Silicon Valley Bank, one of tech’s favorite lenders, has collapsed after 48 hours of chaos, becoming the second-largest bank failure in US history. On Friday, the Federal Deposit Insurance Corporation shut down the bank and seized its assets.[0] This is the biggest failure of a US bank since the financial crisis in 2008 and it has sent anxiety across the financial system and shaken the tech industry.
The FDIC is now acting as a receiver for the bank, liquidating its assets to pay back customers and creditors.[1] Customers may access their insured deposits on Monday, but FDIC insurance only covers deposits up to $250,000.[2] Many Silicon Valley startups had more than that in their accounts, leaving them in a bind.
The collapse of the bank is due in part to the plunge in the value of bonds it acquired during boom times, when it had a lot of customer deposits coming in and needed somewhere to park the cash.[3] The bank sold part of its bond holdings at a steep loss of $1.8 billion to compensate for withdrawals.[4]
President Joe Biden and other political figures have emphasized that “no losses will be borne by the taxpayers” related to the government’s intervention for Silicon Valley Bank.[5] But some are skeptical of that statement, including Democratic Sen. Elizabeth Warren of Massachusetts.[6]
As of December 31, 2022, Silicon Valley Bank had approximately $209.0 billion in total assets and about $174.5 billion in total deposits, according to the FDIC.[7] All insured depositors will have full access to their insured deposits no later than Monday, and the FDIC will pay uninsured depositors an “advance dividend within the next week.”[8] Ultimately, the failure of Silicon Valley Bank highlights the widening gap between the value of large lenders and what they’re actually worth in the market, and it serves as a reminder of the fragility of the banking sector.[3]
0. “Bernie Sanders blames Trump-era policy for Silicon Valley Bank run” Business Insider, 13 Mar. 2023, https://www.businessinsider.com/silicon-valley-bank-bernie-sanders-donald-trump-blame-2023-3
1. “Yellen rules out bailout for Silicon Valley Bank: “We’re not going to do that again”” CBS News, 12 Mar. 2023, https://www.cbsnews.com/news/janet-yellen-silicon-valley-bank-bailout-face-the-nation-interview-today-2023-03-12/
2. “Is my money safe? How secure is the banking system? Your Silicon Valley Bank fallout questions, answered” CNN, 13 Mar. 2023, https://www.cnn.com/2023/03/13/business/svb-fallout-consumer/index.html
3. “US banks sitting on unrealized losses of $620 billion” CNN, 12 Mar. 2023, https://www.cnn.com/2023/03/12/investing/stocks-week-ahead/index.html
4. “What to know about the spectacular collapse of Silicon Valley Bank” NPR, 10 Mar. 2023, https://www.npr.org/2023/03/10/1162599556/silicon-valley-bank-collapse-failure-fdic-regulators-run-on-bank
5. “With Silicon Valley Bank depositors protected, let the bailout debate begin” Axios, 13 Mar. 2023, https://www.axios.com/2023/03/13/let-the-bailout-debate-begin-silicon-valley-bank-fdic
6. “The tech industry avoided an ‘extinction-level event,’ but it’s not unscathed” CNN, 13 Mar. 2023, https://www.cnn.com/2023/03/13/tech/tech-industry-relief-silicon-valley-bank/index.html
7. “PR-16-2023 3/10/2023” FDIC, 12 Mar. 2023, https://www.fdic.gov/news/press-releases/2023/pr23016.html
8. “Mark Cuban urges Fed to buy Silicon Valley Bank debt ‘immediately,’ says it’s ‘not the wealthy taking the hit’” Fortune, 11 Mar. 2023, https://fortune.com/2023/03/11/mark-cuban-fed-buy-silicon-valley-bank-debt-immediately-not-wealthy-taking-hit/
