PREVIEW: THE SILLY VALLEY PANIC OF 2023

What caused it? What have we learned? What comes next?

The U.S. banking industry has experienced nine major banking panics in its 233-year history. That equates to a panic besieging the U.S. economy every quarter century.

Each is different, yet all are the same.

Years of prosperity are punctured by the failure of a seemingly impregnable financial institution.

• In 1857, it was the Ohio Life Insurance & Trust Company, an institution with the “highest reputation for solvency and responsibility.”

• In 1873, it was Jay Cooke & Co., which had “extended its affairs until its reputation as one of the foremost of American bankers had become worldwide.”

• In 1930, it was the Bank of United States, the 28th largest bank in the country which had “secured a position of prominence among the greatest banking institutions of the United States.”

• In 2008, it was Lehman Brothers, which had cut its teeth 147 years earlier financing the country’s burgeoning cotton trade.

Each failure struck like a thunderbolt on a clear day. And each was followed by months, sometimes years, of uneasy hope punctuated by moments of acute fear.

That’s where we find ourselves today.

Three prominent financial institutions have ascended to the heavenly vault in the sky, two of which were admired industry darlings.

What caused these institutions’ demise? How many more banks are likely to follow? And which banks are most vulnerable in the present environment?

On Friday, I’ll be publishing an in-depth report that answers these questions and more with detail and precision.

The report is informed by over a decade of rigorous study, relationships of confidence with many of the present era’s best bankers, and a perspective that simultaneously reaches back to the beginning of modern American banking as well as across the breadth of the industry today.

It’s a remarkable story. One that, with few exceptions, no one knows. Not regulators. Not academics. Not practitioners. Not even our friends on the frontlines — those at Silicon Valley Bank, Signature Bank and First Republic Bank who deserve our sympathy, not scorn, at a moment like this.

If you want to operate with confidence at a time when others are floundering in uncertainty, you will want to read the story.

See you on Friday.

John