March began in an inauspicious way: with the collapse of Silvergate Bank, an institution closely associated with crypto. Then just a few days later, the FDIC stepped in to close Silicon Valley Bank, a three-decade-old firm that held deposits from many startups and tech companies. Days later, the failure of Signature Bank marked the third in a week.
What does this mean for startups or the industry at large? What could this mean for the American banking system? It’s too early to say (though we have some hunches). The Verge will stay up to the minute with news, analysis, and explainers on the effects of these bank collapses and what happens next.
- Loans to insiders at SVB “more than tripled” to $219 million in the last three months of 2022.
The loans increased as the bank began looking weaker, Bloomberg reports.
In its most-recent proxy statement, SVB Financial Group, the parent company of Silicon Valley Bank before its collapse, said it made loans last year to related parties including “companies in which certain of our directors or their affiliated venture funds are beneficial owners of 10% or more of the equity securities of such companies.”
- Is the Fed even functioning?
The Fed was focusing on monetary policy when it was raising interest rates, says Peter Conti-Brown, a Wharton School expert on the Federal Reserve. But was it supervising places like Silicon Valley Bank to see what the outcome of that policy was?
- Credit rating firms fell down on the job, again.
Hey, remember the phrase “structured by cows” from the aftermath of the 2008 financial crisis? I think about it once a week, no reason.
Anyway! When Signature and Silicon Valley Bank collapsed, they were both highly-rated by credit ratings agencies.
- When it came to Silicon Valley Bank, Fed monitors fell down on the job.
A year before the collapse, a senior team of Fed examiners started telling SVB about its problems, Bloomberg reports. But by then it was already late in the game. It had been the fastest-growing bank in the nation for five years, but apparently this didn’t ring alarm bells.
Silicon Valley Bank went broke, but not because it was woke
The culture war has come for the banks, and friends, it is stupid.Read Article >
There are a wide variety of proposed explanations for the fall of Silicon Valley Bank. For instance, The Wall Street Journal’s editorial page has suggested SVB’s board “may have been distracted by diversity demands” as I guess it had too many women, too many Black people (one), too many queer people (again, one), and too many veterans (???).
The Silicon Valley Bank fallout is just beginning
Following the collapse of Silicon Valley Bank last week, a lot of companies and entrepreneurs have been making the flight to — at least perceived — safety. That means the biggest banks have been getting more deposits: JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo.Read Article >
“Everyone is asking, ‘Where should we bank? Where is it safe to bank?’” Ryan Gilbert, founder of Launchpad Capital, told Silicon Valley Business Journal. “When you think you bank with the safest bank in your ecosystem, and they disappeared overnight, you realize it’s impossible to predict an earthquake.” He moved his account to Chase.
- Would you like to see some music videos made by a failed bank?
FT Alphaville rounds up the Signature Bank music videos.
Yes, that’s right. In addition to loans, Signature made music videos. This seems weird until you remember that it’s one of two banks that heavily serviced Broadway productions — so they’re meeting their customers where their customers are, I guess.The Signature Bank musical universe
- It is, at minimum, bad optics to sell a bunch of your shares before your bank collapses.
And so now the federales are looking into stock sales made by Silicon Valley Bank’s leadership before the bank failed.
- Smells like crisis PR!
Axios got some details on Peter Thiel’s Founders Fund and its decision to advise portfolio companies to pull funds from the troubled Silicon Valley Bank.
The story assures us that Thiel wasn’t “part of the conversation” and that Founders Fund told “LPs that this was all about prudently protecting their investments.”
The tech industry moved fast and broke its most prestigious bank
On the last night of its existence, Silicon Valley Bank was hosting VC Bill Reichert of Pegasus Tech Ventures, who was giving a presentation on “How to Pitch Your WOW! to Investors” to about 45 or 50 people. Mike McEvoy, the CEO of OmniLayers, recounted the scene for me. “It was eerie over there,” he said. He saw a number of people exiting the building during the event, looking subdued.Read Article >
Roger Sanford, the CEO of Hcare Health and a self-described “professional Silicon Valley gadfly,” was also there. “Everyone was in denial,” he told me. “The band played on.”
Mar 13The FDIC is going to try and auction off Silicon Valley Bank again.
That didn’t quite work out on Sunday, but the Wall Street Journal reports officials told senators they have “additional flexibility” to make a deal now that the bank’s collapse has been deemed a threat to the financial system.
The move also gives regulators the ability to offer would-be buyers deal sweeteners such as loss-sharing agreements, according to former regulators.
While none of the largest U.S. banks bid on SVB during a failed auction on Sunday, at least one offer was made by another institution, but it was declined by the FDIC, officials told lawmakers on Monday.
Mar 13President Joe Biden says Silicon Valley Bank deposits will “be there when you need them.”
It’s the promise the president made to depositors in a speech at the White House on Monday. Throughout his brief remarks, Biden also reassured viewers that no taxpayer money would be used to bail out the bank.
