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A12 business
Monday 13 March 2023
Can the chaos from Silicon Valley

Bank's fall be contained?

By KEN SWEET
AP Business Writer
NEW YORK (AP) — Can
Washington come to the
rescue of the depositors of
failed Silicon Valley Bank? Is
it even politically possible?
That was one of the grow-
ing questions in Washington
Sunday as policymakers
tried to figure out whether
the U.S. government —
and its taxpayers — should
bail out a failed bank that
largely served Silicon Val-
ley, with all its wealth and A person walks past a sign posted at an entrance to Silicon
power. Valley Bank in Santa Clara, Calif., Friday, March 10, 2023.
Associated Press
Prominent Silicon Valley
personalities and execu- time. days. PacWest Bank, a
tives have been hitting the Staff at the Federal De- California-based bank that
giant red "panic" button, posit Insurance Corpora- caters to small to medium-
saying that if Washington tion — the agency that in- sized businesses, plunged
does not come to the res- sures bank deposits under 38% on Friday.
cue of Silicon Valley bank's $250,000 — have worked While being a unique situ-
depositors, more bank runs through the weekend look- ation, it was clear that a
are likely this week. ing for a potential buyer bank failure this size was
"Either deposits in the U.S. for the assets of the failed causing worries. Treasury
are safe or they're not. If bank. There have been Secretary Janet Yelle,n as
not, look out below," Da- multiple bidders for assets, well as the White House,
vid Sacks of Craft Ventures, but as of Sunday morn- has been "watching close-
who is closely tied to billion- ing, the bank's corpse re- ly" the developments; the
aires Elon Musk and Peter mained in the custody of governor of California has
Thiel, wrote on Twitter on the U.S. government. spoken to President Biden;
Sunday. Despite the panic from and bills have now been
Silicon Valley Bank failed Silicon Valley, there are no proposed in Congress to up
on Friday, as fearful de- signs that the bank's failure the FDIC insurance limit to
positors withdrew billions could lead to a 2008-like temporarily protect deposi-
of dollars from the bank in crisis. The nation's bank- tors.
a matter of hours, forcing ing system is healthy, holds "I've been working all
U.S. banking regulators to more capital than it has weekend with our banking
urgently close the bank in ever held in its history, and regulators to design appro-
the middle of the workday has undergone multiple priate policies to address
to stop the bank run. It's the stress tests that shows the this situation," Yellen said
second-largest bank failure overall system could with- on "Face the Nation" on
in history, behind the col- stand even a substantial Sunday.
lapse of Washington Mutu- economic recession. But Yellen made it clear in
al at the height of the 2008 Further, it appears that her interview that if Silicon
financial crisis. Silicon Valley Bank's failure Valley is expecting Wash-
Silicon Valley Bank was appears to be a unique sit- ington to come to its res-
a unique creature in the uation where the bank's ex- cue, it is mistaken. Asked
banking world. The 16th- ecutives made poor busi- whether a bailout was
largest bank in the coun- ness decisions by buying on the table, Yellen said,
try largely served technol- bonds just as the Federal "We're not going to do that
ogy startup companies, Reserve was about to raise again."
venture capital firms, and interest rates, and the bank "But we are concerned
well-paid technology work- was singularly exposed to about depositors, and
ers, as its name implies. one particular industry that we're focused on trying to
Because of this, the vast has seen a severe contrac- meet their needs," she add-
majority of the deposits at tion in the past year. ed.
Silicon Valley Bank were in Despite being a poten- Sen. Mark Warner, D-Vir-
business accounts with bal- tially unique collapse, Sili- ginia, said on ABC's "This
ances significantly above con Valley Bank's demise Week" that it would be a
the insured $250,000 limit. hasn't stopped investors "moral hazard" to poten-
Its failure has caused more for looking for other banks tially bail out Silicon Valley's
than $150 billion in depos- that might have similar situ- uninsured depositors. Moral
its to be now locked up in ations. The stock of First Re- hazard was a term used of-
receivership, which means public Bank, a bank that ten during the 2008 finan-
startups and other business- serves the wealthy and cial crisis for why Washing-
es may not be able to get technology companies, is ton shouldn't have bailed
to their money for a long down nearly a third in two out Lehman Brothers.q