During the Summer of Love, Cream stood at the forefront of psychedelic rock and in anticipation of releasing their second album, Disreali Gears, they released “Strange Brew” as the album’s first single in June 1967.

The Summer of Love was a culmination of unique events that created a moment in history that will always be remembered, but likely never repeated. While March 2023 may not mark a revolution in music, hallucinogenic drugs, or free love, it does represent a moment in time where the elements aligned for the “Strange Brew” that was the collapse of Silicon Valley Bank.

She’s a witch of trouble in electric blue

In her own mad mind she’s in love with you

With you

Now, what you gonna do?

SVB was in love with venture capital companies and startups in the tech industry, and in turn, those companies and startups were in love with SVB. Venture capital companies and startups loved SVB because the bank would often grant loans that other banks wouldn’t and pair those loans with low interest rates. It was a match made in Silicon Valley heaven.

Strange brew

Kill what’s inside of you

Well, it was a match made in heaven until Fed rate hikes interrupted a system that had worked for SVB for years. As interest rates increased, startup capital decreased—new fundraising by VC firms fell to a nine-year low in the fourth quarter of 2022. Many startups no longer had new capital to put into SVB and started withdrawing funds, so deposits slowed, and SVB found itself having to sell assets to maintain liquidity. Ultimately, Fed rate hikes brought to light the strange brew that was SVB’s mismanagement of assets versus liabilities.

She’s some kind of demon messin’ in the glue

If you don’t watch out it’ll stick to you

To you

What kind of fool are you?

On Wednesday, March 8, in an attempt to regain lost liquidity, SVB announced it would be selling $2.25 billion in new stock and that it had already sold securities valued at approximately $21 billion, but did so at a loss. This was the glue nobody wanted to stick to, so several venture capital investors told their startups to pull out of SVB. It didn’t take long for news to spread like wildfire, and with the ease of online banking, the sprint on the bank and SVB’s collapse happened within 48 hours.

On a boat in the middle of a raging sea

She would make a scene for it all to be ignored

And wouldn’t you be bored?

Before regulators shut down SVB and the FDIC took over on Friday, March 9, and made all depositors whole by Monday, SVB was in crisis management mode. Greg Becker, SVB’s Chief Executive, made a call to reassure customers that the bank was just fine, for them not to panic, and to keep their deposits in the bank.

Meanwhile, on the ground, SVB’s previously scheduled dinner at South by Southwest in Austin went on, and when an attendee asked about the bank’s troubles, the host reassured him in the strength of SVB’s balance sheet, but attendees couldn’t be fooled, and they dubbed the dinner “the last supper.”

Strange brew

Kill what’s inside of you

SVB’s last-ditch efforts to save itself were futile. And while SVB’s collapse caused a temporary ripple effect across the banking industry, it’s important to note that SVB was a strange brew that brought on its own demise and this is not a repeat of the 2008 financial crisis.

In the end, no depositors lost money, First Citizens Banc  purchased SVB from the FDIC and the broad stock market rallied. 

Remaining calm in the face of the storm again prevailed.