Silicon Valley Bank Banking Crisis: What you need to know! | B2B Vault: The Payment Technology Podcast | Episode 153

What's up everybody, it's Justin live from B2B Vault, the payment technology podcast sponsored by Nationwide Payment Systems, hosted by this guy, the Wade Boggs of payment processing himself, Allen Kopelman., and we'll be providing you educational information about fintech, small business payment processing, and the technology businesses are using in the world today. And in today's podcast, we'll be discussing the Silicon Valley Bank crisis of 2023. What could go wrong? What did go wrong? Who's to blame? Who— all the scary things involved in bank Catastrophes. Sounds like a bunch of rich guys crying to me. Put them in teardrop cups and let's drink them. Don't really care, but we're going to talk about the crisis of the Silicon Valley Bank thing. You take it away, bucko.

Okay, so it's been over 800— I put out a blog this morning, so it's been 868 days since we've had a bank failure. And we've had 3 banks go down. So we had— the 3 banks were Silvergate, Signature Bank, and Silicon Valley Bank. Now, out of the one thing those 3 banks all had in common was they were all doing business with crypto. So we're all involved in the cryptocurrency, and there's some other banks that are involved in cryptocurrency, and people are worried about doing business with those banks right now. Some of them, we're a little bit watching carefully now to see if any of those banks drop also, because people, when something like this happens, they run to the bank and they go take their money out of the bank, and then they go take it over to another bank. And all, you know, so what, what actually, you know, took place was these banks all failed because they didn't have the liquid cash to do business.

Got it.

So that's how a bank fails, by not having liquidity. And the lack of liquidity came from, as Mr. Wonderful Kevin O'Leary said on every news channel he could be on the last 3 days, is because they made bad investments and then they were borrowing money and the investments were paying like 1%, and then they were paying higher rates to borrow money to kind of keep the bank going. And that became into a, a bad storm and they could not keep the bank going. And a lot of this is caused by not running the bank properly and also Again, what we talk about on the program a lot when it comes to fintech and technology and all these things that involve money is the lack of oversight and regulation. And, you know, they lose— we have all kinds of things going on like buy now pay later, you know, companies losing millions of dollars, and then they're in trouble for not following truth in lending laws. And then these banks all were not required because regulation was loosened up. They were not required to do certain types of reporting, and because they didn't have to report back to the federal government on their liquidity, and obviously they were not reporting back to their shareholders either because the guy Kevin O'Leary lost over $10 million. So what people don't understand, when the bank— when a bank fails, right, there's two parts of the bank: the people who have money on deposit, okay, and then there's people who have— who are investors in the bank. So the, the— basically, you know, I wrote in the article who were the winners and who were the losers. So the depositors are going to get their money because every bank account is insured by the FDIC. Up to $250,000 per bank account, and businesses for more money because you're a business. And so that those funds are safe, the deposit money. Then the losers are the people who are running these banks are all out of a job because they booted everybody out. They got rid of the board, the executives, everybody running the bank. They brought in all new people. To run these 3 banks and get them back open so people can come in there. And hopefully they try to convince most people to leave their money there, that it's going to be safe, you know. But obviously some people are going to, if not take all their money, take some of their money out of the bank. And so the— and then the losers in the whole situation, besides the, the the executive teams and people who got fired is people who were investors in the bank. Like Kevin O'Leary said he lost $10.1 million. Yeah, because he was an investor. Now he wasn't crying about it, so I don't know how much money he has, but I could sure use $10.1 million. I could just use $1 million. He's a grand. Like, he could just give everybody $100 grand. And we would all be happy. But I'm just saying, so it's, it's, it's basically, you know, and then the other thing that's going on at this, at these banks is they were also acting in concert with businesses like Etsy. I believe they, one of them worked with Stripe, and then the merchants who were using those platforms were having to wait for their money until the whole deposit situation could get Figured out, figured out. Yeah, so, you know, maybe if you're doing a good amount of money on one of those platforms, maybe you should look at getting a website and not depending on being on a platform like that where something like this could go sideways again.

