Jaysus!
Silicon Valley Bank closed in second-biggest bank failure in U.S. history
The bank, which caters to tech startups, was taken over by the government after a run on deposits Thursday, sparking concerns about broader economic fallout
By Gerrit De Vynck and Rachel Lerman
Updated March 10, 2023 at 1:53 p.m. EST|Published March 9, 2023 at 11:52 p.m. EST
The second-largest bank failure in U.S. history rocked the tech industry and sent ripples of anxiety throughout the financial system Friday as Silicon Valley Bank went from being a key part of the tech ecosystem to collapsing in a matter of hours.
The bank, which largely serves startups and venture capitalists, was shut down by regulators and taken over by the federal government after depositors scrambled to withdraw their money following a surprise filing from the firm on Wednesday night that it had sold $21 billion in assets and was selling more of its own stock to shore up its balance sheet.
The stock prices of other banks fell too, and Treasury Secretary Janet L. Yellen said she was monitoring the situation. Start-up founders and venture capitalists fretted that money needed to pay employees could be lost or frozen by the bank’s collapse.
Silicon Valley Bank’s rapid failure has shocked the tech industry, prompting fears that the economic situation for the sector is worse than previously thought. The collapse is also strengthening calls from Wall Street analysts and investors that the Federal Reserve’s interest rate hikes are too aggressive and risk causing serious damage to the economy.
At the end of December, Silicon Valley Bank held around $209 billion in total assets, making it the second-largest failure of a federally-insured bank in U.S. history, after Washington Mutual, which collapsed during the financial crisis in 2008. A spokesperson for the bank did not return a request for comment.
The Federal Deposit Insurance Corporation, which took over the bank, said depositors would be able to withdraw the $250,000 of government-insured funds on Monday. But because the bank served tech businesses, many of them had much higher amounts of money stored with the bank. On Friday, questions ricocheted around Silicon Valley about whether companies would be able to get their money back, and what to do if they couldn’t.
The bank’s failure also leaves a gaping hole in for the tech industry, which had relied on the bank for its expertise in startups and willingness to provide services to fast-growing, risky startups.
“No bank understand startups and tech the way they do,” said Antoine Nivard, co-founder and general partner at Blank Ventures. “They have a 40-year reputation earned the hard way built on the most extensive network of insider relationships with Silicon Valley’s most important players.”
The FDIC said it created a new bank to manage the firm’s operations, starting on Monday — a rare occurrence in a bank failure and typically means that the process was rushed.
https://www.washingtonpost.com/technology/2023/03/09/silicon-valley-bank-shares/