Hey, Hey, ba fam Brown ambition is back. I am writing solo today and I cannot even tell y'all. I know I shouldn't have a big fat smile on my face because a bank did just collapse and another one is right behind it, And understandably, a lot of y'all
are freaked the f out about what has been happening. Now, if you've been living under a rock or you are not a part of the family group chat that has been popping off, and everyone who's like I keep my money rolled up in my socks or in my mattress, and they're not gloating to you right now, let me get you up to speed on what's been going on. Why do I have a big smile on my face? I just love this stuff. I just y'all know. My
background is as a business reporter. I spent years covering finance and business for sites like Yahoo Finance and Business Insider, and then I ran a hole damn content team for five years for a fintech company, and our whole job was to break down really like confusing complex personal finance topics and help y'all understand what's going on so that you can live in this calm, you know, serene sort of state of mind that I live in because I know when to worry, and I would say, now is
not the time for people like you and I to be freaking out, all right, So I do want to walk through what the heck has happened with the Silicon Valley bank collapse, which I'm recording this a few days after that collapse has happened, and I'm actually one of the reasons we've waited to even talk about it, or I've waited, is because you need to let the dust settle, you know, you need to figure like, let the smart people, the regulators, the president of the freaking United States, have
a press conference about it, and let them start to unpack what's happening. What does this mean for people who were using that bank, which is probably none of the people who listen to Brown Ambition and definitely not myself, And what does that and like, what can we learn from it, and how can we actually move forward without
freaking out? Okay? And if you, like me, are still worried, because you're like, damn, I've spent a decade trying to convince my dad to stop rolling up his damn money in his sucks and deciding that he does not trust banks. And I have finally got this man. He's got a Vanguard investment account. He say, he's got a four to one k now he's got money in savings. This man's
even got I even bought him some eyebonds. So and I'm worried that, like dang, with all this swirling talk about what this means for us, are people going to start making hasty, uneducated decisions about what to do with their money. And what I'm here to do is just to be a voice of reason. And I am just one of many voices out there, y'all. I of course, am not your financial advisor. I am not an investment advisor. I don't work for a big bank, although I have
in the past. I'm just, like Tiffany says, we are your smart financial besties, the little voices in your head. And so I want you all to pull up a seat, pour yourself a little glass of wine. I wish I could join you there, but you know, doctor's orders. And let's break this down. Okay, So the first question you guys probably have is like, what the heck even is SVB and why are people freaking out this is not one of the big banks that you see when you
go downtown and you see the big blue banks. You got your Chases, and you got your BAA's and your Wells Fargo's or your big online banks. Even so, the reason you've never heard about SVB until now is because the bank's customers are largely startup founders and like tech bros. In Silicon Valley. It's called Silicon Valley Bank and they mean that ish Okay. They've only been around for about forty years, and over the years it has become the go to spot for startups and their executives to keep
their cash there. One of the reasons is because the size of Silicon Valley Bank. Now, I'll get into a little bit of like trust me, y'all. We won't talk about Trump and how he had something to do with this bad this bad business. But basically, the bank allowed its customers to deposit more money than was actually insured. So for those of y'all who know a thing or two about a little friend of mine called FDIC insurance, let's back up a little bit and talk about that.