Yeah, it's a good time for people who, uh, put all their ducks in a row on Etsy. I get it though, like, not everybody has the budget for a website, but you know, it's one of those things where you got to figure it out.

Yeah, so it's, you know, so it's kind of, you know, it's kind of crazy. Now the other thing is, is, you know, the government's not gonna do like a full-blown bailout like they did in 2008-2009. Yeah, they paid off the investors and partially and things like that. They're not doing that this time.

Why not?

I don't know. That's just what they said. They said they're not— the bailout is strictly for depositors only. They're not going to bail out the investors.

They're not going to bail out the already rich people, right?

Oh, they're not going to bail out the mega, the mega rich. And this is the things that we talk about on the podcast about, you know, regulation And you know, everybody, this, these banks, they were basically getting very greedy in how they were running the bank. And because they were, instead of having the liquidity, right, they like invested the money in bad investments that weren't paying off. And then they had to borrow money to keep the liquidity going. And then what was coming in from their investments costs, they weren't bringing in enough to cover as the Fed started raising the rate up, you know, 50 basis points, 75 basis points, 50 basis points. And as the federal— as the rates went up, then the cost to borrow money went through the roof. And then on the other hand, at this Silicon Valley Bank, they were also doing business like me and Justin were at that— what was that show we were at in Miami? Emerge, the Emerge America. Yeah, which is a show that's taught where there's a lot of tech companies, startup companies, right? These kinds of different companies at the show. And those are the kind of people that they were banking, you know, which— and they were loaning them money.

Yeah.

And then we've seen in the last few months a lot of those, a lot of these tech companies, you know, that were, you know, valued at millions of dollars all of a sudden, you know, started going downhill. Tons of layoffs, right? And, you know, everybody laying off all these people. So, you know, that's, that's just what's going on with all this, the whole, the whole banking situation. And it's going to be tough on some of the merchants that were, you know, because they also were dealing with, you know, local businesses You know, it was like a— they had branches and everything all over California.

No kidding.

So yeah, so they were dealing with, you know, local business owners and things like that. So it's going to be tough on businesses to figure out what they're going to do, and especially how tight— if, you know, how tied in is their business to the bank, right? You know, did they have loans there? You know, do they have a mortgage over there? You know, like, what's going on? And, um, that's gonna, that's gonna, you know, cause— I think it's gonna take a while for it all to shake out. And even business owners, let's say you're a SaaS company or a tech company, you had a merchant account over there, maybe you're thinking about that you gotta get a different merchant account because you're not— you don't feel confident in doing 100% of your business over there. But it's gonna, you know, somebody, you know, some other bank is going to have to absorb that bank. Like, the part of their— they have two other branches of the bank. One is in, I think, Asia, and the other one in, in Europe. And HSBC is going to acquire the Silicon Valley Bank UK. They acquired it for £1 today. That was a kind of a good deal.

Nice.

So they're taking over that part of the bank, and I think there's an Asian branch of the bank too, and that's gonna, you know, that's, that's all gonna, you know, start spilling over as to who's gonna, who's gonna be running these banks.

Nice. And the money, man.

So in the end, you know, the thing that people don't understand is like we have all these laws and everything. Like, so they have this thing, the Dodd-Frank Act, right? So the Dodd-Frank Act, you know, is a Wall Street reform and consumer protection act. And then also, you know, we have the Consumer Financial Protection Bureau. And obviously none of these— whatever, whoever runs the whole Dodd-Frank Act and Consumer Financial Protection Bureau, none of them were watching all the— watching these guys. And then to top it off, we have the whole FTX thing going on, right? Right. And, and when you look at it, what is the FTX and all these banks have all in common? It's all crypto related, and that's kind of a weird, you know, coincidence. What do you think?

