{"id":264,"date":"2023-03-14T10:02:35","date_gmt":"2023-03-14T15:02:35","guid":{"rendered":"https:\/\/enjoyingthisjourney.com\/silicon-valley-bank-collapse-a-stark-reminder-of-the-risks-of-putting-all-your-eggs-in-one-basket\/"},"modified":"2023-03-14T10:02:36","modified_gmt":"2023-03-14T15:02:36","slug":"silicon-valley-bank-collapse-a-stark-reminder-of-the-risks-of-putting-all-your-eggs-in-one-basket","status":"publish","type":"post","link":"https:\/\/enjoyingthisjourney.com\/silicon-valley-bank-collapse-a-stark-reminder-of-the-risks-of-putting-all-your-eggs-in-one-basket\/","title":{"rendered":"Silicon Valley Bank Collapse: A Stark Reminder of the Risks of Putting All Your Eggs in One Basket"},"content":{"rendered":"

The collapse of Silicon Valley Bank (SVB) on Friday, March 12, 2023, has become the largest bank failure in US history since the 2008 financial crisis.[0]<\/a><\/sup> SVB was the “financial partner of the innovation economy,” catering to nearly half of all US venture-backed startups and working closely with venture capital firms.[1]<\/a><\/sup> It was a publicly traded bank based in Santa Clara, California, and had around $209 billion in total assets at the end of December.[2]<\/a><\/sup><\/p>\n

The collapse was caused by a sudden, swift bank run after SVB, the parent company of Silicon Valley Bank, announced it was selling $21 billion of assets at a $1.8 billion loss.[3]<\/a><\/sup> This sparked panic among tech investors, who encouraged startups to withdraw their money, prompting a bank run.[2]<\/a><\/sup> Following a sharp drop in SVB's stock price, trading was suspended and the bank was shut down by authorities.[2]<\/a><\/sup><\/p>\n

SVB was particularly flexible about lending tech startups money even though they didn\u2019t have free cash flow or much in the way of assets.[4]<\/a><\/sup> It also offered lines of credit, which allowed startups to cover dips in cash flow.[4]<\/a><\/sup> SVB had more than $200 billion in assets when it failed, and 97 percent of its deposits were uninsured.[5]<\/a><\/sup><\/p>\n

The failure of Silicon Valley Bank has sparked debate about the role of the Federal Deposit Insurance Corporation (FDIC) in such a situation. The Biden administration made an unprecedented move, guaranteeing that all depositors at the collapsed Silicon Valley Bank would be able to gain access to their entire funds.[2]<\/a><\/sup> Had the Dodd-Frank regulations that SVB fought against been in place, it may have been possible to identify the bank's pitfalls sooner.[5]<\/a><\/sup><\/p>\n

The bank\u2019s collapse also raises questions about the role of the FDIC in such a situation. Is this a financial rescue?[2]<\/a><\/sup> While the FDIC is providing a safety net for depositors, it is also an insurer of last resort, and some are questioning whether this is the best use of taxpayer money.<\/p>\n

The collapse of Silicon Valley Bank serves as a stark reminder of the importance of diversification and the risks associated with putting all your eggs in one basket. It is also a reminder of the need to pay attention to the banking sector and to ensure that banks are properly regulated and managed.<\/p>\n

0. <\/span>“The tech industry avoided an ‘extinction-level event,' but it's not unscathed” CNN, 13 Mar. 2023, https:\/\/www.cnn.com\/2023\/03\/13\/tech\/tech-industry-relief-silicon-valley-bank\/index.html<\/a><\/p>\n

1. <\/span>“What is Silicon Valley Bank? The bank\u2019s collapse, explained.” Vox.com, 12 Mar. 2023, https:\/\/www.vox.com\/technology\/23634433\/silicon-valley-bank-collapse-silvergate-first-republic-fdic<\/a><\/p>\n

2. <\/span>“Signature Bank's collapse could deal a blow to cryptocurrency industry” The Washington Post, 13 Mar. 2023, https:\/\/www.washingtonpost.com\/technology\/2023\/03\/13\/signature-bank-collapse-crypto\/<\/a><\/p>\n

3. <\/span>“Silicon Valley Bank's failure, the government's depositor rescue, and venture capitalists' incredible tantrum.” Slate, 13 Mar. 2023, https:\/\/slate.com\/technology\/2023\/03\/silicon-valley-bank-rescue-venture-capital-calacanis-sacks-ackman-tantrum.html<\/a><\/p>\n

4. <\/span>“Despite rescue, Seattle startups and banks face SVB blowback” The Seattle Times, 14 Mar. 2023, https:\/\/www.seattletimes.com\/business\/despite-rescue-seattle-startups-and-banks-face-svb-blowback\/<\/a><\/p>\n

5. <\/span>“Trump-era banking law paved way for Silicon Valley Bank\u2019s collapse” Vox.com, 13 Mar. 2023, https:\/\/www.vox.com\/business-and-finance\/2023\/3\/13\/23638655\/silicon-valley-bank-trump-fdic-banking-law<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The collapse of Silicon Valley Bank (SVB) on Friday, March 12, 2023, has become the largest bank failure in US history since the 2008 financial crisis.[0] SVB was the “financial partner of the innovation economy,” catering to nearly half of all US venture-backed startups and working closely with venture capital firms.[1] It was a publicly […]<\/p>\n","protected":false},"author":2,"featured_media":263,"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\/264"}],"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=264"}],"version-history":[{"count":1,"href":"https:\/\/enjoyingthisjourney.com\/wp-json\/wp\/v2\/posts\/264\/revisions"}],"predecessor-version":[{"id":265,"href":"https:\/\/enjoyingthisjourney.com\/wp-json\/wp\/v2\/posts\/264\/revisions\/265"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/enjoyingthisjourney.com\/wp-json\/wp\/v2\/media\/263"}],"wp:attachment":[{"href":"https:\/\/enjoyingthisjourney.com\/wp-json\/wp\/v2\/media?parent=264"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/enjoyingthisjourney.com\/wp-json\/wp\/v2\/categories?post=264"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/enjoyingthisjourney.com\/wp-json\/wp\/v2\/tags?post=264"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}