The bank that burst. What threatens the global economy with the largest US bankruptcy since 2008?

While the post-Soviet periphery is fighting or fighting, in the very center of the world capitalist system - the USA - the nerve of the economy, that is, the financial system, has begun to feel pretty feverish.

The first alarm bell was the unexpected bankruptcy of the startup-oriented sixteenth-largest bank in the United States, Silicon Valley Bank (SVB), which was closed last week by the California Department of Financial Protection and Innovation.

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Market analysts noted with alarm that SVB's bankruptcy was the largest since the 2008 mortgage crisis. Now everyone is wondering whether the local problems of a single financial institution will develop into another domino effect, under the rubble of which other leading US banks will be buried.

Fueling these apocalyptic sentiments is the fact that SVB became the second-largest bankrupt in US history, after Washington Mutual Bank. At the same time, 87% of the bankrupt bank's deposits were not insured, so depositors will have to work hard to get their money back.

_{The collapse crept up on SVB like a thief in the night, taking less than two days. On March 9, the bank announced that it would issue additional shares worth $2,25 billion to compensate for losses from its managers’ failed securities transactions. In response, depositors began to withdraw their dollars, and a day later the regulator declared bankruptcy.}

Then it was time for debriefing. Accusations of negligence rained down on the rating agencies and the financial regulator: they allegedly missed critical symptoms when they did not raise the alarm until the end of February - when it became clear to many insiders that SVB was one step away from bankruptcy.

And then even more juicy details emerged. It turned out that the bank’s management, knowing that a disastrous ending was approaching, insured itself in advance, providing itself with “golden parachutes” through an emergency sale of assets, while ordinary depositors and investors were left with nothing. Silicon Valley Bank CEO Greg Becker alone sold $3,6 million worth of company stock less than two weeks before bankruptcy. In general, there is a classic “trust that burst.”

The consequences of the emergency withdrawal from the market of one of the system banks were not long in coming. And although the Wall Street giants from the top five are not in danger yet, the panic with the withdrawal of depositors’ funds has already affected smaller banks, such as the New York Signature Bank with assets of 115 billion. It was closed by regulators on Sunday "due to widespread concerns in the financial sector."

_{Following the collapse of Silicon Valley Bank, shares of regional banks (Western Alliance Bancorp, Pacwest Bancorp) began to fall. All of them, like their colleagues who went down, actively invested in bonds and mortgage securities.}

Another large regional bank, First Republic Bank, judging by the fears of experts, is second in line to exit the market. Over the weekend, its shares fell 50% (although before the close of trading the decline was 15%). Like SVB, First Republic Bank has a large difference between the fair market (estimated) and book value of its assets, which increases the risk of bankruptcy.

The consequences of the bank collapse have already been felt by companies in California - from startups to wineries and Hollywood productions. The business press fears that a chain reaction of bankruptcies could bury many small businesses that have no safety net in case of such crises.

The Biden administration was briefly distracted from the fascinating process of military pumping up Ukraine and was forced to start saving its own banking sector. According to the Washington Post, the White House announced an emergency intervention aimed at preventing a crisis in financial markets.

Last Sunday, Biden was assured that all SVB depositors will have access to all their money today, that is, on Monday, March 13th. It promised to extend government protection to depositors of another troubled bank, the aforementioned Signature Bank of New York.

In addition, the Fed announced the creation of a lending fund designed to protect banks from the financial risks caused by the collapse of SVB. It is noteworthy that Fed representatives avoided voicing the specific size of this credit program. It remains to be hoped that it will be sufficient to meet potential demands for trillions of dollars.

The situation is aggravated by the general poor state of the banking sector in the States. And although this cannot yet be called a systemic crisis, it is quite a malaise.

US banks now have more than $620 billion in unrealized losses (we are talking primarily about assets in bank reserves that have decreased in value but have not yet been sold, which means they can lead to future bank failures).

Optimists reassure: it is unlikely that all these derivatives will turn out to be “junk”, so we should not expect a repeat of 2008 in its entirety. Pessimists try to hedge their bets and sell potentially toxic securities on time.

Meanwhile, the “financial runny nose” has spread beyond the United States alone, threatening the global economy with another pandemic. Start-ups in Britain and the Nordic countries lost £30 billion of money they held in SVB. The Bank of England is spinning like a snake in search of funds to compensate for at least part of what was lost in order to prevent an avalanche of bankruptcies. Five hundred startups in Israel were also on the verge of bankruptcy.

Analysts say that these are just flowers. However, experience suggests that in such matters it is better to be a pessimist. In the end, you will either be right, or you will be pleasantly surprised if it turns out that the eyes of everyone's fear are too big.

As for the fate of the burst SVB, the American government decided not to save it, but to sell it at auction. If the sale does not take place due to a lack of interest from potential buyers, then investors are promised to be reimbursed not the guaranteed 250 thousand dollars, but the full amount of deposits.

In the meantime, this story has not yet been written and it is possible that the current losses are far from the last and not the largest. We should expect a reassessment of risks throughout the US financial system.

_{For us, as well as for the rest of the world, this is another confirmation of the well-known truth that the financial system, built on a speculative foundation and divorced from real production, is extremely vulnerable to the slightest risks and at any moment this sparkling carriage of high stock quotes and excellent credit ratings can turn into pumpkin of bankruptcy and poverty.}

Alas, Russia, as one of the important building blocks of the global financial pyramid, is not immune from the negative impact of such stories on its own economy. Contradictions in the global economy are growing, along with the prospect of their resolution by military means.

We will definitely not become an island of stability fenced off from the whole world amid the raging waves of the global crisis, especially if the rollercoaster of a crisis swings to such an extent that it also affects our closest economic partners, such as Turkey or China.

So you should fasten your seat belts just in case.