I think that crypto is in trouble. I think that there's a lot going on. Yeah, with crypto. And I mean, I don't, I don't have enough play, you know what I mean, to even really know.

Yeah, I don't have that kind of money that they're talking about playing.

I'm saying I don't even, whatever. But what I'm trying to say is that like crypto, I don't think crypto is going anywhere. To, in my opinion. You know, the banks can keep trying scaring all the people away from crypto like it's some boogie monster, but the banks is doing that on purpose because they don't want us to have a decentralized currency. So do I think all of this is related? Sure, why wouldn't it not be? Why would you not try and stop cryptocurrency from happening so people can actually have financial freedom in the USA? I don't know. But yeah, other than that, I think that, uh, banks are gross, corrupt, and a bunch of other things. Uh, I— if I didn't have to, I would keep my money in a mattress under— in my house.

Yeah. Um, well, one thing I think people should learn from this, if you had to take away a lesson, is make sure that wherever you have your money, because we've talked about this on the, on the podcast before. Some people keep their money like on some of these apps, and not all of these apps where you're keeping your money are FDIC insured.

Oh, right.

And that's, and that's a problem, you know. And also, when you're making an investment, you know, understand that when you make an investment that, you know, that you have to be able to lose that money. Agreed. Because if you're not prepared to lose it, then, you know, you shouldn't be investing it.

I agree.

And that's the whole, you know, that's the whole thing. But, you know, the, you know, they're scrambling around at the government today, you know, Janet Yellen from the Federal Reserve and all the people in Congress. And today I sat in, there was a meeting online from Utah, which is like this slope technology thing that they have there where there's a lot of technology companies based in Utah.

Oh yeah.

And apparently like they were hot— a lot of those companies were highly affected by, um, this whole thing going on with the Silicon Valley Bank because they were one of the biggest investors in these tech companies. And, you know, it was like a perfect— I don't want to say the perfect storm, but it's the perfect nightmare. Like 2008, 2009, what did we have? We had— they wanted— the government decided everybody should be able to get a house in 2008, 2009.

So I don't have a house. Was that where that— I missed that memo.

Well, I'm going to explain what happened. So what happened was, is they told all the banks to just loan people money, right? And then people had like 2 mortgages on their house. So usually when you buy a house, you have to put a 20% down payment, okay? And then you have an 80% loan. I don't know. Well, no, I'm just saying this is how it's— this is typically how it's done. So then, you know, that's— so they feel like, oh, you had enough money to put the down payment, and then you have enough money to pay your house payment. But what they were doing before the 2008-2009 was, is they were letting people get like 2 loans. So you basically would buy the house, and then because you didn't maybe have the 20%, you got another loan for the 20%, like a home equity line of credit.

Okay.

And then that covered the whole, the 100%. So now you're paying off 2 loans on your house. And then what happened— the crash happened was because they loaned money to people that couldn't really afford these houses. So then people couldn't afford these, like, two house payments, right? Because maybe you had one house payment for $700, $800, and then you had another house payment for a couple thousand. So you're in there for $3,000. You couldn't afford the 2,000 to begin with, maybe, and then the economy went crashing down 2008, 2009. We had the same thing that we just experienced with gas going through the roof.

Yep.

Now we have, instead of gas through the roof, we have gas higher, pretty high. I wouldn't say it's sky— it's not, you know, $4 a gallon, but it's, it's up there. It goes up and down pretty bad and And food prices now are through the roof. So instead of gas being through the roof, now food is through the roof, right? So, and then, so we have like this whole storm going on of things, and then that's— then these banks go and they fall apart around everybody, and then everybody's panicking out. Now obviously, if you're living in an area where these banks are. I think one of them was in New York, and then the Silicon Valley Bank is in California. And they, you know, they just had their— you know, they, they, they just, you know, now all these businesses are scrambling. People were like waiting outside. People were going to the bank. They had to call like the cops. People were outside the bank on Friday trying to get their money. They couldn't get their money out of the bank. And in fact, some people must have had a heads up because apparently there was a few people that must have been friends of the people running the bank, and those people were able to move some of their money out of there. And that— and I'm sure that that's being looked into because somebody's probably going to go to jail on that deal, but who knows, right?

