The U.S. Treasury Department released a statement at about 2:00 p.m. Friday, March 10: “Today, Secretary of the Treasury Janet L. Yellen convened leaders from the Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency to discuss developments around Silicon Valley Bank. Secretary Yellen expressed full confidence in banking regulators to take appropriate actions in response and noted that the banking system remains resilient and regulators have effective tools to address this type of event.”
Interest rates are rising—which is normally a good thing for banks—and yet banks are failing. It’s a last chance for Congress to re-enact the Glass-Steagall Act.
Silvergate Capital Corp. in San Diego, a small bank with about $14 billion in assets, failed on March 8, Wednesday, and is being liquidated. Silvergate had let itself become a cryptocurrency-dominated bank, as to its deposits and loans.
Silicon Valley Bank in Santa Clara, California was shut down by the Federal Deposit Insurance Company on March 10, Friday; FDIC will resolve it over the weekend. This bank had $212 billion in assets, was among the top 20 U.S.-based banks, and was the largest U.S. bank failure since Washington Mutual ($328 billion in assets) in the fateful month of September 2008.
Silicon Valley Bank is one where most depositors are tech startups which deposit their venture capital loans there; and because of the current “tech swoon” of mass layoffs and cutbacks, these startups are not getting any more venture capital and are spending through what they have; i.e., pulling deposits out of SVB, as the bank is known. This week, in addition, there was a fear-driven (in part, Peter Thiel-driven) run on the bank by those depositors, and its stock market capitalization nearly disappeared. Silicon Valley Bank made a last-ditch, unsuccessful attempt to sell itself, although the FDIC may sell a lot of its assets to another big bank by Monday.
