On Sunday, Treasury Secretary Janet Yellen said that the US government is not exploring the idea of a bailout for Silicon Valley Bank. Instead, it is focused on ensuring the failed bank’s depositors are made whole.
In an interview on CBS TV, Yellen explained the difference between how the Silicon Valley Bank’s situation will be handled compared to historic bank bailouts that the US government made about 14 years ago as a result of the global financial crisis. She said this time around, the focus was more on meeting depositors’ needs.
After California banking regulators closed Silicon Valley Bank on Friday, the Federal Deposit Insurance Corporation (FDIC) took control of the bank’s operation. FDIC insures member bank deposits of $250,000 and below.
Silicon Valley Bank Set to Reopen Today
Reports show Silicon Valley Bank had $174 billion in deposits and about $208 billion in assets under management by the end of 2022. Many crypto companies and tech startups await to see how much they will be able to recoup beyond what’s insured when the bank reopens today.
The Silicon Valley Bank’s collapse marks the second-largest failure of a financial institution in American history, only behind Washington Mutual, which went crumbling down in 2008. Before its collapse, Washington Mutual had $190 billion in deposits and $306 billion in assets.
At the time, JPMorgan Chase purchased Washington Mutual’s banking assets which saw none of its depositors lose their funds. But as of yesterday, Elon Musk remains the only potential buyer to publicly declare that he was open to purchasing Silicon Valley Bank.
Effects of Silicon Valley Bank and Silvergate Collapse on Other Banks
The Silicon Valley Bank’s collapse comes a few days after crypto-friendly bank Silvergate revealed last Wednesday that it would close shop. Before the announcement, several crypto companies had begun to separate themselves from Silvergate, with many saying they would no longer facilitate transactions via the bank.
The Silvergate and Silicon Valley Bank collapse has caused investor confidence in other crypto-friendly banks to fall. For example, the stock of Signature Bank, a popular financial institution among crypto companies, drop by 24% on Friday to trade at $72 per share.