> In retrospect, it seems pretty bad to bank somewhere that is tied to one industry for precisely the reason that when the industry starts facing trouble, the money disappears, and doubly so for our risky industry
It's baffling that banking regulators in the US allow such a racket to exist in the first place. It would be as of "Silicon Valley Insurance Co" were to insure every home in the Bay Area and no other homes anywhere else. The chances of large insurance claims all happening at the same time (the insurance company equivalent of a "bank run") would be unreasonably high if all of the risk were to be concentrated in a single town in an earthquake prone area. Now there are reasonable solutions to diversify that risk away in the insurance industry, such as the reinsurance market.
The US has a strange history of having large numbers of small, independent banks. In other countries (in Canada at least), banking is an oligopoly - the regulator effectively limits the number of banks that exist in the country to only a handful and only a few very large ones. This has the benefit of forcing banks to be large and diversified, thus avoiding the phenomenon of a small bank run or two happening every year like they have in the US. It would appear that the US system is also prone to occasional larger bank runs, like say Lehman Brothers or Silicon Valley Bank... The advantage of the US system is the lack of regulation promotes entrepreneurship and investment, which is something systematically lacking in a country like Canada.
It might also turn out that, in retrospect, it was a bad for the Silicon Valley venture capital industry to be so heavily reliant on a single, non-diversified, local bank. I can't help but wonder how much of a role the VC industry played in this, for example what ever happened to the billions of dollars that the VCs raised for crypto startups? Is Silicon Valley Bank liquidity crisis a domino effect of the cascading bankruptcies and market crashed in the crypto racket?
which is why insurance companies generally don't insure against earthquakes. The gov't doesn't need to come and nanny the company to tell them not to do something.
These specialty banks like SVB are servicing accredited entities, who should have enough sophistication to know what risks they are taking putting enormous amounts of deposits into a single bank.
> which is why insurance companies generally don't insure against earthquakes. The gov't doesn't need to come and nanny the company to tell them not to do something.
I'm not sure where you're getting this information. Natural disasters, including earthquakes, are perils that can definitely be insured. This is possible because the regional insurers can buy catastrophe reinsurance to protect the insurance company from extreme losses that are beyond the company's ability to absorb. I don't know much about earthquakes, but in Florida hurricane / flood insurance is heavily subsidized by the government in order to make home ownership affordable / possible in coastal areas.
Insurance is a highly regulated industry. The government regularly comes to "nanny" insurance companies and tells them what to do on a daily basis. So, again, I'm not sure what you're trying to say. The regulator in the US is called NAIC, it's the insurance equivalent of the Fed for banks in the US.
It's baffling that banking regulators in the US allow such a racket to exist in the first place. It would be as of "Silicon Valley Insurance Co" were to insure every home in the Bay Area and no other homes anywhere else. The chances of large insurance claims all happening at the same time (the insurance company equivalent of a "bank run") would be unreasonably high if all of the risk were to be concentrated in a single town in an earthquake prone area. Now there are reasonable solutions to diversify that risk away in the insurance industry, such as the reinsurance market.
The US has a strange history of having large numbers of small, independent banks. In other countries (in Canada at least), banking is an oligopoly - the regulator effectively limits the number of banks that exist in the country to only a handful and only a few very large ones. This has the benefit of forcing banks to be large and diversified, thus avoiding the phenomenon of a small bank run or two happening every year like they have in the US. It would appear that the US system is also prone to occasional larger bank runs, like say Lehman Brothers or Silicon Valley Bank... The advantage of the US system is the lack of regulation promotes entrepreneurship and investment, which is something systematically lacking in a country like Canada.
It might also turn out that, in retrospect, it was a bad for the Silicon Valley venture capital industry to be so heavily reliant on a single, non-diversified, local bank. I can't help but wonder how much of a role the VC industry played in this, for example what ever happened to the billions of dollars that the VCs raised for crypto startups? Is Silicon Valley Bank liquidity crisis a domino effect of the cascading bankruptcies and market crashed in the crypto racket?