Sure.

Well, look at FTX. I mean, I don't even know how— like, if I, me and Justin did the FTX thing, we'd be—

I'd be under the freaking jail.

We'd be in the supermax, right?

I don't know. I— it's ridiculous to even—

I mean, I just don't understand how everything's, you know, happening like right now with all these financial crimes that are happening before our eyes. And, you know, consumers losing money.

And shame on you.

Shame on who?

That's all that's happening to them. I know, that's all that has always happened. So like, why do we think that it's not going to continue to keep happening?

Well, some— somehow it all—

I mean, as a little kid, when you pick something up and your mom slapped your hand, right, you went and picked it up again, and then your mom gave you a spanking. You didn't pick that up, right?

Exactly.

So I mean, the way that government treats the, you know, the rich elite business owner is just— it's just all a bunch of you wash my hand, I wash yours. But whatever, I don't have any of the money to even stop any of this.

So neither do I. I don't have the money. I'm just wanting to explain it so people understand. People, people were asking me today, who is my money safe at the bank?

No.

It's— what's FDIC insured?

Yeah, is it?

Well, unless the whole system just goes kaput.

If the— if there's no electricity, you have no money. If the infrastructure of the United States of America dies, right, blown up, you ain't getting no money. The bank ain't gonna do you no favors in that type of situation.

Well, that's true.

The bank is going to close their doors Yeah, barricade them and hold on to every last penny until that situation is over. So my suggestion to everyone, this is just me, I've always been this way. Yeah, keep some money in the bank for your, the, the mandatory stuff, but don't put all of it there. I mean, I wouldn't. Yeah, I don't trust anything, especially people that I can't see.

No, but the— what the other thing is, like the digital, you know, they want to move us on to a whole digital currency. I think that, that's, you know, when you look at something like this that happened, it makes you not want to do— not even want to think about doing that, move to a digital currency, because then you have no access to cash or anything. Cash wouldn't even be a thing if you had digital currency.

The way it's looking, it's not going to be a thing.

Well, hopefully we're not— what's not going to be a thing, money or digital currency?

Everything.

Well, we'll see what happens. But that's the, that's the whole story that's going on today, is that, you know, the, the nation—

who owns this bank? Like, who's the guy?

Who is the guy?

CEO of that bank?

The CEO of the bank? Well, I don't think he's not the CEO anymore. Let's look it up and see who was the CEO of the— we have to go to Google.

I mean, that's the real question. CEO of SVB, see what he's talking about, see who that guy is. Nada.

Uh, whoops.

Well, anyway, we'll find out who that is. See, uh, I'm gonna keep his name in my Google updates so I can see what goes— what happens with—

yeah, we should look up and see what's going to go on with this. I mean, I don't understand how, like, you know, you know, like, I see all these things like, oh, Congress is going to hold hearings. I mean, Biden got on TV today and he said, oh, you know, everybody doesn't have to worry about their money, depositors at the bank, right? And they removed all the people on the boards of these banks. They removed all the CEOs, all the executives. And I mean, I've heard people on TV talking about it, and all they talk about is they didn't know how to run the bank. They ran the bank into the ground. They broke all the rules when it comes to liquidity. Nobody was on.

So my question is, if they have all— if someone knows all this information already, how in the hell can they continue doing the job? What is the— so what was the real— I don't— I just don't understand, man. I just don't ever understand, like, the way that this— the way these things work. No, everyone— ah, man.

