SAMEEA KAMAL • MARCH 13, 2023
There’s been plenty of panic, but perhaps not a full-blown meltdown just yet over the collapse of Silicon Valley Bank — the 16th largest bank in the U.S. known as a cornerstone of the start-up economy.
The toppling of the Santa Clara-based bank has meant companies and employees haven’t had cash for some expenses and payroll — a major hit at any time, but especially as the tech industry has struggled over the last year. It also prompted fears of a potentially massive blow to California’s economy, and the nation’s overall. By Sunday evening, though, federal officials allayed the worst of those fears by guaranteeing that all customers of the felled bank will have full access to their money.
- U.S. Treasury Secretary Janet Yellen: “Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.”
That doesn’t include shareholders and certain unsecured debtholders, the press release states. Federal officials also removed the bank’s senior management.
But let’s back up a step. What happened? Depositors began withdrawing money just as the bank’s investments began to tank, CalMatters’ Ben Christopher reports.
That led to a California state agency shutting down the bank Friday and then that agency — the California Department of Financial Protection and Innovation — handing the bank over to a federal regulator, the Federal Deposit Insurance Corp.
And while the FDIC insures deposits of up to $250,000, most of the bank’s accounts exceeded that. Garry Tan, president and CEO of the startup incubator Y Combinator in California, told NPR that the bank’s closure and no subsequent rescue would mean “a whole generation of startups will be wiped off the planet.”
That’d be a devastating blow for California, where state revenues are largely dependent on high earners, many of whom come from Silicon Valley.
And while the worst of the crisis seems to be averted, at least for now, finance watchers worry that other specialty banks might experience a run from depositors, too. That could lead to more small and mid-sized banks closing.
As one protection, the Fed also said Sunday that it’s creating a new “Bank Term Funding Program” that offers loans to banks under easier terms than are typically provided by the central bank, to protect uninsured deposits in the wider U.S. banking system.
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