in years, marking the first merger between systemically important global banks since the 2008 financial crisis.

How we got here: Credit Suisse had experienced massive outflows last week (up to $10 billion per day, according to the WSJ) and was teetering on collapse. An uncontrolled implosion of Credit Suisse would have had “incalculable consequences for the country and the international financial system,” Swiss President Alain Berset said. In other words, if Credit Suisse came crashing down, it would have brought many others with it.

UBS didn’t exactly volunteer as tribute

Understanding the market calamity that would’ve occurred otherwise, Swiss regulators essentially forced UBS to go through with this purchase and offered the bank $108.8 billion in liquidity as a way of saying “thanks for preventing a global financial crisis .”

For Credit Suisse, it’s an inglorious end. The iconic financial institution had been badly mismanaged for years, and its measly sale price reflects its fall from grace. Valued at ~$8.5 billion at market close on Friday, Credit Suisse sold for significantly less than half of that.

• To put the price tag in perspective, Crocs is worth more than twice as much as what Credit Suisse was bought for.
• No disrespect to Crocs, but Credit Suisse has been around for 166 years and had $574 billion in total assets at the end of 2022. This is a stunning collapse of a once-revered bank.

So, what’s it all mean? Just like US authorities did last weekend, Swiss regulators moved rapidly to nip a spiraling crisis in the bud, employing a “let’s do what needs to be done and worry about the consequences later” approach. It’s unclear whether these last-ditch government efforts will shore up confidence in a sector that’s had its world turned upside down in less than two weeks.

METAL RECORDS: Heavy metal band Metallica is the proud new owner of a vinyl factory in Virginia that has been pressing their records for the last 15 years. Metallica is seizing the means of production in order to satisfy surging demand for records—last year, vinyl records outsold CDs for the first time since 1987.

It’s true. Inside the Octavia Lab at @lapubliclibrary’s Central Library, you can find podcast studios, laser cutters, sewing machines, powerful computers (with Adobe Cloud!) and even a way to digitize VHS tapes—FOR FREE. Named after the late science fiction writer, Octavia E. Butler, she used the library as place to research and create space for herself, as Black woman author in a sci-fi literary world dominated by white men. Her legacy of using the library as a source of power continues in this lab, for anyone looking to expand their horizons.

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