I’m writing this Saturday post because I was there in 2008, when a small money market firm — The Reserve Primary Fund — cratered. While it seemed small at the time it wound up taking out Lehman Bros., Wachovia Bank and many other firms needed to be bought out.
My award-winning story in 2008 — also on a Friday, which seems to be the practice on Wall Street — beat all the larger papers by days explaining what the stock market faced on Friday from a little known player cratering.
Fast forward to Friday when the firm called Silicon Valley Bank, a 40-year-old lender to startups and venture capitalists — became the second-biggest bank casualty in US history as it was abruptly shut down and being taken over by the FDIC.
Naturally the big tech investors called for a government bailout using 2008 as the playbook for making them whole after the bank extended them too much credit in a rising interest-rate environment.
I could see the feds coming in and selling the parent company to a Wells Fargo or JP Morgan for pennies on the dollar in order to stem the risk of contagion.
Former Treasury Secretary Larry Summers said Silicon Valley Bank’s implosion shouldn’t pose a systemic risk to the US financial system as long as depositors are made whole.
The message there is bail out the bankers or else.
We will see what Monday brings, since the feds have all there black cars outside the Federal Reserve building in lower Manhattan this weekend.
However, as Shakespeare put it. Beware Ides of March.