Hi, and welcome to the your good news podcast with me your host, Katherine Getty. Each Thursday, I'll give you the scoop on the good news coming out of Washington, and how you can get involved with this thing called democracy. Welcome back to another episode of New York good news podcast. Quick update on what's happening in Washington with a slight backdrop of California, New York More to come on that, as well as another Women's History Month, trivial. More of on a personal note. So let's do that. What's happening in Washington first, and I think everyone is by this point heard of Silicon Valley Bank. So what's the backdrop on Friday, financial regulators announced that they were taking control of Silicon Valley Bank, it's a bank based in Santa Clara, California. And it was the largest bank collapse since the global financial crisis of 2008. I don't know about any other millennials, but are you triggered by hearing the year 2008. And I was even in college at the time, but it's still triggering. So Friday, that was happening, the bank was collapsing. By Sunday, a New York based Signature Bank, another regional bank, was also teetering on the brink of collapse, announced that it was closing its doors. And the reason it, both of these banks were having to close their doors was there was a run on the banks, people were getting really nervous about their funds. So they were going pulling all of their money out. Early this week, the federal government stepped in to guarantee customer deposits in full, we'll talk more about why that's important. But in an effort to find some good in this, I want to give you the tools to understand one how this happened, and to what it means for the US financial banking system. Now, at the outset of this conversation, I want to say I am relying on the information that is fresh and available. I am not a financial wizard. So I am doing my best. But I thought it was important to kind of give you an understanding of what are the ways our US government is trying to address a financial banking crisis. A systemic bank issue like this, let me be clear, isn't good. But understanding the rules and regulations, like I said, is really going to help give you the tools to be a more informed member. I want to empower you to feel confident and knowing okay, what's happening? What are the bank regulators doing? Why did this happen? What may be looking for does this mean? So first, how did this happen? Established in 1983, Silicon Valley Bank was just before collapsing America's 16th largest commercial bank. And let me repeat Silicon Valley Bank was the 16th largest commercial bank. That definitely made me nervous when I found that fact out. It provided banking services and nearly half of all US venture backed technology and life sciences company. So think startups and the tech and life sciences space. SV B's, Silicon Valley Banks, as UBS collapse was sudden, but the signs According to financial experts had been there. And the collapse on Friday, March 10, was basically 48 hours of frenetic activity. On Wednesday, last Thursday, the bank let basically articulated they had a loss on some of their investments, and that panicked depositors, people that were in the bank. And they there was a classic run on the bank, people got nervous, they started taking out all their funds. But the roots goes back much further. And I think like other many banks, from what I've learned, Silicon Valley Bank invested billions into the US government bonds during the era of near zero interest rates. Why would they do that? Because bonds were typically a really safe investment for banks, it was a way for them to make money, but ensure that they had safe ways to keep people's money. When interest rates rise, as we've been seeing over the last few what, year or so, interest rates have been rising. So when interest rates rise, those bonds fall. So the jump in rates eroded the value of the bond portfolio. Basically, the portfolio was yielding an average of 1.79 return when the average over 10 year period should be about 3.9. So you see that delta is being created, at the same time of the interest rates rising and the reason the Feds raise the rates of interest is to tamp down inflation. So while that's happening, tech startups had to channel more of their cash toward was debt. At the same time they were struggling to raise new money because inflation, it was a perfect storm. It was all starting to come to the head and Silicon Valley Bank was really it's kind of a canary in the coal mine on this. So signature Valley Banks issues led to closing another aforementioned bank Signature Bank Signature Bank is based in New York, in the similar vein, Signature Bank was the Bank of crypto. I know confusing, because I thought crypto was like on the interwebs. We can talk about that. And maybe another time, it was our new experience a run on the bank as well. And so we have the setup to banks, Silicon Valley Bank, California bank, Signature Bank in New York based bank faced the problem that their holdings, these investments they had invested in government bonds are now valued less. So what actions to the US government take by Sunday, the Federal Deposit Insurance Corporation, FDIC, you probably see that little logo when you go into banks, assumed control in tandem with a regulators. Before any further, I want to say what is let's define what the FDIC is. It's an independent government agency, and it was created by Congress, but it doesn't get any money from the Congressional appropriations process. So it's completely separate. So what happens, what the FDIC really does is banks pay an insurance premium to the FDIC, this insurance basically covers if there is a problem in any banks if there's a run on banks. But what happened, so it's like 12 cents for every $100 goes to the FDIC. And kind of with that, there's also a limit by law of $250,000 that it ensures, so anything over that, in theory would have been lost. And so when you're thinking about these two banks, the reason they became so important is one Silicon Valley Bank was the Bank of these life science companies and startups and people. And then Signature Bank was also like a crypto. So they're kind of like important banks and important regional banks. And the Biden administration okayed to use that aforementioned insurance money to cover the depositors in full. So these, anyone who has Silicon Valley Bank with hole holdings, or Signature Bank or made a fool, I will say on like a personal note, I'm trying to understand more and get more information on so what happens next, because that what was held in those two banks was pretty sizable. And so what happens next, if there is another issue, this is not being categorized as a bailout, when you think about 2008. It's using the insurance program that's there, but it definitely depletes it. And I think it definitely puts us in a vulnerable position. I'm going to say there's probably going to be an investigation launched, I think I saw something that maybe the DOJ was investigating, no, Congress will investigate more is going to come I'll share more information as I have it if this of this is of interest. I think it's interesting to me, because I definitely was like, feel like banks feeling is not great. But I wanted to understand more of okay, well, how is the US government addressing this? What does this mean, maybe looking forward for some legislation on ensuring that we're not in this position? Again, I think it's always good to understand the root because that's where good public policy is made. So now on a more feel good note, my sweet boyfriend had the idea that I would take the rest of March and honor continue honoring women. I honored some political women last week, and I thought, You know what, I think it's great. I'm going to continue to do it. And I'm going to do this more on a personal note. And if you follow me on Instagram, I shared a little bit about this, my heroes, my mom, hi, mom, putting on the spot love to interview you. But I wanted to share this story because I think it's a good way for you to take stock and think about the woman in your life who have shaped your story. And I might get emotional. No surprise there. But my mom is my hero for many reasons. My my mom chose to go into the Marines. She was part of the ROTC program and college was a way to pay for college, but she chose to go into Marines when there were less than 400 women in the Marines. It was not a place that was super welcoming to women think
1970s machonis. But she made a seat at that table. And she is forever my hero for doing that. Because I think oftentimes, I mean, I think being in DC, it is sometimes still a very male dominated space. And to have a role model like my mom who said I'm gonna make a seat at the table even when there's not a seat is inspirational. She then created a whole new career after leaving the Marines, and became an elementary education teacher, she inspired so many young minds. She taught anywhere from kindergarten to fourth grade. And I mean, I think teaching we all know is a really hard job. It's a lot of thankless hours, she transitioned a lot of us a lot of the knowledge she got in the Marines to help set up these kids for success. I am so honored to have that example. And I think that both of those being in the Marines and being a teacher really inspired me to pursue public service. And you're probably thinking, Katherine, you're lobbyists, how is that public service? I'll get there, I promise. You know, I think that public service and how you serve your community, or your friends, or this, US government can look a lot of different ways. And I really try to interpret that we need to meet people where they're at and create good public policy. And we may disagree with another person or another party on the issue. But we don't have to be disagreeable. And we don't have to name call. And we don't have to degrade one another. And I think that that's what politics has become over the last few years. But my mom's lesson was always to treat people with respect, and to serve one another, and to be and to always step up to the plate. She also went on to be a leader in the teachers and her inner school. And I will say, where my really love of politics and why I'm probably doing this podcast, also a nugget and there are a seat in there is that they were on different sides of the aisle, and they would root for different candidates for governor's races. And I can remember as a kid, holding a sign for one governor's candidate and running across the road and holding it for a different candidate. It inspired in me that public service is so important, and letting your voice be heard and voting and being a part of the conversation is so important. And I'm so grateful for that experience. I'm so grateful to grown up in a family where disagreeing about politics didn't mean it was the end of the conversation. It was just the beginning. So I hope you think about the women that are in your life. Mom, I love you so so much. Thank you for your example. i It is quite the juxtaposition between Silicon Valley Bank and my mom. But I hope you've enjoyed learning what's happening in Washington and also thinking about women in your life that you need to tribute this month and always. And Mom, I love you so so much. Thank you for joining today's episode of The your good news podcast. If you haven't already, I know I say every week. Go ahead and hit subscribe. So every Thursday you'll have a new episode of what's happening on Washington and that good news that's coming out. I'm on Instagram. My handle is at Katherine Getty. I'd love to hear more from you. Thank you so much and tune in next week to another episode of The your good news podcast.