{"id":303,"date":"2023-03-15T11:03:20","date_gmt":"2023-03-15T16:03:20","guid":{"rendered":"https:\/\/enjoyingthisjourney.com\/silicon-valley-bank-collapse-a-reminder-of-banking-risks\/"},"modified":"2023-03-15T11:03:21","modified_gmt":"2023-03-15T16:03:21","slug":"silicon-valley-bank-collapse-a-reminder-of-banking-risks","status":"publish","type":"post","link":"https:\/\/enjoyingthisjourney.com\/silicon-valley-bank-collapse-a-reminder-of-banking-risks\/","title":{"rendered":"Silicon Valley Bank Collapse: A Reminder of Banking Risks"},"content":{"rendered":"

Silicon Valley Bank (SVB) has gone down in history as the largest US bank failure since the 2008 Great Recession.[0]<\/a><\/sup> Founded in 1983, SVB had become deeply ingrained in the financial infrastructure of the tech industry, banking for nearly half of all venture-backed tech startups and many in the healthcare sector.[0]<\/a><\/sup> Last Friday, the Federal Deposit Insurance Corporation (FDIC) took control of SVB after a bank run and capital crisis.[1]<\/a><\/sup><\/p>\n

SVB specialized in catering to venture capital and private equity firms, so it experienced high growth as tech boomed over the past decade.[2]<\/a><\/sup> However, its depositor base was too concentrated in firms and employees from the venture capital realm, and when things got bad for its non-diversified group of clients, it very quickly got bad for the bank.[3]<\/a><\/sup><\/p>\n

The bank's collapse was precipitated by an announcement on March 8 that it had sold $21 billion of assets at a $1.8 billion loss and was going to sell $1.75 billion worth of shares to help plug that hole.[1]<\/a><\/sup> This spooked markets and clients, leading to massive withdrawals, which rendered the financial institution insolvent.[4]<\/a><\/sup><\/p>\n

The FDIC said it would retroactively protect all depositors at the two failed banks, not just smaller, insured, depositors.[5]<\/a><\/sup> The Federal Reserve and the Treasury Department also said that banks facing similar situations\u2014having to sell Treasury securities to meet deposits\u2014could instead borrow from the Fed.[5]<\/a><\/sup><\/p>\n

US President Joe Biden sought to reassure Americans that the banking system was sound, saying \u201cAmericans can have confidence that the banking system is safe. Your deposits are safe.\u201d[6]<\/a><\/sup> However, many of SVB's depositors had more than $250,000 held at the bank, which is above the FDIC\u2019s normal insurance guarantee in case of bank failure.[5]<\/a><\/sup><\/p>\n

The incident has sent shock waves across the tech sector, and it serves as a reminder of the risks associated with having a single industry make up the majority of a bank's deposits.[7]<\/a><\/sup> Despite assurances from the government that deposits are safe, uninsured US depositors do, in practice, lose money with some frequency.[4]<\/a><\/sup> Moving forward, it is essential to ensure that banks build solid and diversified portfolios and that depositors exercise caution when considering where to keep their hard-earned money.<\/p>\n

0. <\/span>“\u2018Lungs of the startup world\u2019: bank fall upends most Silicon Valley industries” The Guardian, 15 Mar. 2023, https:\/\/www.theguardian.com\/technology\/2023\/mar\/15\/silicon-valley-bank-failure-industries-investors-rattled<\/a><\/p>\n

1. <\/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

2. <\/span>“What is Silicon Valley Bank? The bank\u2019s collapse, explained.” Vox.com, 14 Mar. 2023, https:\/\/www.vox.com\/technology\/23634433\/silicon-valley-bank-collapse-silvergate-first-republic-fdic<\/a><\/p>\n

3. <\/span>“Government fear-mongering over Silicon Valley Bank \u2014 and how to profit” New York Post , 15 Mar. 2023, https:\/\/nypost.com\/2023\/03\/15\/government-fear-mongering-over-silicon-valley-bank-and-how-to-profit\/<\/a><\/p>\n

4. <\/span>“The Silicon Valley Bank collapse couldn\u2019t have happened in this one state” Vox.com, 15 Mar. 2023, https:\/\/www.vox.com\/policy\/23636583\/silicon-valley-bank-collapse-fdic-deposit-massachusetts<\/a><\/p>\n

5. <\/span>“Silicon Valley Bank: Who's to Blame?” City Journal, 13 Mar. 2023, https:\/\/www.city-journal.org\/silicon-valley-bank-who-is-to-blame<\/a><\/p>\n

6. <\/span>“Why did Silicon Valley Bank fail and is a financial crisis next?” Al Jazeera English, 14 Mar. 2023, https:\/\/www.aljazeera.com\/economy\/2023\/3\/14\/why-did-silicon-valley-bank-fail-and-is-a-financial-crisis-next<\/a><\/p>\n

7. <\/span>“Opinion | The Boys Who Cried \u2018Woke!\u2019” The New York Times, 14 Mar. 2023, https:\/\/www.nytimes.com\/2023\/03\/14\/opinion\/silicon-valley-bank-republicans-woke.html<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Silicon Valley Bank (SVB) has gone down in history as the largest US bank failure since the 2008 Great Recession.[0] Founded in 1983, SVB had become deeply ingrained in the financial infrastructure of the tech industry, banking for nearly half of all venture-backed tech startups and many in the healthcare sector.[0] Last Friday, the Federal […]<\/p>\n","protected":false},"author":2,"featured_media":302,"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\/303"}],"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=303"}],"version-history":[{"count":1,"href":"https:\/\/enjoyingthisjourney.com\/wp-json\/wp\/v2\/posts\/303\/revisions"}],"predecessor-version":[{"id":304,"href":"https:\/\/enjoyingthisjourney.com\/wp-json\/wp\/v2\/posts\/303\/revisions\/304"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/enjoyingthisjourney.com\/wp-json\/wp\/v2\/media\/302"}],"wp:attachment":[{"href":"https:\/\/enjoyingthisjourney.com\/wp-json\/wp\/v2\/media?parent=303"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/enjoyingthisjourney.com\/wp-json\/wp\/v2\/categories?post=303"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/enjoyingthisjourney.com\/wp-json\/wp\/v2\/tags?post=303"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}