FDIC insurance is bay, Okay. It's the reason why we put our money into banks. And we go to bed each night and we do not stress. Because as long as you were banking with an FDIC inshored institution, your funds are covered up to two hundred and fifty thousand dollars per account, per bank, per account holder. So if you and a partner are you know, part of the same bank, you each get two hundred and fifty thousand
dollars worth of protection. That means if thing were to happen, if the bank were to collapse, the federal government says, we got you. This money is insured. The best part about FDIC, well, honestly, the best part is that it protects your money up to two hundred and fifty g's. But one of the other best parts is that that
insurance is paid into buy the banks themselves. So the same way you and I like pay a little bit of money into an insurance pool, that then, like you know, let's say a lot of people get sick from COVID and they're all, you know, filing insurance claims. Part of the reason we pay premiums is so that the insurance company has money to give to the sick, even if we ourselves are not sick. Right, So all these banks
they pay their FDIC premiums, their little dues. That money goes into a central pot, and when one of them falls on hard times, then the FDIC can be like, oh, we have all this money in reserve. We got your customers, We're good now. The issue with SVB is that several or a lot of its customers were holding way more than that two hundred and fifty thousand dollars limit. Over ninety percent by one account, of the bank's customers had
more than that limit in the bank. Okay, these are risky, risky you know types of investors, types of They're not like you and I. Okay, these are people who are holding their cash there because they want to invest in the next hot startup, you know. And these people, this
is what's hilarious about this. These are supposed to be the smart ones, you know, the big like venture capitalist firms, the tech executives like Peter Teel, you know, like these big wigs who are supposed to really understand how this whole investing game works. And they're supposed to understand that when you have a lot of money tied up in a bank that does not that's way over the insurance limit, that that is risky, right, But basically what happened is
these big tech guys, these tech bros. Hey, I'm not trying to be gender like you know, I'm sure there's some some ladies in there too, right, But essentially, the bank customers started to get really nervous the past few days. They started to wonder, Okay, what if something happens, will the bank actually have enough cash on hand to give me my money back? And because they understand that they are over that insurance limit, they really start to sweat. And so what happens We end up with a bank
run on SVB. So what is a bank run? A bank run is when just like I said, customers of a bank start to get worried about their money not being available to them, so they run, run, run to the ATM, they run online, and they start to transfer their money out. And in fact, one of the biggest like you know, I mentioned Peter Teal, he was one of the guys who actually advised his clients to withdraw millions of dollars from SVB the day before it collapsed.
So you have this like situation where everyone's talking to each other in Silicon Valley and tech and you got money in SVB. Yo I heard Peter Teal is being like run yo, run, like this bank's going to go down, and so everyone panics and you have that herd mentality. So I hope that that explains like how we got to a place where SVB basically seemingly overnight lost a lot of its deposits because people were coming right now.
There was a concern that, oh, shoot, we're actually SVB is not going to have enough money if everyone not enough money to pay everyone, if they come with their checks and want us to cash them, right. So that's when the FDICEE the federal government immediately steps in and is like whoa wo wo wo who press pause everyone, hoda hoda hoda. So immediately they take over right and effectively SVB does collapse. But what's crucial to understand here is that people are not actually going to be losing
their money. So even if investors or bankers, depositors or rather customers of this bank put in over that two hundred and fifty thousand dollars limit, the federal government, the Biden administration has said basically, we're gonna make you guys whole. You're not gonna lose any money. All right, we're gonna let you go over the FDIC limit in this particular case.
I think it's understandable why they bended bent the rules in this case because of like one social media, you know, the same types of conversations that were happening behind closed doors that made all of svb's customers freak out, make withdrawals and then ended up collapsing. The bank, The White House,
the government. They're worried that the rest of us, now that we're hearing this news and it's trickling down, that we're going to start doing the same and that there could potentially be like a really bad impact on other banks. Here's where I want to be a voice of reason, though. I think the Biden administration, and this is just my opinion, and after reading up a lot on this, they're really just trying to assuage fears and like do the right thing. Okay,
sure they're gonna make these investors money. Hole, They're doing them a solid. These people knew what they were doing. They knew they were investing, they were putting money, not investing rather, but they were depositing money into a bank account, and they were depositing way above the limit where they would have been protected. They should have known better, and
they did know better, but they did it anyway. And Biden and the White House and the government, they're basically like, y'all know you did wrong, but we are almost going to put aside the fact that we should be, you know, letting you get what you deserve, because we're just worried about the rest of America freaking out if y'all lose your money. So we're gonna make y'all good. We're gonna
give you all your money back. Blah blah blah blah blah. Okay, and they're doing that to sort of stop people from freaking out. But the reality is, what does this mean for regular you know, bank customers like you and I. I bank with some pretty big bank, some an online bank, a fricking mortar bank. I use an online only bank for my business account personally, So a lot of us are at these institutions that are really really large, like they are much bigger than a SVB, And this is
where it can get a little wonky. Okay, So like stick with me, maybe we'll like take a deep breath and a pause, because Mama gets excited about this stuff. But I do want to explain that one of the things about SVB is that they weren't the biggest bank
in the US. They're actually the sixteenth largest bank in the US, and regulations hit different when you were in that top ten, you know, top ten largest banks in the US, which I'm going to hazard a guess the majority of y'all listening would recognize those banks and be like, Yeah, that's my bank, boo, that's who I bank with, right. The good news is that those big banks they're not
like SVB. They're not investing in hot Silicon Valley startups or cryptocurrencies like Signature Bank, which is another one that people are freaking out about potentially collapsing. They're very different. They're held to tighter regulatory standards, and that's one issue we're going to get into again, going back to how Trump himself and his administration helped create an environment where it was a lot easier for a bank like SVB to go under. But just keep this in mind, the
big big banks, they have tighter regulations. They are way less risky with your deposits than a bank like SVB. Okay, so also you have a FDIC insurance, all right, as long as you keep in mind that two hundred and fifty thousand dollars cash limit deposit limit for your protection, then you should be gucci. All right. I don't got more than two hundred and fifty g's in a checking account,
do y'all like? I don't feel like a lot of y'all do, And if you do, we might need to have a little conversation, okay, about diversifying and putting cash in other accounts, investing some of that cash. But anyway, another topic for another day. The vast majority of us are not really don't really have anything to be concerned by.
