What you need to know about the failure of SVB and Signature banks (copia)
The failure of Silicon Valley Bank and Signature Bank has generated concern in the United States. Some claim a crisis similar to 2008, when the real estate bubble burst, is coming.
However, here at Capifinders, we explain that it is a different situation. For example, nowadays, people are no longer lending 125%, not making loans with negative amortization, and not doing operations where they started on day 1 with an amortized table and adjusted every six months, explains Robert Ferra, from Lending Capital USA.
What we are currently experiencing in the United States is the result of the economic maneuvers applied to alleviate the financial crisis generated by the pandemic. So much money was printed to keep the economy afloat; consequently, people and companies began to capitalize. When there was much money in the market, that created inflation, says Andrés Zambrano.
In 2021, it was suggested that inflation would be temporary, but by 2022, it was said that it had to be fought by increasing interest rates to raise the cost and access to money. Inflation can eliminate the middle class and leave only the poor and wealthy. And this is detrimental to any country.
Banks that had lent money at meager interest rates are now borrowing at high rates, making the banks devalue. If your revenues are 2% and your costs are 5%, you are looking at your company not operating at the highest performance. Consequently, that creates panic in shareholders and depositors, Ferra points out.
The Federal Deposit Insurance Corporation (FDIC) insures individual accounts up to $250,000, but it does not guarantee investors or shareholders.
In addition, the U.S. government acted quickly, unlike in 2008, to avoid a domino effect by creating a loan to help banks in trouble. This also protects the consumer.
Is it advisable to invest in this context? Yes, and the best investment option is real estate, but you should get good advice and seek help from professionals who, for example, get properties with an added value of 50, 60, and 70%.
Meanwhile, Antonio Ocasio, a lawyer specializing in business, advises investing in several startups. If eight out of ten of these companies fail, those two that work are the ones that sustain the others; that is to say, there is a redistribution, and those losses are justified. Then, the one that will succeed will cover the expenses of the others.
Phrases that will inspire you
1. "Inflation creates many risks in our society because inflation can eliminate the middle class and leave two classes in a country: poor and rich."
2. "Sometimes it is preferable for banks to lose their position than for them to be unable to control inflation."
3. "The government has to be much more interested in the depositor than the bank itself."
4. "Losing deposits meant losing confidence in the system."
5. "Fear is more contagious when you lose confidence in the system, and that is what we did see more of in 2008."
6. "No one can force you to put money in a bank that is bad to make it better."
7. "The banking business is a business based on trust. So, no bank can withstand all its depositors wanting to take money out simultaneously."
