Silicon Valley Bank (SVB) and the Cannabis Industry – Cannabis | weed | marijuana

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

Luckily, SVB doesn’t have (or had?) no cannabis companies as significant customers. Despite the venture capital investors pumped into the industry, US cannabis banking remains elusive.

However, the cannabis industry will feel the effects of SVB’s collapse. Here’s how.

Silicon Valley Bank (SVB) and the cannabis industry

While SVB doesn’t have any major cannabis companies on its list, it did have a few smaller cannabis companies.

However, this is less about the direct exposure of the cannabis industry to SVB. Whether your local cannabis industry banks (or had?) with the SVB is irrelevant.

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

Canada’s banking sector is often unfairly praised for being “stable,” while American banks are ruthless. But that doesn’t take into account the secret Fed bailouts that Canadian banks have received.

As the SVB collapse spreads, small credit unions will be one of the first causalities. And they won’t 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 it that SVB will spread? Signature, First Republic and Charles Schwab are already following in SVB’s footsteps.

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

What happened?

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

Fed Chairman Powell is not an “expert” but a stooge — the media liaison for the corporate-sovereign counterfeiting cartel.

Consider what Murray Rothbard, a real expert, said in What Has Government done to our Money? writes:

The bank creates new money out of thin air and does not have to acquire money through the production and sale of its services like everyone else. In short, the bank is already bankrupt at any time; but its bankruptcy is only revealed when customers become suspicious and trigger “bank runs”.

One 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 at the end of the year.

Held-to-maturity enabled the SVB to “exclude paper losses on these holdings from both its income and its equity”.

In a footnote to its financials, the bank said the value of these “held-to-maturity” securities was $15.1 billion below its book value.

“The fair value gap at the end of the year was nearly the size of SVB’s total equity of $16.3 billion,” the Wall Street Journal article reads.

SVB is just the beginning

The cannabis industry should take note of this; This is not a SVB specific situation. Investment capital dried up.

The Federal Deposit Insurance Corp. (FDIC) reported that US banks’ unrealized losses on available-for-sale held-to-maturity securities totaled $690 billion as of September 30, up almost fifty percent sequentially.

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

The combination of long maturities of longer-dated assets and modest declines in deposits highlights the risk that these unrealized losses could turn into actual losses should banks have to sell assets to meet their liquidity needs.

In fact, SVB’s official reason for selling was to raise fresh capital. “We expect our clients to continue to see higher interest rates, depressed public and private markets, and increased cash burn as they invest in their businesses.”

But as Murray Rothbard pointed out,

No other business can go bankrupt overnight just because its customers decide to repossess their own property. No other business creates fictional new money that evaporates in true measurement.

SVB & the cannabis industry

We have not resolved anything 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 the election of anti-war, anti-bank bailout Barack Obama and the realization that he is on the same payroll as the Bush family.

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

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

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

These people are criminals. It’s time to call them that.