HomeTop StoriesThe US government is committed to guaranteeing the funds of Silicon Valley...

The US government is committed to guaranteeing the funds of Silicon Valley Bank depositors

Khanna for “decisive action” on the failure of the SVB

Khanna calls on the Biden administration to take “decisive action” against the collapse of the SVB


NEW YORK — The U.S. government on Sunday took extraordinary measures to halt a possible banking crisis following the historic bankruptcy of Silicon Valley Bank, assuring depositors at the bankrupt financial institution that they would soon have all their money at their disposal.

The announcement came amid fears that the factors that caused the Santa Clara, California-based bank to fail could spread, and just hours before trading began in Asia. Regulators had been working all weekend to try to find a buyer for the bank, which was the second largest bank failure in history. Those attempts appeared to have failed as of Sunday.

EARLIER: Yellen rules out bailout for Silicon Valley Bank

In a sign that the financial hemorrhage was quickly beginning, regulators announced that New York-based Signature Bank had filed for bankruptcy and was seized on Sunday. With more than $110 billion in assets, Signature Bank is the third largest bank failure in US history.

The Treasury Department, the Federal Reserve and the FDIC said on Sunday that all Silicon Valley Bank customers will be protected and have access to their money and announced steps to protect the bank’s customers and prevent more bank runs.

“This move will ensure that the U.S. banking system continues to fulfill its vital role of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth,” the agencies said in a joint statement. declaration.

Regulators had to rush to shut down Silicon Valley Bank, a financial institution with more than $200 billion in assets, on Friday as it experienced a traditional bank run with depositors rushing to withdraw their money in one go. It is the second-largest bank failure in U.S. history, behind only Washington Mutual’s 2008 bankruptcy.

Some prominent Silicon Valley executives feared that if Washington failed to bail out the bankrupt bank, customers would start hunting other financial institutions in the coming days. Stock prices have plummeted in recent days at other banks that target tech companies, including First Republic Bank and PacWest Bank.

The bank’s clients include a range of companies from the California wine industry, where many wineries rely on the Silicon Valley Bank for loans, and technology startups committed to fighting climate change.

Sunrun, which sells and leases solar power systems, had less than $80 million in cash deposits with Silicon Valley Bank as of Friday and expects to have more information about its expected recovery in the coming week, the company said in a statement.

Stitchfix, the popular clothing retail website, announced in a recent quarterly report that it had a credit line of up to $100 million with Silicon Valley Bank and other lenders.

Silicon Valley Bank began to become insolvent as its clients, mostly technology companies that needed money because they struggled to get financing, started withdrawing their deposits. The bank had to sell bonds at a loss to cover the withdrawals, leading to the largest bankruptcy of a US financial institution since the height of the financial crisis.

Yellen described rising interest rates, which have been raised by the Federal Reserve to fight inflation, as the core problem for Silicon Valley Bank. Many of its assets, such as bonds or mortgage-backed securities, lost market value as interest rates rose.

Sheila Bair, who served as the FDIC chairman during the 2008 financial crisis, recalled that with almost all bank failures at the time, “we sold a bankrupt bank to a healthy bank. And usually the healthy acquirer also covered the uninsured because they wanted the franchise value of those large savers to be as optimal as possible, that is the best outcome.”

But with Silicon Valley Bank, she told NBC’s “Meet the Press,” “this was a liquidity crisis, it was a bank run, so they didn’t have time to prepare to market the bank. So they have to now, and playing catch-up.”

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