 What happened with Silicon Valley Bank? Silicon Valley Bank is, as Silvergate used to be a sleepy little community bank in Southern California, San Diego area. And then became a crypto bank and took off and became, became well-known. Silicon Valley Bank has been well-known for a long time. It is a fairly well-known bank because of its relationship to Silicon Valley. It's been around for a long time. It's basically had a similar business model the entire time. Basically Silicon Valley Bank banks Silicon Valley. It banks startups and it banks venture capital funds. So venture capital funds put their money, you know, they raise a billion dollar fund, they'll put the money in Silvergate. And, you know, they're not looking for an interest on the deposits. The deposits don't bear an interest. The same with startups. Silicon, the venture capital fund takes the money that it has. It invests in a startup. That basically what that means is it moves the money from its account at Silicon Valley Bank to the account of the startup in Silicon Valley Bank. Very easy to transact. Again, startup is not looking to make money off of its deposit at the banks. It doesn't mind getting zero on its deposits. And so Silicon Valley Bank makes loans, some of them to startups. It sometimes even takes equity as part of the repayment of those loans and it's done very well with that. But then over the last few years, as venture capital has just exploded and there's been a huge amount of money in Silicon Valley and a huge amount of money invested in startups, Silicon Valley Bank again had huge amounts of deposits, an increase in deposits that was massive. Many of those deposits landed up going into, invested in securities. And they did the same thing as Silvergate did. They basically looked for yield on those securities. They wanted a return on those securities at a time where the yield curve was flat, relatively flat. And therefore they bought long-term securities. They bought two, five, ten, I don't know, maybe some mortgage-backed securities. And again, as interest rates went up because of inflation, what you saw is that security portfolio dropped in value. And that is fine if you can hold on. But the problem was that over the last few months, venture capital has not been investing in those startups. The startups are not getting a replenishment of money. Venture capital is not raising new capital and the startups are spending the money. That is, it's going out of the bank account of Silicon Valley Bank and into the bank accounts of employees, suppliers, people who rent their offices. So there is net deposits leaving Silicon Valley Bank as the venture capitalists, right, and as the startups spend the money. And where is Silicon Valley Bank going to get the money to fill all those, to pay off all those deposits? Well, they should be able to sell securities, but they've got a bunch of securities that if they sell, they're going to lose a lot of money. And that's what happened. They were forced to sell securities. They declared that they lost money. In order to compensate for that loss of money, they said they were going to raise capital. This suggested to the marketplace that Silicon Valley Bank was in trouble, which it was. And that it was overvalued, which it was given that it was probably going to raise capital to follow a valuation. Again, Silicon Valley Bank's business is still okay. Its loans will still pay back. It's a long, well-established bank. It's been doing the same thing for a long, long time. But they got hit by the securities. They got hit by inflation. They got hit by taking on too much risk in a place where you're not supposed to take risk. John says by Bitcoin, do you see what Bitcoin's doing today? Bitcoin's not doing too well. It might be correlated with Silicon Valley Bank. Last I see over the last 24 hours, Bitcoin's down 8.3%. It's below 20,000 now. I mean, I don't know how long that'll stay. I'm not predicting Bitcoin. But it does look like Bitcoin is kind of suffering a little bit with what is going on in the banking sector. So Silicon Valley Bank dropped 60% yesterday as it announced it was going to raise capital. And people like Peter Thio, a bunch of other venture capitalists were telling their companies, their startups that they're invested in, to pull their money out of Silicon Valley Bank. You had a bank run. Everybody went to the bank to start pulling money out. Silicon Valley Bank doesn't have the capital to sustain that unless it keeps selling securities at a loss. And it turned out this morning that they couldn't raise capital, that they went out into the market and tried to raise capital, and nobody would give them the capital. So they announced this morning, and this is why trading was halted, they announced this morning that they would seek a buyer, somebody to buy them out. Now, this is fascinating. Silicon Valley Bank is not a bank that anybody would have expected would sell. It's not a bank that it's obvious who is going to buy. It is a bank that has a great business model. It's been a great bank for a long time, but it requires particular expertise. But what it turns out, I think, from Silvergate and from Silicon Valley is, and this has been true for a long time, and this is one of the great weaknesses of American banking, is you really need a diversified deposit of base. You need depositors, you know, from a wider way of industries so that you don't get one of these, everybody's leaving crypto, everybody pulls their money out of Silvergate, there's no new money in ventures, everybody's moving money out of Silicon Valley. It's interesting to me that this happened to Silicon Valley Bank because they should know better. They did, you know, this is a bank that has been through more than one, you know, tech downturn. You think they would have learned from those what happens. Anyway, I think that's pretty much the story. It would be interesting to see who buys Silicon Valley Bank. There's a lot of value there. They're not going to sell for zero. This is more liquidity issue than it is an actual value issue. This is the kind of problems banks get into relatively frequently. Well, not frequently, but periodically to a large extent because of the structure of the American banking system. The very little reserves that bank actually have, you know, we saw that in 2008-2009. Banks don't keep much reserves because the Fed, you know, the Fed basically doesn't require it in that sense to raise the bottom. So all of this, a consequence of regulation, a consequence of inflation, a consequence of zero interest rates. I told you that rising interest rates would have negative impacts on the economy. I expected zombie companies to really get hit. Turns out those zombie companies were smart in that they had funded themselves with long-term debts. They don't have to refinance it anytime soon. So they're holding out for now. But this is what is amazing about markets and what's amazing about bad government policy. You just don't know where it's going to manifest itself. You just don't know. And here we are with two banks getting into real deep trouble. Silvergate I probably would have expected because I've always been skeptical about crypto. But I would have never expected this a Silicon Valley bank. So here you see financial institutions getting into trouble. And yeah, all because of unintended consequences of raising interest rates. And I'm sure the Fed is carefully watching the banking sector to see what happens. By the way, just everybody knows, and it's clear I should have said at the beginning, I do not hold a position at Silvergate. I do not hold a position long or short in Silicon Valley Bank. I guess I wish I had it short, but I hold no positions in either banks. Nothing that I've said so far should be construed as investment advice, purely educational. I don't think I said anything about investment. And so all those caveats, hopefully you found that beneficial to understanding what's going on right now. Silicon Valley Bank will probably sell at a decent price. Shoulders will still lose a lot of money. But you know, somebody's going to buy them because there's real value there. As I said, Silvergate is unwinding and is going away. All right. I'll go to Patreon, subscribe star locals, and just making a appropriate contribution on any one of those, any one of those channels. Also, if you'd like to see the Iran book show grow, please consider sharing our content and of course subscribe. Press that little bell button right down there on YouTube so that you get an announcement when we go live. And for those of you who already subscribers and those of you who already supporters of the show, thank you. I very much appreciate it.