Banking regulators shut down Silicon Valley Bank, or SVB, on Friday, March 10, after the bank suffered a sudden, swift collapse, marking the second-largest bank failure in US history. It first tried to raise money by selling shares and then it tried to sell itself, but the whole thing spooked investors, and ultimately, it went under. On Sunday, March 12, the federal government said it would step in to make sure all of the bank’s depositors would have access to their funds by Monday, March 13. Regulators also shuttered another bank, Signature Bank of New York, which had gotten into crypto, and the federal government said its depositors’ money would be guaranteed as well. Silicon Valley Bank is known for helping to finance an explosion of West Coast companies in the tech sector — an industry that has recently been walloped by high interest rates and an economic slowdown.
- But the tech sector as a whole also took a downward turn in recent months, and companies increasingly began to withdraw their deposits from the bank.
- “The Fed ring-fenced the SVB disaster and averted a crisis of epic proportions for the banking sector,” said Wedbush Securities’ Dan Ives.
- President Joe Biden was in constant communication with several administration officials in the wake of the SVB collapse over the weekend, a White House official said Monday.
- A third of Y Combinator companies won’t be able to make payroll in the next 30 days, according to YC CEO Garry Tan.
Biden says no taxpayer money will be used to cover losses
Crypto firm Circle operates a stablecoin, USDC, that’s backed with cash reserves — $3.3 billion of which are stuck at Silicon Valley Bank. That stablecoin should always be worth $1, but it broke its peg after SVB failed, dropping as low as 87 cents. The HSBC rescue is “fantastic news” for the UK startup ecosystem, said Piotr Pisarz, the CEO of Uncapped, a financial tech startup that lends to other startups. Like many other banks, SVB ploughed billions into US government bonds during the era of near-zero interest rates. The FDIC said those with insured deposits with SVB, typically up to $250,000, would be able to access their money by no later than Monday. SVB said earlier this week, that in order to make good on those withdrawals, it had to sell part of its bond holdings at a steep loss of $1.8 billion.
For starters, some depositors are getting nervous and looking to shift their money out of midsize and regional banks into bigger ones, threatening broader instability in the banking system. Worries over a run at SVB led Wall Street investors to dump other bank stocks as well. Shares of some prominent West Coast lenders took sharp nosedives Friday, including First Republic Bank, PacWest Bancorp and Western Alliance Bancorporation.
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That’s good, because Vox Media has “a substantial concentration of cash” at Silicon Valley Bank. Of course, one other problem is that a lot of investors were also banking at SVB, too. That might be a lot of money for an individual, but we’re talking about companies here. A recent regulatory filing reveals that about 90 percent of deposits were uninsured as of December 2022.
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But many Wall Street traders are betting that in the event they did, their shares would become worthless. Among the worst off were San Francisco-based First Republic Bank and Phoenix-based Western Alliance Bancorp, whose shares closed 61% and 47% lower, respectively, on Monday. Until shortly after the failure of Silicon Valley Bank, its (now-former) CEO Greg Becker was a director of the Federal Reserve Bank of San Francisco. Had a buyer not been found, SVB UK would have been placed into insolvency by the Bank of England, leaving customers with only deposits worth up to £85,000 ($100,000) — or £170,000 ($200,000) for joint accounts — guaranteed. What seemed like a safe bet quickly came unstuck, as the Federal currencies conversions and taxes Reserve hiked interest rates aggressively to tame inflation. Regulators announced the takeover after what was effectively a run on the bank.
JPMorgan Chase was nearly 2% higher and Citigroup was up 2.9% after falling more than 7% on Monday. “If the S&L crisis is a model of what happens next, we are closer to the peak in rates than the market thought,” he said, meaning that the Federal Reserve could soon stop hiking interest rates to fight inflation. It’s also very possible that the US economy will slip into a mild recession within the next year, he added. US stocks surged Tuesday, breathing a sigh of relief as inflation data for February met economists’ expectations and bank stocks rebounded. Customers withdrew $42 billion in a single day last week from Silicon Valley Bank, leaving the bank with $1 billion in negative cash balance, the company said in a regulatory filing.
During Tuesday’s hearing, some Republican lawmakers appeared to blame the 10 things successful forex traders do Fed’s focus on that program and on addressing climate change in general for a lack of regulatory banking oversight. Republican Senators repeatedly insinuated on Tuesday that the recent US banking turmoil came as a result of the Federal Reserve’s focus on climate change. Investors also parsed through fresh data on the state of the economy. Confidence in the US economy grew in March despite the turmoil in the financial sector, according to the Conference Board. A survey from the Federal Reserve Bank of New York revealed that Americans expect home prices to continue swelling over the next year.
The federal government has said it will step in to make sure all of Silicon Valley Bank depositors would have access best online stock trading courses for 2021 to their funds. To some, this looks like a bailout, but President Joe Biden has said that those funds would not come from taxpayer dollars, but via loans from a newly created Bank Term Funding Program. It’s also important to note for consumers that the money you have in the bank right now is almost definitely fine. For those with uninsured deposits at SVB – basically anything above the FDIC limit of $250,000 – they may or may not receive back the rest of their money. These depositors will be given a “Receiver’s Certificate” by the FDIC for the uninsured amount of their deposits. The FDIC has already said it will pay some of the uninsured deposits by next week, with additional payments possible as the regulator liquidates SVB’s assets.
There are no solvency problems, former FDIC Chair Sheila Bair told CNN. There is no systemic banking issue, former Treasury Secretary Larry Summers told Wolf Blitzer. Silicon Valley Bank’s collapse won’t cause a recession, said Mark Zandi, chief economist of Moody’s Analytics. Both stocks made up the previous day’s losses during extended trading. “If the damage had spread across our financial system, the deposits and savings of tens of millions of families and small businesses could have been at serious risk,” Schumer said in remarks on the Senate floor. When news spread of regulators’ decision to make all depositors whole, many immediately wondered what that would mean for taxpayers.
