Happy Saturday readers. I’m Phil Rosen. “Happy” is used loosely here, as the past week has been defined by chaos and uncertainty across the banking system.
Silicon Valley Bank and Credit Suisse have stolen most of the headlines, but between others like First Republic Bank, Signature Bank, and Silvergate Bank, there’s plenty to digest.
Today, I’ve rounded up everything that you need to know to get caught up on the worst banking crisis since 2008.
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People walk by the New York headquarters of Credit Suisse on March 15, 2023 in New York City. After its largest shareholder said it could not provide further support, Credit Suisse shares fell by as much as 30% on Wednesday as global concerns over the stability of major banks continued to spread.
1. Credit Suisse was losing the faith of investors long before this week. The scandal-hit lender has been feeling the pain since Silicon Valley Bank sparked the bank crisis. Here’s a closer look on how it got to this point — and why so many investors are concerned about what happens next.
2. SVB’s collapse completely screwed things up for companies with bad credit. At the beginning of the week, the spread on junk-rated bonds relative to US Treasuries surged to the widest level since December. The bank’s failure has also eliminated a key source of funding for startups that would usually be denied by traditional institutions.
3. Venture capitalists have never been more divided, with accusations flying over who killed their beloved Silicon Valley Bank. VCs who have worked in the field for years told Insider that they couldn’t remember a time when there was so much infighting. One founder said that “it was an internet bullying thing that in 36 hours took down an institution that’s been vital to the industry for so many decades.”
4. Ray Dalio, the billionaire founder of Bridgewater Associates, sounded off on the financial turmoil. SVB’s downfall marks a “canary in the coal mine” moment that will have repercussions well beyond the VC world, in his view. He explained how history illustrates that the current economic cycle could see more firms selling assets at major losses — which is precisely what sparked this latest crisis.
5. No one is cheering about the implosion of SVB, but there could be a silver lining. Scary uncertainty aside, the event might just be what triggers a bull-run in the stock market. Expectations are growing that the Fed will pause its aggressive interest rate hikes, and that would mean a reversal of the primary source of pain for equities.
6. The biggest bank failure since 2008 is everyone’s problem. There is a lot that’s still unclear as the financial world sifts through the wreckage, but the fall of Silicon Valley Bank will be felt for years to come. Here’s what the future could hold after the stunning collapse.
7. A popular real-estate tax loophole could be eliminated. Doing so could crush the market. That’s according to some experts speaking with Insider, who say that President Biden’s plan to do away with the 1031 exchange could cause property values to plummet. “Getting rid of the 1031 would decimate the market,” one source said.
8. A top real-estate economist said the bank turmoil could actually help spark a faster housing rebound. There have already been signs of more activity in the housing market, and mortgage rates could end up falling faster than expected with a less hawkish Fed, according to Nadia Evangelou, senior economist for the National Association of Realtors. Find out why she’s anticipating some near-term relief in affordability.
9. Goldman Sachs named its favorite growth stocks among financials. Traditional banks and regional names have taken sharp losses in the past week — but Goldman’s strategists are confident that these 12 picks can rise above the crowd thanks to strong earnings growth.
10. Buy into this batch of bank stocks right now as uncertainty grips the banking sector. Bank of America strategists laid out 23 names that still offer upside despite the drag of SVB and Credit Suisse. See the full list.
Curated by Phil Rosen in New York. Feedback or tips? Tweet @philrosenn or email firstname.lastname@example.org
Edited by Max Adams (@maxradams) in New York and Nathan Rennolds (@ncrennolds) in London.