Yeah, it's crazy. I mean, there's people on TikTok, everybody's up in arms, and people would think that the Dodd-Frank Act, which was put in place so that the 2008 crisis that we had in 2008 with all these bank failures would not happen again, and then it happens again. So that's the story of the, of the bank. Check out the blog on Nationwide Payment Systems. .com if you need a merchant account because you were associated with this bank situation and you need to figure out, um, where your— what you need to do with your merchant services. Maybe what you need to do with— I'm sure people are scrambling around now to figure out, you know, I'm sure the dust is going to settle because the bank, whoever took over, you know, the— who was ever running the bank now They're convincing people to stay at the bank, not leave the bank. So, and then whoever's taking it over, hopefully a buyer for the bank is announced quickly so that there's not like a bank run. So where people are going to the bank wanting their cash. I know if you go in some banks, like some branches, they have no cash. Like they don't have any. You go in and say, oh, I need 2 grand. They're like, look at you like you're crazy. Crazy. For sure. They don't have 2 grand, so that's kind of scary that all our money is on like the whole digital platform moving around.

Mine ain't. Well, I'm saying I got it buried in my backyard, all 200 pennies.

Come on, I know Justin, he's got, he's got a, he's got a, uh, I ain't got nothing. It's got a secret mattress somewhere. Yeah.

Yeah, in my brain.

Okay, well, you never know. So that's the story today of what's going on with the bank. We figured it's a hot topic all over the news, so we'll cover it here on the podcast. You know, obviously the, the government needs to figure out how to protect consumers better. I don't know what the, the Consumer Financial Protection Bureau and Dodd-Frank— they definitely not watch out for this whole thing or the FTX thing that's going on right now. And, uh, let's see what's going to happen with all this. I mean, if you, if you have an opinion, leave us a comment, let us know what you think. And, uh, you know, what should the government— I think they, all these guys should get locked up, but that's besides the point.

Never happened.

Never happened. So Listen to the podcast.

Go to b2bvault.info. There's a couple forms if you have a question for me or Allen, or you'd like to sponsor the podcast. If you need a merchant account, there's an Apply Now button that you click. Boom, sends you to the Nationwide Payment Systems. Fill out some, uh, another form there and you will hit the ground running. So, uh, yeah, follow us on Snapchat— I mean TikTok, LinkedIn, Facebook, Twitter. YouTube. Never forget the YouTube. Please like and subscribe to YouTube channel. Turn on post notifications so then that way you never miss another episode.

Yeah, check us out on the new Spotify. They've made a new— they—

Spotify for Podcasters bought Anchor, so Anchor turned into Spotify for Podcasters, I guess. I I'm not—

it's a little confusing.

I, I mean, it's not— it's the, the branding is confusing for me now. Like, the actual website didn't change, but you know, the back end of it at all. But I don't, I don't know.

It was like weird to log in though for you. Yeah, yeah. When you log in, it takes you— you have to go look around to go find exactly where you need to go. But for users, it's supposed to be on the front end. They're supposed to make a better user experience on Spotify. So wherever you listen to a podcast— Spotify, Apple, Stitcher— we're there. We're on all the apps. iHeart, we're everywhere. Amazon Music is making a big push for podcasts now too. Oh yeah, because if you have Amazon Prime, you can get Amazon Music now for free.

I thought you—

I always got that. Oh, I don't know, they keep sending me stuff. Download the Amazon because you always got Amazon music for free.

You just never used it.

Oh, okay.

That's why they're—

but yeah, I guess not enough people were using.

No one uses Amazon Music.

I don't, I don't know. I tried it out too. I found the podcast that was on there.

Well, there you go. That's all that matters.

That was all that's good. So peace out, everybody. Have a great day. Carpe diem. Don't sweat about the bank. Everybody's getting their money. Make sure you have your money in an FDIC insured account, and, you know, safe, or in a safe, yeah, or in a shoebox, or in the mattress. And, you know, if you need a merchant account, think about us. We can help you out. Peace out. Peace.