The speech followed a Sunday announcement from the government’s top banking regulators that they were setting up an emergency lending program to ensure all SVB depositors are made whole.
Signature Bank is closed by regulators, the third US bank failure in a week
Signature Bank, one of the two big US destinations for crypto companies, has been closed by New York regulators. “All depositors of this institution will be made whole,” the Treasury, Federal Reserve and Federal Deposit Insurance Corporation said in a joint statement.Read Article >
This is the third major bank that has fallen in the space of a week, and investors are spooked. The joint announcement that depositors will be protected above the $250,000 guaranteed by the FDIC appears to be meant to reassure banking customers that their money will not be frozen. Signature had $88.59 billion in deposits as of December 31, 2022. The New York Department of Financial Services has taken possession of the bank.
Etsy is delaying seller payouts following Silicon Valley Bank’s collapse
Etsy says some sellers won’t receive their payments on time due to the sudden collapse of Silicon Valley Bank. In an email sent out to impacted shop owners, the company says it used the shuttered institution to send out deposits to “some sellers” and that they may not get their scheduled payments as a result, leaving shop owners worried about the future of their stores.Read Article >
Etsy started notifying sellers about the potential delays on Friday, the same day the Federal Deposit Insurance Corporation and California regulators shut down Silicon Valley Bank. The bank served as a staple in the venture capital and startup industries, with companies like Etsy, Roku, and Roblox having funds tied up in the institution. The FDIC auction for the Silicon Valley Bank’s assets is expected to take place on Sunday afternoon, and if no buyer emerges, the FDIC will be forced to sell its assets in an attempt to reimburse depositors.
- A federal bailout isn’t in the cards for Silicon Valley Bank, but deposits are safe.
Depositors will be paid back in full and can access their money starting Monday morning, officials said. In an interview on Face the Nation, US Treasury Secretary Janet Yellen ruled out a government-backed bailout:
During the financial crisis, there were investors and owners of systemic large banks that were bailed out. And the reforms that have been put in place means that we’re not going to do that again. But we are concerned about depositors and are focused on trying to meet their needs.
Mar 10Roku signals Silicon Valley Bank distress.
The company told the SEC that it had $487 million, around 26 percent of its cash, held with Silicon Valley Bank, which folded today. It also said it’s unsure about how much of that it’ll get back — a common concern among firms that banked there, especially with payday looming.Roku’s 8-K SEC filing
Mar 10Panic! At the bank.
Silvergate is gone. The FDIC took over Silicon Valley Bank. Several other banks have lost billions in value, and it’s unclear whether a number of tech companies will be able to keep operating while all of this gets figured out.
If you’re unclear why our situation is the way it is, go back and take a look at Liz Lopatto’s article from a few weeks ago about interest rates and what they mean for tech companies right now.
Silicon Valley Bank has failed
Within hours of reports that Silicon Valley Bank was considering a sale after it failed to raise enough money to keep going, state and federal banking regulators shut it down. In an announcement from the Federal Deposit Insurance Corporation (FDIC), the agency said, “All insured depositors will have full access to their insured deposits no later than Monday morning, March 13, 2023.”Read Article >
Silicon Valley Bank is important for venture capital firms and startups. But as the economy has changed, VC-funded companies burned through their available cash. Simultaneously, VC funding dried up. So Silicon Valley Bank’s deposits dropped faster than the bank anticipated.
Another tech bank is in deep trouble — but not because of crypto
(Update 12:12PM ET: Federal and state regulators stepped in and shut down Silicon Valley Bank to protect insured deposits.)Read Article >
Two days after Silvergate Bank announced its shutdown in a collapse with deep ties to problems with some of its crypto customers, Silicon Valley Bank is also struggling. Its stock price plunged more than 60 percent before trading was halted on Friday morning. It may sell itself — CNBC reports it’s now in talks to sell itself, and Reuters says that it’s “exploring options, including a sale.”
Jan 5Silvergate Capital survived a post-FTX run on deposits, but now the crypto-focused bank’s stock is tanking.
Exactly one month ago, Silvergate’s CEO insisted things were ok, despite the problems with FTX, a major customer.
Today its Q4 filing reveals deposits from crypto customers shrank from $11.9 billion to $3.9 billion in three months, $150 million of the bank's deposits are held by customers who’ve filed bankruptcy, and it’s laying off 200 employees.
The company’s stock price is down 46 percent.
Dec 5, 2022Silvergate: “We’re fine!”
Silvergate Capital, a famous crypto bank, has filed a letter with the SEC from its CEO, Alan Lane. Apparently, he is using it to correct what he terms “speculation — and misinformation — being spread by short sellers and other opportunists.”
Okay! Unfortunately for Lane, this question raises more questions than it answers, such as what his “extensive due diligence” on FTX and Alameda consisted of!