Silicon Valley Bank (SVB) & the Cannabis Industry

What is the relationship between Silicon Valley Bank (SVB) – the largest U.S. bank failure since 2008 – and the cannabis industry?

Fortunately, SVB doesn’t (or didn’t?) have any cannabis companies as significant clients. Despite the venture capital investors have pumped into the industry, U.S. cannabis banking remains elusive.

That said, the cannabis industry will feel SVB’s collapse. Here’s how.

Silicon Valley Bank (SVB) & the Cannabis Industry

While SVB has no major cannabis companies on their roster, there were some ancillary cannabis companies.

Still, the issue here is less about the cannabis industry’s direct exposure to SVB. Whether or not your local cannabis industry is (or was?) banking with SVB is irrelevant.

Just as it was irrelevant in 2008 whether Fannie Mae and Freddie Mac guaranteed your mortgage, everybody felt the hit—even people in different countries.

Canada’s banking sector often gets undeserving praise for being “stable,” while American banks are reckless. But this fails to consider the secret Fed bailouts the Canadian banks received.

With the SVB collapse spreading, small credit unions will be one of the first causalities. And they will not get billion-dollar bailouts from Washington.

And, of course, cut off from traditional banking services, cannabis companies depend on small credit unions.

But how likely is SVB to spread? Signature, First Republic and Charles Schwab are already following SVB’s steps.

But the Federal Reserve Chair Jerome Powell said the banks were “well capitalized,” and he’s supposed to be the expert, right?

What Happened? 

The cannabis industry will feel SVB’s collapse because every sector will feel the consequences.

Fed Chair Powell is not an “expert,” but a stooge—the media liaison for the corporate-state cartel of money counterfeiters.

Consider what Murray Rothbard, a real expert, writes in What Has Government Done to Our Money?:

The bank creates new money out of thin air, and does not, like everyone else, have to acquire money by producing and selling its services. In short, the bank is already and at all times bankrupt; but its bankruptcy is only revealed when customers get suspicious and precipitate “bank runs.”

An accounting trick places government bonds as either “available for sale” or “held to maturity.” Silicon Valley Bank had $91.3 billion in securities classified as “held to maturity” on its year-end balance sheet.

Held-to-maturity allowed SVB “to exclude paper losses on those holdings from both its earnings and equity.”

In a footnote to its financials, the bank reported the value of those “held to maturity” securities was $15.1 billion below their balance-sheet value. 

“The fair-value gap at year-end was almost as large as SVB’s $16.3 billion of total equity,” the Wall Street Journal article revealed.

SVB is Only the Beginning

The cannabis industry should take notice; this isn’t a situation unique to SVB. Investment capital is drying up.

The Federal Deposit Insurance Corp. (FDIC) reported that U.S. banks’ unrealized losses on available-for-sale and held-to-maturity securities totalled $690 billion as of September 30, up almost fifty percent from the previous quarter.

FDIC Chairman Martin Gruenberg said in a December 1, 2022, speech:

The combination of a high level of longer-term asset maturities and a moderate decline in deposits underscores the risk that these unrealized losses could become actual losses should banks need to sell investments to meet liquidity needs.

And indeed, SVB’s official reason for selling their holdings was to raise fresh capital. “We expect continued higher interest rates, pressured public and private markets, and elevated cash burn levels from our clients as they invest in their businesses.”

But as Murray Rothbard pointed out,

No other business can be plunged into bankruptcy overnight simply because its customers decide to repossess their own property. No other business creates fictitious new money, which will evaporate when truly gauged.

SVB & the Cannabis Industry

We solved nothing from the 2008 crisis. The banks are still corrupt as hell. And the government is in bed with them.

Occupy Wall Street was a rational response to electing anti-war, anti-bank bailout Barack Obama and realizing he’s on the same payroll as the Bush Family.

Of course, instead of stinking up a park, Occupiers could have implemented some nonviolent strategies. 

Hopefully, this time, instead of allowing the corporate press to play the race card effectively, we can unite and realize it’s not black versus white or poor versus rich.

Some earn a living by providing goods and services. That’s most of us. But some people extort wealth, counterfeit money, and manipulate interest rates.

Those people are criminals. It’s time we start calling them as such.