All Right, I'm gonna take a quick little breather, and I'm gonna come right back, and I'm going to talk to y'all about Okay, well, you're talking about customers of big banks, But what if I bank with a credit union? What if I bank with a regional, smaller bank? Do I have to be worried? We're gonna come bite back. Take a quick little breaky break. I'm gonna get a sip in my water, take a sip of your wine.
I hope that you're feeling the relaxation vibes start to hit okay, and I'll be right back with more on Brown ambition. All right, bafam, it's Mandra back explaining what the heck happened with SVB and it's bank collapse and what does that mean for you and me? Right so again, if you haven't, if you haven't like listened so far, or maybe you're still a little stressed, like, let me just remind you my my my feelings are this. I haven't done anything to my bank deposits. I'm not concerned
about it. I don't have more than two hundred and fifty thousand dollars in cash in my bank accounts. Unfortunately, but fortunately, so if my bank, out of some you know, crazy crazy circumstance were to collapse, I feel confident that I would get those funds back because the federal government has these protections in place. And as a reminder, the FDIC is paid into buy banks themselves. They're the ones putting money in this fund to cover consumers if something
were to happen. Okay, so it's not even like taxpayer funded. It's coming from the banks themselves, which I think makes a hell of a lot of sense. Y'all are the ones who can be greedy, right, So why don't you put your money where your mouth is and put some protections in place for us? All right? So I just want to calm everyone down. I don't think stuffing your mattress with cash or running to the bank and taking cash out right now, like unless you really need the cash,
makes a ton of sense. Okay. So the banks that we have today, like the ones that you invest in, they're probably going to have way more strict regulatory policies to follow. And that is all a part of what happened after the last big financial crisis. Y'all remember two thousand and eight. It was not cute back then. Now. I'm not gonna lie I didn't even have money to worry about in two thousand and eight, but if you did,
it was pretty scary. We did see the largest bank collapse in US history, Washington Mutual in two thousand and eight, and as a result, Congress got their butts in gear the Biden or sorry, the Obama Biden administration. They passed the sweeping financial regulatory package that basically said, if you are a big bank and you have or not even a big bank, if you've got more than fifty billion dollars in deposits. So then we will here's the new
regulations you have to abide by. Federal government can come in and give you these stress tests, which is basically is like getting a tune up on your car. You know, however often you're supposed to do that. So the regulators can come in and say, okay, well we're going to run a bunch of models and tests and basically decide if you are at risk, if you're too risky with how you are handling your deposits, and if we got to worry about you. So these stress tests are really important.
