In case you missed it, Silicon Valley Bank, one of the premier banks for the venture capital industry, failed in less than a week on Friday. Of equal importance, the Fed announced a brand-new rescue program for the entire US banking system on Sunday evening.
The Fed’s current playbook is to fight inflation and slow the economy. That playbook is facilitating a few sizable failures which adjust the financial system’s view of risk/reward, but the Fed still appears apt to save the overall financial system. These high-profile failures and the requisite implementation of the new rescue facility called the Bank Term Funding Program is a part of the process that our country went through about 15 years ago, and again in the early 1990s, and again in the 1970s, and the 1930s…
Our latest Forbes article is actually a direct note to small banks. They are so important to the financial system, but they don’t always have the resources of larger banks. Small banks often need to be directly supported and instructed on how to navigate these abstruse times.
We hope you find this helpful and are willing to send it to a small bank executive you know.
Full article: https://www.forbes.com/sites/joshuapollard/2023/03/13/silicon-valley-bank-failed-on-friday-and-the-government-crafted-a-new-rescue-plan-on-sunday-here-are-4-things-that-small-banks-must-do-now/
Clips from the article:
- “The decisions made right now, especially for small banks, will put them in the category of acquirer or acquired in just a few short years.”
- “Jerome Powell (the key decision maker in the direction of interest rates), leaning on the sagacious actions of his predecessors, wants to ‘break the grip of inflationary expectations.’ Breaking a few banks on that path is of much lower importance.”
- “On Sunday, March 12th, the government came to the rescue like it was 2008 all over again.”
- “It is more challenging for smaller banks to engage because of scale and other reasons, but there couldn’t be a more important time for small banks to hire, consultant with, or acquire the right talent to help them improve both liquidity and earnings through the Federal Home Loan Bank and the forthcoming government programs.”