In Depth: Why SVB failed and why it won't happen here

"Banks that most of us use in Western New York are well diversified banks" - Michael Angelucci
Employees stand outside of the shuttered Silicon Valley Bank (SVB) headquarters on March 10, 2023 in Santa Clara, California. Silicon Valley Bank was shut down on Friday morning by California regulators and was put in control of the U.S. Federal Deposit Insurance Corporation.
Employees stand outside of the shuttered Silicon Valley Bank (SVB) headquarters on March 10, 2023 in Santa Clara, California. Silicon Valley Bank was shut down on Friday morning by California regulators and was put in control of the U.S. Federal Deposit Insurance Corporation. Photo credit Getty

BUFFALO, N.Y. (WBEN) The failing of two U.S. banks is different than the 2008 banking crisis.

"It was almost a perfect storm," said Michael Angelucci of Level Financial Advisors. "They really didn't do a lot wrong. It's nothing like 2007-2008 where there were questionable investments."

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In this case, Angelucci said it's a well known fact that the tech sector has been laying off thousands of workers and having problems. As a result, those companies have started drawing on their deposits at their banks. As they do that, the bank has to come up with cash, so they start selling some of their investments, such as U.S. Treasury notes.

"Unfortunately, the demand was immediate and although they had to sell those U.S. Treasuries, they had to sell them at a loss because as interest rates went up, the value of the Treasuries went down. SVB (Silicon Valley Bank) said they were going to issue more stock to bring in cash flow to pay the depositors, and people flooded the bank. There were 42 billion dollars in requests last week. It created a cascading effect on the bank failure," he said.

Angelucci compared it to a classic bank run. "A Jimmy Stewart, Wonderful Life scene, where the money isn't in the bank. It's somewhere else. In this case, it's in Google, or Amazon or in any high tech business."

The key point for banking customers, he said, is not to put more than $250-thousand dollars in any one bank.

"Banks that most of us use in Western New York are well diversified banks. They have different types of depositors and different types of assets. They're well managed and we shouldn't see any sort of issue related to this," according to Angelucci who can't emphasize enough that FDIC insurance is every consumer's protection.

Angelucci was more reassuring when he offered this. "M & T, Key Bank and other area banks that we're familiar with, they have exposure to many different types of companies and industries and government entities. Depositors may work for school districts, or GM, or a bank. They work for many different types of businesses that are not being hit like technology right now."

Featured Image Photo Credit: Getty