But see what happened was then we had a change in administration, right, remember twenty sixteen. I try to forget, and yet what's happening with SVB. We can't deny the fact that this is a direct result of the Trump administration rolling back some of those policies, some of those regulations that the Obama administration put in place for precisely this reason. Why do we have to learn the hard way? Why can't we just protect ourselves and not have to learn the hard way? I don't know, but this is
what has happened. And in fact, what's ironic is that SVB, Silicon Valley Bank itself and its executives, they were the ones on Capitol Hill being like, yo, we almost have fifty billion dollars in funds. We're about to get hit with these regulations. We don't want that. Come on, man, let's increase this this threshold so that you have to have two hundred billion in assets before in deposits, before
you have to deal with all these annoying regulations. And unfortunately for them and for a lot of other definitely for their customers, the Trump administration pasted the rolling back of those same policies. So all of a sudden, SVB has one hundred and fifty billion dollars more that they can take on from their customers before they have to deal with these pesky regulations. Right, So that's how we've
ended up where we are today. Now, for those of y'all who are banking with smaller regional banks, you may be concerned because, like SVB, they don't have the same regulations as these big, big, big banks that'll you know, the majority of Americans bank with have to deal with. So what might happen to your bank? So there is some concern that regional bank customers, even credit union customers, that y'all may start to freak out so much and
that it'll might trigger another bank run. Now, this is all like psy psychology at play, right, As long as people remain calm, things should be okay. I think it's worth going to your bank. And if your bank has not sent you an email correspondence, I got some from my bank, my business bank account that I was actually very I was like, great, send me a little note. Let me know. Everything's juicy, everything's gucci, right, juicy. Check
your bank's policies. Check in with your bank and just ask, hey, let me just reassure me. Tell me what policies you guys have in place to protect my funds as long
as they're FDIC insured. You already know that you're covered up to two hundred and fifty k per account per institution, per account holder, right, but you may want to know from them that they have so much money in cash reserves that they would be more than fine to cover everyone's deposits if they came and wrote their checks, you know, and wanted to take their money out today. So you
are well within your rights to ask those questions. Check the bank's websites, look for reassurance notes from bank executives, bank leaders, and you know, look at that closely, because one of the reasons SVB ended up in this predicament is because they were going to be in a situation where they didn't have enough cash on hand to cover everyone's deposits. All right, So largely, I would say the
best thing to do is nothing. The best thing to do is uses as an opportunity to just educate yourself again, which I hope that I've helped y'all do. Remind yourselves what FDIC insurance is and how it works, and how the banks that you and I use are much different than SVB and even Signature Bank, which is another regional bank that has been taken over by the government in the last few days now. Signature Bank has invested and let people put money in from cryptocurrency into their accounts.
Most banks don't do that. Okay, these are unique, you know, different kinds of banks and unique situations that were inherently more risky. Okay, they attracted riskier clients, they had riskier types of deposits, all right. So again, just I want you to understand, it's like apples and oranges if you're
trying to compare your bank to these. All right, okayba fam, thank you for letting me scratch my brain and just get this, get this out of my system, because I really miss being a part of stories like this and getting to work in a newsroom with other really smart, brilliant business and financial journalists and some of my best some of my favorite sources at a time like this, If y'all are looking for up to the date news on what's happening in the banking sector, the New York
Times Business desk, like one of my best friends is an editor there. Shout out to Vivian. She didn't want to be on the podcast. She's shy, y'all, but I tried. They are doing an excellent job breaking this down. Read Ron and sorry Ron, what's his last name? Tara Siegel Bernard and Ron Lieberman Liebman, something like that at the New York Times. They cover consumer finance for the Times. They are wonderful. You can check out market Watch, check
out CNBC. They've got great writers, great reporters who are gonna be breaking this down. This is not the end of the story, but I hope that you guys will just use this episode. Hopefully you feel a little bit better about you know, where you're banking and what's going on with your money right now. Hopefully you feel a little edgemicated, all right, Hopefully you have something to say in the family group chat when auntie or uncle or in my case, my father is like, damn, I'm gonna
put that money back in my rolled up socks. You don't want to do that right now? Okay. Interest rates for us are popping. I didn't even mention that. Like, my interest rate is like three plus percent right now on my high yield savings accounts. So take advantage of that, Like we should be keeping our I think we should be, you know, focused on keeping debt low right now and squirreling away money in our savings in a high old savings account. And it's still safe to do that as
far as I'm concerned. Okay, take that for what it's worth. Again, I am not your financial advisor. I am not Janet Yellen. I am not a part of the Fed or the Treasury. But I am a person, like I said, who has a history as a business financial reporter. And I feel perfectly fine. Okay, So keep keep listening. To Brown Ambition.
If you have questions, hit us up, okay, but definitely read anything you can get as much, get as much great information as you can so that you're better educated, so that you can sort of do what I do and let these funny social media memes like roll right off your back and just keep it, keep it moving. Okay, until next time via FAM. Thank you so much for listening. I will see y'all next week. Hey ba Fam, We could not do this show without your support or the
support of our team behind the scenes. The Brown Ambition podcast is produced by Cumulus Podcast Network. It's edited by the wonderful Emani Crosby and produced by Tanya Bustos. Dennistimplinsky is our in house tech guru, and I am Bandy Woodrid Santos your co host, and I will see y'all next week.