{"id":213,"date":"2023-03-13T05:02:45","date_gmt":"2023-03-13T10:02:45","guid":{"rendered":"https:\/\/enjoyingthisjourney.com\/california-regulators-shut-down-silicon-valley-bank-how-and-why-it-collapsed\/"},"modified":"2023-03-13T05:02:45","modified_gmt":"2023-03-13T10:02:45","slug":"california-regulators-shut-down-silicon-valley-bank-how-and-why-it-collapsed","status":"publish","type":"post","link":"https:\/\/enjoyingthisjourney.com\/california-regulators-shut-down-silicon-valley-bank-how-and-why-it-collapsed\/","title":{"rendered":"California Regulators Shut Down Silicon Valley Bank: How and Why it Collapsed"},"content":{"rendered":"

On Friday, March 10, 2023, California regulators shut down Silicon Valley Bank (SVB), one of the largest banks in the US and the go-to lender for tech startups.[0]<\/a><\/sup> This marked the biggest bank failure in the country since the Great Recession and sent shockwaves through the global economy.[1]<\/a><\/sup><\/p>\n

SVB was founded in 1983 in Santa Clara, California, and quickly became the bank for the burgeoning tech sector.[2]<\/a><\/sup> It claimed to bank for nearly half of all US venture-backed startups as of 2021, and was also a banking partner for a lot of the venture capital firms that fund those startups.[3]<\/a><\/sup> <\/p>\n

The bank\u2019s collapse was largely attributed to a mismatch between assets and liabilities.[4]<\/a><\/sup> A sharp surge in deposits occurred, and these were largely invested in long-term bonds, particularly those which were government-guaranteed mortgage securities.[4]<\/a><\/sup> As the Federal Reserve began aggressively raising interest rates, funding sources for tech startups dried up, putting pressure on deposits, and at the same time, Fed rate hikes triggered a historic bond-market selloff, putting a big dent in the value of SVB\u2019s securities holdings.[4]<\/a><\/sup><\/p>\n

On Thursday, the share price of SVB plummeted by 60%, resulting in a one-day mark-to-market profit of approximately $513 million for traders who had bet against the stock. This was due to increasing anxieties concerning the bank's operations.[5]<\/a><\/sup> Friday morning, the stock dropped another 63% prior to being stopped, and the Federal Deposit Insurance Corp. declared that it had taken control of the bank.[5]<\/a><\/sup> The bank announced a $1.8 billion loss Thursday following a $21 billion fire sale of its fixed-income portfolio.<\/p>\n

The U.S. government declared that on Monday morning, all depositors at the failed Silicon Valley Bank would be able to access their funds.[6]<\/a><\/sup> The announcement seemed to involve deposits of greater value than the maximum $250,000 that is federally insured.[7]<\/a><\/sup> More than 90 percent of the bank\u2019s customers had account balances above this.[8]<\/a><\/sup><\/p>\n

The FDIC said that depositors will have access to all of their money starting Monday, March 13.[9]<\/a><\/sup> No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.[6]<\/a><\/sup><\/p>\n

As of December 31, 2022, Silicon Valley Bank had approximately $209.0 billion in total assets.[10]<\/a><\/sup> Despite skeins of bank regulations meant to prevent another financial meltdown, Silicon Valley Bank went down in flames last week, and its failure has prompted a lot of finger-pointing.[11]<\/a><\/sup><\/p>\n

0. <\/span>“Yellen rules out bailout for Silicon Valley Bank: “We're not going to do that again”” CBS News, 12 Mar. 2023, https:\/\/www.cbsnews.com\/news\/janet-yellen-silicon-valley-bank-bailout-face-the-nation-interview-today-2023-03-12\/<\/a><\/p>\n

1. <\/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><\/p>\n

2. <\/span>“Space sector reacts to collapse of Silicon Valley Bank” SpaceNews, 10 Mar. 2023, https:\/\/spacenews.com\/space-sector-reacts-to-collapse-of-silicon-valley-bank\/<\/a><\/p>\n

