{"id":2270,"date":"2023-03-14T06:02:47","date_gmt":"2023-03-14T11:02:47","guid":{"rendered":"https:\/\/embarrdowns.com\/silicon-valley-bank-collapses-after-bank-run-biden-administration-intervenes\/"},"modified":"2023-03-14T06:02:47","modified_gmt":"2023-03-14T11:02:47","slug":"silicon-valley-bank-collapses-after-bank-run-biden-administration-intervenes","status":"publish","type":"post","link":"https:\/\/embarrdowns.com\/silicon-valley-bank-collapses-after-bank-run-biden-administration-intervenes\/","title":{"rendered":"\u201cSilicon Valley Bank Collapses After Bank Run, Biden Administration Intervenes\u201d"},"content":{"rendered":"

Silicon Valley Bank, an iconic 40-year-old institution based in Santa Clara, California, that catered to nearly half of all U.S. tech startups backed by venture capital, collapsed on Friday after a bank run forced the Federal Deposit Insurance Corporation (FDIC) to take control of the institution.[0]<\/a><\/sup> It is the largest US bank to fail since the 2008 financial crisis.[1]<\/a><\/sup><\/p>\n

At the end of December 2021, Silicon Valley Bank held around $209 billion in total assets and was one of the 20 largest commercial banks in the US.[2]<\/a><\/sup> According to its website, the bank serviced 65 percent of \u201call existing start-ups and many of the most prominent venture capital firms.\u201d[3]<\/a><\/sup><\/p>\n

SVB was particularly flexible about lending tech startups money even though they didn\u2019t have free cash flow or much in the way of assets.[4]<\/a><\/sup> As a result, it had become an integral part of the financial infrastructure of the tech industry, especially startups.[1]<\/a><\/sup><\/p>\n

In order to make good on withdrawals, SVB had to sell part of its bond holdings at a steep loss of $1.8 billion, the bank said last week.[3]<\/a><\/sup> The announcement scared the bank’s customers, who became concerned about SVB’s stability, and consequently withdrew more money from the bank, an example of a bank run.[5]<\/a><\/sup><\/p>\n

The Biden administration took an unprecedented step, ensuring that all customers of the defunct Silicon Valley Bank would be able to access all of their funds.[6]<\/a><\/sup> The Federal Deposit Insurance Corporation (FDIC) usually provides up to $250,000 in coverage per account holder, per bank. However, a whopping 85% of funds held by SVB were not protected by the FDIC, meaning billions of dollars must now be paid for by the federal government.[7]<\/a><\/sup><\/p>\n

On Monday, the stock prices of other banks considered to possess similar risks to SVB significantly decreased, with First Republic Bank falling by more than 60% and Western Alliance Bancorp dropping nearly 50%.[5]<\/a><\/sup> Investors were afraid that other lenders, particularly those of a smaller or regional size, would experience a similar rise in withdrawals, resulting in difficulty to satisfy the redemptions.[5]<\/a><\/sup><\/p>\n

The narrative of the Silicon Valley Bank incident is simple and clear.[3]<\/a><\/sup> During the pandemic, startups and tech firms experienced significant gains, some of which were deposited at the Silicon Valley Bank.[8]<\/a><\/sup> The bank, flush with their cash, followed the standard protocol for banks and kept a portion of the money on reserve, while investing the rest into long-term Treasury bonds that offered good returns during times of low interest rates.[8]<\/a><\/sup><\/p>\n

0. <\/span>“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<\/a><\/a><\/p>\n

1. <\/span>“What is Silicon Valley Bank? The bank\u2019s collapse, explained.” Vox.com, 12 Mar. 2023, https:\/\/www.vox.com\/technology\/23634433\/silicon-valley-bank-collapse-silvergate-first-republic-fdic<\/a><\/a><\/p>\n

2. <\/span>“My Trade Amid SVB’s Fall? An ‘Insurance Policy’ on BofA I Hope Doesn’t Pay Off” RealMoney, 12 Mar. 2023, https:\/\/realmoney.thestreet.com\/investing\/stocks\/my-bank-trade-an-insurance-policy-on-bofa-i-hope-doesn-t-pay-off-16118056<\/a><\/a><\/p>\n

3. <\/span>“Silicon Valley Bank’s failure, the government’s depositor rescue, and venture capitalists’ incredible tantrum.” Slate, 13 Mar. 2023, https:\/\/slate.com\/technology\/2023\/03\/silicon-valley-bank-rescue-venture-capital-calacanis-sacks-ackman-tantrum.html<\/a><\/a><\/p>\n

4. <\/span>“Despite rescue, Seattle startups and banks face SVB blowback” The Seattle Times, 14 Mar. 2023, https:\/\/www.seattletimes.com\/business\/despite-rescue-seattle-startups-and-banks-face-svb-blowback\/<\/a><\/a><\/p>\n

5. <\/span>“After Silicon Valley Bank collapses, plenty of worries over what’s next” NPR, 14 Mar. 2023, https:\/\/www.npr.org\/2023\/03\/14\/1163135286\/silicon-valley-bank-collapse-fallout-whats-next<\/a><\/a><\/p>\n

6. <\/span>“Signature Bank’s collapse could deal a blow to cryptocurrency industry” The Washington Post, 13 Mar. 2023, https:\/\/www.washingtonpost.com\/technology\/2023\/03\/13\/signature-bank-collapse-crypto\/<\/a><\/a><\/p>\n

7. <\/span>“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<\/a><\/a><\/p>\n

