Silicon Valley Bank became the biggest U.S. lender to fail in more than a decade after a tumultuous week that saw an unsuccessful attempt to raise capital and a cash exodus from the tech startups that had fueled the lender's rise.
Regulators stepped in and seized it Friday in a stunning downfall for a lender that had quadrupled in size over the past five years and was valued at more than $40 billion as recently as last year.
The move by California state watchdogs to take possession of the bank, known as SVB, and appoint the Federal Deposit Insurance Corp. as receiver adds to the turmoil at smaller lenders caused by the U.S.'s rapid interest-rate increases. Just days earlier, Silvergate Capital Corp. announced it was shutting its bank down, spurring a broader selloff in industry stocks.
Banks were already suffering from the jump in rates that eroded the value of their portfolios, and meanwhile customers in the technology and crypto startup worlds were yanking cash amid a slump in their businesses. In SVB's case, the turmoil fed on itself as customers worried about its health rushed to withdraw money.
"Bank runs are a lot about psychology. And at this point, it's very rational to be nervous," said Saule Omarova, a law professor at Cornell University.
In Washington, the situation prompted a series of discussions among top regulators.
Fed Moves
Treasury Secretary Janet Yellen called a meeting Friday with leaders from the Federal Reserve, the FDIC and the Office of the Comptroller of the Currency to discuss developments around SVB. Yellen said in a statement that the US banking system "remains resilient" and the regulators "have effective tools" to address the fallout.
The government is assessing whether it can sell SVB, or parts of it, by Monday, said a person familiar with officials' conversations, who asked not to be identified speaking about internal deliberations. That's the day when customers can come to the bank and start taking out the rest of their money.
Treasury representatives didn't immediately respond to an emailed request for comment.
What Went Wrong
Problems mounted for SVB after Peter Thiel's Founders Fund and other high-profile venture capital firms advised their portfolio companies to pull money from the bank.
