Silicon Valley Bank, one of tech’s favorite lenders, collapsed on Friday after 48 hours of chaos, becoming the second-largest bank failure in US history.
The bank’s blowup has sent shockwaves across the tech sector, Wall Street, and Washington, DC, amid concerns that other banks could be in trouble or that contagion could set in. In the days after Silicon Valley Bank’s collapse, the panic appeared to spread, leading to the failure of additional banks, including Signature Bank of New York, which had bet on crypto. But it’s not clear how serious the fallout would be.
(Disclosure: Vox Media, which owns Vox, banked with SVB before its closure.)
The federal government has said it will step in to make sure all of Silicon Valley Bank depositors would have access to their funds. To some, this looks like a bailout, but President Joe Biden has said that those funds would not come from taxpayer dollars, but via loans from a newly created Bank Term Funding Program. It’s also important to note for consumers that the money you have in the bank right now is almost definitely fine.
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Emily Stewart, Sara Morrisonand1 more
9 questions about Silicon Valley Bank’s collapse, answered
Justin Sullivan/Getty Images
If you work in tech, you had probably heard of Silicon Valley Bank before now. If you’re not familiar with this seemingly regional bank, nobody’s blaming you. It had billions of dollars in deposits, but fewer than two dozen branches, and generally catered to a very specific crowd of startups, venture capitalists, and tech firms. Anyway, you’re here now — Silicon Valley Bank isn’t.
Banking regulators shut down Silicon Valley Bank, or SVB, on Friday, March 10, after the bank suffered a sudden, swift collapse, marking the second-largest bank failure in US history. Just two days prior, SVB signaled that it was facing a cash crunch. It first tried to raise money by selling shares and then it tried to sell itself, but the whole thing spooked investors, and ultimately, it went under. On Sunday, March 12, the federal government said it would step in to make sure all of the bank’s depositors would have access to their funds by Monday, March 13. Regulators also shuttered another bank, Signature Bank of New York, which had gotten into crypto, and the federal government said its depositors’ money would be guaranteed as well.
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Li Zhou
The Fed prioritizes inflation over bank turmoil with its latest rate hike
Wednesday, the Federal Reserve announced that it intends to raise interest rates by another quarter of a percentage point in its latest bid to curb inflation.
It’s a somewhat contentious move given the recent banking failures the US has experienced, and some economists fear that higher interest rates could further weaken the financial sector. Those in favor, however, argued the hike would show the banking sector is stable enough to handle higher rates. Additionally, the Fed has long been under pressure to do more to bring inflation down, and raising interest rates is one of the few tools at its disposal. In the last year, the Fed has steadily continued to raise interest rates — which are now between 4.75 and 5 percent — as it tries to target inflation.
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Sara Morrison
What happens to Silicon Valley without Silicon Valley Bank?
John Brecher/Washington Post via Getty Images
The collapse of Silicon Valley Bank was a big deal. It didn’t just impact Silicon Valley businesses — or the many non-Silicon Valley-based businesses that banked there, including Vox’s parent company Vox Media. The end of SVB created ripple effects throughout the American banking and financial system.
It also showed how some of the practices that made Silicon Valley what it is today contributed to SVB’s demise. And it showed how Silicon Valley might not be the cradle of innovation and the pride of American business culture that it used to be. It was not a good look when some of Silicon Valley’s loudest voices — the same people who decried bailing out student loan borrowers — were begging, some in all caps, for the government to make SVB depositors whole. After days of prominent venture capitalists’ pleas, the government found a way to bail out SVB depositors without using taxpayer dollars. Nevertheless, plenty of people noticed Silicon Valley’s hypocrisy.
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Why the Silicon Valley Bank collapse couldn’t have happened in this one state
Paul Marotta/Getty Images
In Michael Mann’s 1995 movie masterpiece Heat, bank robber Neil McCauley (Robert De Niro) explains to panicked bank customers that he has no intention of hurting them: “We’re here for the bank’s money, not your money. Your money is insured by the federal government. You’re not gonna lose a dime.”
As clients at Silicon Valley Bank (including my employer, Vox Media) learned last week, McCauley’s promise isn’t quite true. Deposits at banks and credit unions are indeed insured by the federal government, but only in cases of bank insolvency, and only up to $250,000 per person, per bank. If an individual or business deposits more than $250,000, that amount could vanish if the bank fails.
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Emily Stewart
Did the Fed break Silicon Valley Bank?
Samuel Corum/Bloomberg via Getty Images
It turns out the Federal Reserve has been moving fast and breaking things, but few people noticed until the collapse of Silicon Valley Bank.
Over the past year, the Fed has been hiking interest rates at an aggressive, quick clip in an effort to tame high inflation in the United States. The common adage on Wall Street is that the Fed increases rates until something breaks. Until last week, the question was what, if anything, was breaking. Interest rate increases generally take some time to work their way through the economy, but some people were sort of scratching their heads at just how long that lag seemed to be. The job market, which interest rate increases are aimed at cooling, has remained strong. The economy is generally in surprisingly decent shape. Sure, things looked a little ugly in crypto and tech, but maybe the trouble would be contained there.
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Andrew Prokop
Why bailouts keep happening even though everyone hates them
Jakub Porzycki/NurPhoto via Getty
The old saw about democracy is that it’s the worst form of government, except for all the others.
At the moment, the same holds true about bailouts aimed at averting economic panic — like we saw with Silicon Valley Bank (SVB) this weekend.
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Whizy Kim
What the hell is a “woke bank”?
Nikolas Liepins/Anadolu Agency via Getty Images
Some banks are huge. Some are tiny. Some serve all possible kinds of customers, while others, like the recently kaput Silicon Valley Bank, carve out a niche, catering to venture capitalists and tech-related startups. But there’s another important category in the taxonomy of banks, according to a new right-wing narrative: the “woke bank.”
As SVB shuttered last week and federal lawmakers began picking through the wreckage of the first major bank failure in more than a decade, some have decided the problem was ideological. Across Twitter and television, conservatives are characterizing what was a classic bank run — albeit the largest since 2008 — as a morality play.
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