8. <\/span>“There\u2019s a deeper story to Silicon Valley Bank\u2019s failure. What can we learn from it?” The Guardian, 13 Mar. 2023, https:\/\/www.theguardian.com\/commentisfree\/2023\/mar\/13\/svb-collapse-2008-financial-crisis<\/a><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Silicon Valley Bank, an iconic 40-year-old institution based in Santa Clara, California, that catered to nearly half of all U.S. tech startups backed by venture capital, collapsed on Friday after a bank run forced the Federal Deposit Insurance Corporation (FDIC) to take control of the institution.[0]<\/a><\/sup> It is the largest US bank to fail since the 2008 financial crisis.[1]<\/a><\/sup><\/p>\n

At the end of December 2021, Silicon Valley Bank held around $209 billion in total assets and was one of the 20 largest commercial banks in the US.[2]<\/a><\/sup> According to its website, the bank serviced 65 percent of \u201call existing start-ups and many of the most prominent venture capital firms.\u201d[3]<\/a><\/sup><\/p>\n

SVB was particularly flexible about lending tech startups money even though they didn\u2019t have free cash flow or much in the way of assets.[4]<\/a><\/sup> As a result, it had become an integral part of the financial infrastructure of the tech industry, especially startups.[1]<\/a><\/sup><\/p>\n

In order to make good on withdrawals, SVB had to sell part of its bond holdings at a steep loss of $1.8 billion, the bank said last week.[3]<\/a><\/sup> The announcement scared the bank’s customers, who became concerned about SVB’s stability, and consequently withdrew more money from the bank, an example of a bank run.[5]<\/a><\/sup><\/p>\n

The Biden administration took an unprecedented step, ensuring that all customers of the defunct Silicon Valley Bank would be able to access all of their funds.[6]<\/a><\/sup> The Federal Deposit Insurance Corporation (FDIC) usually provides up to $250,000 in coverage per account holder, per bank. However, a whopping 85% of funds held by SVB were not protected by the FDIC, meaning billions of dollars must now be paid for by the federal government.[7]<\/a><\/sup><\/p>\n

On Monday, the stock prices of other banks considered to possess similar risks to SVB significantly decreased, with First Republic Bank falling by more than 60% and Western Alliance Bancorp dropping nearly 50%.[5]<\/a><\/sup> Investors were afraid that other lenders, particularly those of a smaller or regional size, would experience a similar rise in withdrawals, resulting in difficulty to satisfy the redemptions.[5]<\/a><\/sup><\/p>\n

The narrative of the Silicon Valley Bank incident is simple and clear.[3]<\/a><\/sup> During the pandemic, startups and tech firms experienced significant gains, some of which were deposited at the Silicon Valley Bank.[8]<\/a><\/sup> The bank, flush with their cash, followed the standard protocol for banks and kept a portion of the money on reserve, while investing the rest into long-term Treasury bonds that offered good returns during times of low interest rates.[8]<\/a><\/sup><\/p>\n

0. <\/span>“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<\/a><\/a><\/p>\n

1. <\/span>“What is Silicon Valley Bank? The bank\u2019s collapse, explained.” Vox.com, 12 Mar. 2023, https:\/\/www.vox.com\/technology\/23634433\/silicon-valley-bank-collapse-silvergate-first-republic-fdic<\/a><\/a><\/p>\n

2. <\/span>“My Trade Amid SVB’s Fall? An ‘Insurance Policy’ on BofA I Hope Doesn’t Pay Off” RealMoney, 12 Mar. 2023, https:\/\/realmoney.thestreet.com\/investing\/stocks\/my-bank-trade-an-insurance-policy-on-bofa-i-hope-doesn-t-pay-off-16118056<\/a><\/a><\/p>\n

3. <\/span>“Silicon Valley Bank’s failure, the government’s depositor rescue, and venture capitalists’ incredible tantrum.” Slate, 13 Mar. 2023, https:\/\/slate.com\/technology\/2023\/03\/silicon-valley-bank-rescue-venture-capital-calacanis-sacks-ackman-tantrum.html<\/a><\/a><\/p>\n

4. <\/span>“Despite rescue, Seattle startups and banks face SVB blowback” The Seattle Times, 14 Mar. 2023, https:\/\/www.seattletimes.com\/business\/despite-rescue-seattle-startups-and-banks-face-svb-blowback\/<\/a><\/a><\/p>\n

5. <\/span>“After Silicon Valley Bank collapses, plenty of worries over what’s next” NPR, 14 Mar. 2023, https:\/\/www.npr.org\/2023\/03\/14\/1163135286\/silicon-valley-bank-collapse-fallout-whats-next<\/a><\/a><\/p>\n

6. <\/span>“Signature Bank’s collapse could deal a blow to cryptocurrency industry” The Washington Post, 13 Mar. 2023, https:\/\/www.washingtonpost.com\/technology\/2023\/03\/13\/signature-bank-collapse-crypto\/<\/a><\/a><\/p>\n

7. <\/span>“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<\/a><\/a><\/p>\n

8. <\/span>“There\u2019s a deeper story to Silicon Valley Bank\u2019s failure. What can we learn from it?” The Guardian, 13 Mar. 2023, https:\/\/www.theguardian.com\/commentisfree\/2023\/mar\/13\/svb-collapse-2008-financial-crisis<\/a><\/a><\/p>\n","protected":false},"author":3,"featured_media":2269,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[47],"tags":[],"_links":{"self":[{"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/posts\/2270"}],"collection":[{"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/comments?post=2270"}],"version-history":[{"count":0,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/posts\/2270\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/media\/2269"}],"wp:attachment":[{"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/media?parent=2270"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/categories?post=2270"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/tags?post=2270"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}