Silicon Valley Bank, previously ranked as the 16th largest bank in the US, collapsed in just a few days. Rumors of its potential collapse quickly circulated on social media and messaging apps, leading depositors to withdraw an astounding $42 billion in a single day. On March 10th, regulators confirmed that SVB had indeed failed and the FDIC took over, marking the largest bank failure in the US since the 2008 financial crisis.
President Biden and Federal Financial Agencies Take Decisive Action
The Biden Administration and federal financial agencies took decisive action to protect Silicon Valley Bank depositors and avoid economic fallout.
In a joint statement released, the Department of the Treasury, Federal Reserve, and the Federal Deposit Insurance Corporation (FDIC) stated that depositors of Silicon Valley Bank would be able to access all their funds just one weekend after the bank’s collapse. They did this without using a single taxpayer dollar. Instead, they guaranteed deposits through the Deposit Insurance Fund, an emergency fund managed by the government that is funded with quarterly fees paid by financial institutions and interest on government bonds.
Biden highlighted that his priority was "protecting depositors, protecting the banking system, protecting the economic gains we have made together for the American people."
Biden Praised for Decision to Protect Depositors and Workers
The decision by regulators to protect all Silicon Valley Bank deposits safeguarded not only the bank but also its customers and workers who relied on the bank for their paychecks.
Sen. Alex Padilla (D-Calif.) said in a statement that the "decisive action taken by regulators to fully protect all Silicon Valley Bank deposits will ensure that millions of workers across the country will be paid on time — and it will limit the potential damage to California’s and the nation’s economy."
Rep. Jimmy Panetta (D-Calif.) echoed a similar sentiment in a statement, stating that the actions were necessary to protect not the bank but the bank's customers, who were put at risk through no fault of their own.
Investigation into Bank’s Failure
The bank’s failure came as a result of several factors, including its investments losing value and its depositors withdrawing large amounts of money. According to report by the Federal Reserve, blame was ultimately attributed to the bank's management, the regulator, and social media. 93.9% of SVB’s deposits were uninsured and it had the second highest ratio among large US banks.
Fortunately, federal regulators acted swiftly following the downfall of SVB, introducing various steps to minimize depositor losses and restore trust in both the banking sector and the broader economy.