🎧Silicon Valley Bank & The Deposits Multiverse - Alex Johnson | Fintech takes
Banking meets the Marvel Universe
Hi! It’s George from Investorama, your guide to the future of investing - without the hype.
I’m back into podcasting and loving the conversations that enlighten me about current events! This one is with Alex Johnson from Fintech Takes, it happened between the collapse of Silicon Valley Bank and that of Credit Suisse.
Alex Johnson is a fintech specialist and creator of the excellent newsletter Fintech Takes. I had invited him to discuss the boom of high-yield deposits. It was a coincidence that a bank collapsed the day before because people withdrew their deposits (That was Silicon Valley Bank, we discussed Credit Suisse with the next guest Dan Davies I’ll share the full episode next week)!
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Our conversation includes the collapse of Silicon Valley Bank, the Art of the Newsletter, and a breakdown of a few high-yielding deposits (some of them have made an appearance in my T.I.Ps - or Terrible Investment Products).
About the SVB Bailout
“It's not really a bailout in the classic sense, if you are just rescuing depositors who had nothing to do with the risks that SVB was taking. The management at SVB and the equity holders at SVB are not being rescued.”
It’s quite different from what happened across the banking sector during the Great Financial Crisis, even if we also call it a bailout.
“We don't carefully analyze the balance sheets of the banks that we work with. We just sort of expect that our money is going to stay in our account, sort of the opposite of the South Park example. So I don't think there was really any moral hazard or risk to rescuing depositors”
Alex’s view is, to make it very simple, that the regulators did a great job. Depositors should be rescued, but he also ranted a bit against the VCs who cry for help on Twitter. We name and shame a few of them in the podcast (Around the 17 min mark)
We discussed the practical and philosophical differences between a regular bank account, a savings account and an investment account and how fintech blurred the lines.
And went through a range of products and their features, including:
a Natwest savings account yielding 6%
an SVB(!) savings account yielding 6.5%
a Tellus real estate note
the heavily promoted Public Treasury Treasury Bill Account: a promising concept
Celsius 18% deposits 😱
Ultimately, the events of the last few days need to make you think about the
"In the absolute worst case where something goes wrong, you really wanna make sure that that company is keeping careful track so that if they were to go outta business, the partners they work with can sort of track down all the customers and make sure that they get their money back. So, I'm not as concerned in this particular case about FDIC insurance or SIPC, I think that's just a function of what kind of account it is under the surface. I think the bigger question is: how well set up are these FinTech companies to deal with the worst case scenario if they go out of business? And to be candid, a lot of less mature FinTech companies [can be a concern]."
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