3. <\/span>“Silicon Valley Bank failure could wipe out ‘a whole generation of startups'” NPR, 11 Mar. 2023, https:\/\/www.npr.org\/2023\/03\/11\/1162805718\/silicon-valley-bank-failure-startups<\/a><\/p>\n

4. <\/span>“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<\/a><\/p>\n

5. <\/span>“SVB Collapse Has Short Sellers Making $500M, Now they Have to Collect” Bloomberg, 10 Mar. 2023, https:\/\/www.bloomberg.com\/news\/articles\/2023-03-10\/shorts-make-500-million-on-svb-demise-collecting-won-t-be-easy<\/a><\/p>\n

6. <\/span>“Silicon Valley Bank collapse: Everything that\u2019s happened until now” Cointelegraph, 13 Mar. 2023, https:\/\/cointelegraph.com\/news\/silicon-valley-bank-collapse-everything-that-s-happened-until-now<\/a><\/p>\n

7. <\/span>“Treasury Secretary Janet Yellen says U.S. government won't bail out Silicon Valley Bank” CNBC, 12 Mar. 2023, https:\/\/www.cnbc.com\/2023\/03\/12\/treasury-secretary-janet-yellen-says-us-government-wont-bail-out-silicon-valley-bank.html<\/a><\/p>\n

8. <\/span>“Silicon Valley Bank CEO should return millions in company stock he sold, lawmakers say” The Washington Post, 12 Mar. 2023, https:\/\/www.washingtonpost.com\/technology\/2023\/03\/12\/greg-becker-svb-stock\/<\/a><\/p>\n

9. <\/span>“Mark Cuban urges Fed to buy Silicon Valley Bank debt \u2018immediately,\u2019 says it\u2019s \u2018not the wealthy taking the hit\u2019” Fortune, 11 Mar. 2023, https:\/\/fortune.com\/2023\/03\/11\/mark-cuban-fed-buy-silicon-valley-bank-debt-immediately-not-wealthy-taking-hit\/<\/a><\/p>\n

10. <\/span>“PR-16-2023 3\/10\/2023” FDIC, 13 Mar. 2023, https:\/\/www.fdic.gov\/news\/press-releases\/2023\/pr23016.html<\/a><\/p>\n

11. <\/span>“Silicon Valley Bank had more red flags than a CCP meeting but regulators cared about climate not bank risks” Fox Business, 13 Mar. 2023, https:\/\/www.foxbusiness.com\/markets\/silicon-valley-bank-red-flags-ccp-meeting-regulators-cared-climate-bank-risks<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

On Friday, March 10, 2023, California regulators shut down Silicon Valley Bank (SVB), one of the largest banks in the US and the go-to lender for tech startups.[0] This marked the biggest bank failure in the country since the Great Recession and sent shockwaves through the global economy.[1] SVB was founded in 1983 in Santa […]<\/p>\n","protected":false},"author":2,"featured_media":212,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"_links":{"self":[{"href":"https:\/\/enjoyingthisjourney.com\/wp-json\/wp\/v2\/posts\/213"}],"collection":[{"href":"https:\/\/enjoyingthisjourney.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/enjoyingthisjourney.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/enjoyingthisjourney.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/enjoyingthisjourney.com\/wp-json\/wp\/v2\/comments?post=213"}],"version-history":[{"count":1,"href":"https:\/\/enjoyingthisjourney.com\/wp-json\/wp\/v2\/posts\/213\/revisions"}],"predecessor-version":[{"id":214,"href":"https:\/\/enjoyingthisjourney.com\/wp-json\/wp\/v2\/posts\/213\/revisions\/214"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/enjoyingthisjourney.com\/wp-json\/wp\/v2\/media\/212"}],"wp:attachment":[{"href":"https:\/\/enjoyingthisjourney.com\/wp-json\/wp\/v2\/media?parent=213"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/enjoyingthisjourney.com\/wp-json\/wp\/v2\/categories?post=213"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/enjoyingthisjourney.com\/wp-json\/wp\/v2\/tags?post=213"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}