Silicon Valley Bank Collapse: Second-Largest US Bank Failure in History
The collapse of Silicon Valley Bank on Friday has become the second-largest bank failure in US history. Silicon Valley Bank, a key lender for California’s tech industry, was shut down by US regulators who seized its assets after a catastrophic bank run. Depositors are only formally insured up to $250,000, and those with more than that may only get pennies on the dollar back once other creditors are satisfied.
In the wake of its failure, tech investors and startups have been scrambling to find alternative sources of financing. Elon Musk has indicated that he is “open to the idea” of buying Silicon Valley Bank as he lays the groundwork for Twitter payments, though no further information has been provided.
The collapse of Silicon Valley Bank has been attributed to its investments in long-term assets such as Treasury bonds, which lost value as the Federal Reserve raised interest rates. These losses were compounded by a pandemic bull run that saw deposits triple from $62 billion to $189 billion in 2021. SVB also faced competition from Silvergate, a crypto-friendly bank that has become a darling of venture capital.
The Biden administration has stated that “no losses will be borne by the taxpayers” related to the government’s intervention for Silicon Valley Bank. However, skeptics remain, including Senator Elizabeth Warren of Massachusetts who wrote, “We’ll see if that’s true.” The US financial system is now facing a reckoning as the two largest bank collapses in US history have come in rapid succession.
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