The Banking FUD Explained: The Picture Book Version

Feel out of the loop with what the heck is going on with the bank fears and doom and gloom over the past couple of weeks? I’ll try and make it as simple, fast, and painless as possible. 🤕

This means a nice big chunk of the nitty gritty details won’t be in here, but you can read them in the fantastic article from last Friday’s Daily Rip.

Also, I loved picture books as a kid (probably why I like charts) and thought a picture book-ish version would make it easier. 

Let’s start with this guy:

Sam Bankman-Fried

When his dumpster fire FTX collapsed, fallout led to people doing this:

Lots of withdrawals from Silvergate, in addition to some other factors, put stress on its survivability.

which affected this crypto bank:

Silvergate Bank ultimately had to close up shop, a major blow to the crypto industry.

that made ‘big money’ in the tech and fintech world go:

Fear is an emotion that infects participants; when you see everyone fleeing a building, people really don’t stop and ask why; they just follow the crowd.

and do virtual versions of this:

A ‘Bank Run’ – when a massive amount of depositors all want to withdraw their money at the same time. Last Thursday, depositors pulled out $42 billion from Silicon Valley Bank.

that spooked more investors and then spread to this hugenormously important bank:

Silicon Valley Bank’s failure is the second largest in U.S. history.

The shite storm with Silicon Valley Bank came to a head late last week, with experts fearing this would happen in the financial system:

There are/were very real fears that the collapse of Silvergate and Silicon Valley was just the first two dominos to fall in what could be a contagion of other bank failures.

Then, over the weekend, a familiar entity arrives to save the day:

Federal Reserve Chairman Jerome Powell – The Fed ensures depositors will be able to withdraw their money and issues short-term lending to the bank.

And finally, to put everyone’s concerns to rest, an elected official who typically reserves surprise television broadcasts for new wars, terror attacks, or impending zombie apocalypses made a surprise television broadcast to reassure us that everything is okay:

“Americans can rest assured that our banking system is safe. Your deposits are safe,” Biden said from the Roosevelt Room. “Let me also assure you we will not stop at this. We will do whatever is needed on top of all this.”

And that’s where we are today.

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