After Silicon Valley Bank Collapse: Biden and Yellen Take Action
This week saw the collapse of Silicon Valley Bank, a major lender to the tech industry, which sent shockwaves across the nation. The California Department of Financial Protection and Innovation shut down the bank on Friday and appointed the Federal Deposit Insurance Corporation (FDIC) as a receiver.
The FDIC has guaranteed deposits up to $250,000, and customers should have access to their money on Monday. Unfortunately, many tech startups kept far more than that with the bank, and may not get all of it back once other creditors are satisfied.
The failure of Silicon Valley Bank was the largest banking collapse in U.S. history since Washington Mutual in 2008, with approximately $200bn in assets at the time. It is being attributed to a mismatch between assets and liabilities, as well as the Federal Reserve’s aggressive interest rate hikes, which triggered a bond-market selloff and dried up funding sources for tech startups.
In response, the Federal Reserve announced a Bank Term Lending Program that will provide loans of up to one year in exchange for securities. The Fed will value the collateral at par — 100 cents on the dollar — instead of marking it to market.
US President Joe Biden has also pledged to hold those responsible for the collapse of Silicon Valley Bank accountable and strengthen oversight of the country’s largest banks. Treasury Secretary Janet Yellen also stated that her department is focused on trying to meet the needs of depositors.
The collapse of Silicon Valley Bank has caused a lot of concern and fear nationwide, as it is closely intertwined with the financial infrastructure of the tech industry, particularly startups. It remains to be seen whether the Federal Reserve’s new program and the government’s efforts to protect depositors will be enough to stop any contagion from spreading and taking down more banks.
0. “What to know about the spectacular collapse of Silicon Valley Bank” NPR, 10 Mar. 2023, https://www.npr.org/2023/03/10/1162599556/silicon-valley-bank-collapse-failure-fdic-regulators-run-on-bank
1. “What is Silicon Valley Bank? The bank’s collapse, explained.” Vox.com, 10 Mar. 2023, https://www.vox.com/technology/23634433/silicon-valley-bank-collapse-silvergate-first-republic-fdic
2. “Mark Cuban urges Fed to buy Silicon Valley Bank debt ‘immediately,’ says it’s ‘not the wealthy taking the hit’” Fortune, 11 Mar. 2023, https://fortune.com/2023/03/11/mark-cuban-fed-buy-silicon-valley-bank-debt-immediately-not-wealthy-taking-hit/
3. “What a rescue for SVB depositors means for the stock market and interest rates” MarketWatch, 12 Mar. 2023, https://www.marketwatch.com/story/svb-collapse-means-more-stock-market-volatility-what-investors-need-to-know-b87c962b
4. “Gundlach, Ackman Weigh Fed's US Bank Rescue Impact on Markets” Yahoo News, 13 Mar. 2023, https://news.yahoo.com/gundlach-ackman-weigh-fed-us-062357431.html
5. “US guarantees Silicon Valley Bank deposits amid bank crisis fears” Al Jazeera English, 13 Mar. 2023, https://www.aljazeera.com/economy/2023/3/13/us-guarantees-silicon-valley-bank-deposits-amid-bank-crisis-fears
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