FDIC seizes troubled tech-fueled Silicon Valley Bank
NEW YORK – The U.S rushed to seize the assets of Silicon Valley Bank on Friday after it experienced a run on the bank, the largest failure of a financial institution since Washington Mutual during the height of the financial crisis more than a decade ago.
Silicon Valley, the nation’s 16th largest bank, failed after depositors – mostly technology workers and venture capital-backed companies – hurried to withdraw money this week as anxiety over the bank’s balance sheet spread. It is the second biggest bank failure in history, behind Washington Mutual.
Silicon Valley was heavily exposed to the tech industry, and there is little chance of contagion in the banking sector similar to the chaos before the Great Recession more than a decade ago. The biggest banks – those most likely to cause a systemic economic issue – have healthy balance sheets and plenty of capital.
In 2007, the biggest financial crisis since the Great Depression rippled across the globe after mortgage-backed securities tied to ill-advised housing loans rippled from the U.S. to Asia and Europe. The panic on Wall Street led to the collapse of storied Lehman Brothers, founded in 1847.
Because major banks had extensive exposure to one another, it led to cascading disruption throughout the global financial system, putting millions out of work.
But the collapse of Silicon Valley pushed shares of almost all financial institutions lower Friday, shares that had already tumbled by double digits since Monday.
Silicon Valley Bank’s failure arrived with incredible speed, with some industry analysts on Friday suggesting it was a good company and still likely a wise investment. Silicon Valley Bank executives were trying to raise capital early Friday and find additional investors. However, trading in the bank’s shares was halted before the opening bell due to extreme volatility.
Shortly before noon EST, the Federal Deposit Insurance Corp. moved to shutter the bank.
Notably, the FDIC did not wait until the close of business to seize the bank, as is typical in an orderly wind down of a financial institution.
The bank had $209 billion in total assets, the FDIC said.